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Brianna Ltd acquires a delivery truck at a cost of $96 600 (GST exclusive) on 1 January

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Brianna Ltd acquires a delivery truck at a cost of $96 600 (GST exclusive) on 1 January 2016, the beginning of the company’s financial year. The truck is expected to have a residual value of $4000 at the end of its 5-year useful life. Calculate annual depreciation for the first and second years using the straight-line method.

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In accounting terms, depreciation is defined as the reduction of the recorded cost of a fixed asset in a systematic manner until the value of the asset becomes zero or negligible. An example of fixed assets are buildings, furniture, office equipment, machinery, etc. The land is the only exception that cannot be depreciated as the value of land appreciates with time. Depreciation allows a portion of the cost of a fixed asset to be the revenue generated by the fixed asset. This is mandatory under the matching principle as revenues are recorded with their associated expenses in the accounting period when the asset is in use. This helps in getting a complete picture of the revenue

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