Straight Line Method

The Straight-line depreciation is a very common, and the simplest, method of calculating depreciation expense. In straight-line depreciation, the expense amount is the same every year over the useful life of the asset.

 Formula for the Straight-Line Method:

Depreciation Expense = (Cost – Residual Value) / Useful life or Rate%

Example

Company A buys a car for R100 000. The depreciation rate is 20% per annum on a straight line method

Required

Draw up the following accounts in general ledger of King Industries for the financial year ended 31 March 2019 ONLY.                

Start with the opening balances for the 2019 financial year.                                                         

Make all necessary entries including the closing transfers for the 2019 financial year and balance the accounts at the end of the month. Ignore VAT.