ACCOUNTING FOR DEPRECIATION IN MANUFACTURING INDUSTRY

By

EZENWA PAUL CHUKWUJEKWU

Presented To

Department of Accountancy

ABSTRACT

We are in one jet age, Nigeria cannot do without depreciation. The word depreciation is the wear and tear of use of fixed assets or a loss of value of used of fixed assets. The purpose of the study was to enable the accountants to depreciate the fixed assets in manufacturing industry. The chapters run from one to three and justice has been done to this topic.

Table of contents

Title page ii

Approval page iii

Dedication iv

Acknowledgement v

Abstract vi

Table of content vii

CHAPTER ONE

1.1 Introduction 1

CHAPTER TWO

2.1 Definition of depreciation 3

2.2 Causes of depreciation 4

2.3 The need for depreciation 9

2.4 Depreciation and taxation 11

2.5 Methods of depreciation 13

CHAPTER THREE

3.0 Conclusion 19

3.1 Recommendation 20

3.2 Summary 21

Bibliography 23

CHAPTER ONE

1.1 INTRODUCTION

For a manufacturing firm like Golden Guinea plc to carry out its business successfully and to meet its main objectives it needs among other things fixed assets. The fixed assets unlike current assets are held over several period which the objectives or earning revenue. Hence, the amount of money spent on their purchase is treated as capital expenditure. Accepted expenditure refers to the amount SPENT BY AN organization on the acquisition of a permanent assets intended profits.

There are numerous examples of these types of assets some of which are hand and building. However, these comprise of the company's factory buildings, offices and warehouses used for storage purposes. Others include plant and machinery, fixtures and fittings and equipments. These assets are used by industries or manufacturing organization for actual transformation or raw materials into sleazier finished goods. The last but not the least is nature resource. These consist of mines queries oil coal and gas deposits.

These are some time called casting assets since they become xxx when the deposits or resources have been depleted. In addition, they are normally consumed in the services of the business by effusion of time i.e. by wear and tear.

These fixed assets are normally recorded in their book at their cost price, but it is assured that after making use of them for some periods, usually more than one financial year, their value and efficiency decrease.

For example, after some years efficiency and productive capacity decline continuous until it reaches a time when the assets becomes useless and needs replacement.

Hence, it is a felt that on asset depreciates from year to year when it is employed in the business.

This reduction in the value of fixed asset is known as accounting term as depreciation of fixed assets for which this work is.