Page 223 - Accountancy_F5

Example 7.8
Kibaba Ltd purchased an asset costing TZS 30,000,000 last year, which will be in use
for 5 years. The calculations of the depreciation over the five years using sum of the
years’ digit will be as follows:

Solution 7.8
FOR ONLINE READING ONLY
Duration Years
Purchase date to end of asset useful life 5 years
Second year to end of asset useful life 4 years
Third year to end of asset useful life 3 years
LANGUAGE EDITING
Fourth year to end of asset useful life 2 years
Fifth year to end of asset useful life 1 year

Sum of these digits 15

1
1
^
Or: nn + h = 5 ^ 5 + h = 6 # 5 = 30 = 15 years
2 2 2 2
n = Number of years
The computation of the depreciation for each year is as shown below:

TZS
Calculation of depreciation
“000”
1 year = of TZS 30,000,000 is charged = 10,000
st
2 year = of TZS 30,000,000 is charged = 8,000
nd
3 year = of TZS 30,000,000 is charged = 6,000
rd
4 year = of TZS 30,000,000 is charged = 4,000
th
5 year = of TZS 30,000,000 is charged = 2,000
th
Example 7.9
Tibakanya Timber Ltd which operates in Kasenyi deals with the production of timber
and resale. It maintains a number of small tools including chain-saws and screw
drivers to facilitate production of timber. The following information relates to these
items as at 31 Dec. 2021.
st

Student’s Book Form Five
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