Depreciation of fixed assets

What is capitalised and what is expensed, the depreciable base, straight-line depreciation with pro rata, net book value and the depreciation entry.

The outline, topic by topic

Each topic is weighted the way the exam weighs it.

Fixed asset: what is it?
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An item, tangible or not, acquired to serve the company over the long term and carried on the balance sheet instead of being expensed.
A server, a perpetual licence, a vehicle are fixed assets; a monthly subscription or a small supply used up quickly is not.
A 12,000 € excl. VAT item is depreciated straight-line over 4 years, put into service at the start of a year. What is a full year's instalment?
- 3,000 €
- 4,000 €, i.e. 12,000 ÷ 3
- 2,400 €, i.e. 12,000 ÷ 5
- 3,600 €, i.e. 14,400 € incl. VAT ÷ 4
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3,000 €
Pre-tax base divided by life: 12,000 ÷ 4 = 3,000 € a year, i.e. 25% of the base. Recoverable VAT is never depreciated.
Each year, the … is an expense that reduces the result with no ….
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Each year, the depreciation charge is an expense that reduces the result with no cash outflow.
The cash left at purchase. The charge only spreads that cost over the years of use.
Depreciation: what is it?
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Recognition of the loss in value of a durable asset through use, time or obsolescence, spread over its useful life.
It spreads an asset's cost over the years it serves: a server depreciated straight-line over four years costs a quarter of its price in each of them.