I n t e r a c t I v e t e X t foundations in Accountancy/ acca financial accounting (ffa/FA) bpp learning Media is an acca approved Content Provider

 EXAM FOCUS POINT 

If an exam question gives you the purchase date of a non-current asset which is part-way through an 

accounting period, you should generally assume that depreciation should be calculated in this way as a 

'part-year' amount, unless the question states otherwise. 

 EXAM FOCUS POINT 

There are different ways to apply the reducing balance method when the asset has a residual value. 

The method we have used here is the one preferred by the ACCA examining team.  

 EXAM FOCUS POINT 

If you are expected to use the reducing balance method in the exam, you will be given the percentage 

rate to apply; you will not have to calculate it. 

BPP Tutor Toolkit Copy

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CHAPTER 8  

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  TANGIBLE NON-CURRENT ASSETS 

 

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The reducing balance method might therefore be used when it is considered fair to allocate a greater 

proportion of the total depreciable amount to the earlier years and a lower proportion to later years, on 

the assumption that the benefits obtained by the business from using the asset decline over time. An 

example of this could be machinery in a factory, where productivity falls as the machine gets older. 

It is permissible for a business to depreciate different categories of non-current assets in different ways. 

For example, if a business owns three cars, then each car would normally be depreciated in the same 

way (eg by the straight line method); but another category of non-current asset, say, computer 

equipment, might be depreciated using a different method (eg by the reducing balance method).