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depreciable amount is the cost of an asset  When charging depreciation on an asset,
           or other amount substituted for cost less  each part of these items is charged separately
           its residual or scrap value. For example, if  provided that it has a significant cost in
           the machinery cost is TZS 78,000,000 and  relation to the total cost of the items. The
           its residual/scrap value is TZS 6,000,000,   allocation of depreciation on an asset will
           then the depreciable cost is TZS 72,000,000   continue as long as the asset is in use. It
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           (that is 78,000,000-6,000,000).            does not cease even if the asset becomes
           Determination of depreciation will start  idle or is retired from active use unless
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           when the assets is made available for  the asset is fully depreciated. Recognition
           use that is  in the location and condition  of depreciation continues even when the
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           necessary to be used/operated in the       fair value of the asset exceeds it carrying
           manner intended by management. Once        amount, provided that the residual value
           the depreciable amount is established, it   does not exceed its carrying value. Similarly,
           has to be allocated on a systematic basis   repair and maintenance of an asset do not
           over its useful life. Along with this, the   negate the need to depreciate it. However,
           residual value and the useful life of an asset   the depreciation charge can be zero when an
           shall be reviewed at least at each financial   organisation charges depreciation based on
           year-end, and if expectations differ from   the number of units produced, particularly
           previous estimates, the change(s) shall be   when there is no production.
           accounted for as a change in an accounting
           estimate. By definition, the useful life of   If it happens the residual value of an asset
           an asset is the period over which an asset   increases to an amount equal to or greater
           is expected to be available for use by an   than the asset’s carrying amount, the asset’s
           entity or the number of production or similar   depreciation charge is zero till when its
           units expected to be obtained from the asset   residual value subsequently decreases to an
           by an entity. Based on this, the useful life   amount less than asset’s carrying amount.
           can be considered either in terms of the
           number of years or in terms of the number   Depreciation charge can cease, but only
           of units expected to be produced by the    when an asset is withdrawn from ordinary
           asset. On the contrary, the residual value   usage and classified differently (held for
           of an asset is the estimated amount that an   sale). It ceases at the date that the asset
           entity would currently obtain from disposal   is classified as held for sale (or included
           of the asset, after deducting the estimated   in a disposal group that is classified as
           costs of disposal, when the asset is at the  held for sale) and the date that the asset
           age and in the condition expected at the end  is derecognised, that is removed from the
           of its useful life.                        entity’s statement of financial position.






            Student’s Book Form Five
                                                   201




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     ACCOUNTANCY_DUMMY_23 JUNE.indd   201                                                   23/06/2024   17:35
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