Active learning ideas
Depreciation is the systematic allocation of the cost of a non-current asset over its useful life. Students learn that depreciation is not about the asset's market value, but about the matching principle, matching the cost of using the asset against the revenue it helps generate. This topic introduces the straight-line and reducing-balance methods, each reflecting different patterns of asset usage.
Activity 01
Groups are given two assets: a delivery van and a computer. They must calculate depreciation for both using both methods over 3 years and decide which method is more appropriate for each asset.
Why do non-current assets depreciate?
Activity 02
Students think about why a business doesn't just record the full cost of a machine as an expense in the first year. They pair up to discuss the matching principle and share with the class.
What is the difference between straight-line and reducing-balance methods?
Activity 03
Set up stations for calculating depreciation, recording the journal entry, and updating the Accumulated Depreciation ledger account. Students rotate to complete the full cycle for a specific asset.
How is accumulated depreciation presented in the balance sheet?
A few notes on teaching this unit
Watch Out for These Misconceptions
Depreciation is a way to save cash to buy a new asset.
Clarify that depreciation is a non-cash expense and does not involve a bank account. Using a 'Cash vs. Non-Cash' sorting activity helps students realize that depreciation is an accounting adjustment, not a savings plan.
Accumulated depreciation is an asset.
Explain that it is a contra-asset account that reduces the carrying amount of the asset. Showing how it is 'subtracted' in the Statement of Financial Position via a visual template helps correct this.
Methods used in this brief
Capital and Revenue Expenditure
Students differentiate between capital and revenue expenditures and understand their impact on financial statements. They will analyze the consequences of incorrect classification.
8 methodologies
Accruals and Prepayments
This topic introduces the matching principle and the need for adjusting entries at the end of the financial year. Students will calculate and record accrued and prepaid expenses and income.
8 methodologies