Page 230 - DMGT104_FINANCIAL_ACCOUNTING

Financial Accounting

Notes Solution:
In the books of Mr. Ramesh
Machine Account
Date Particulars ( ) Date Particulars ( )
2006 2006
April 1 To Cash A/c 34,000 Dec. 31 By Depreciation 2,550
(24,000 + 10,000) (for 9 months)
Dec. 31 By Balance c/d 31,450
34,000 34,000
2007 2007
Jan. 1 To Balance b/d 31,450 Dec. 31 By Depreciation A/c 3,400
(for 12 months)
Dec. 31 By Balance c/d 28,050
31,450 31,450
2008 2008
Jan. 1 To Balance b/d 28,050 June 30 By Depreciation A/c 1,700
(6 months)
By Cash A/c (Sale) 19,000
By P&L A/c (Loss) 7,350
28,050 28,050

Working Note:
1. Cost of Machine = 24,000 + 10,000 = 34,000
34,000 ´ 10 9
2. Depreciation for 2006 = ´ = 2,550
100 12
34,000 ´ 10
3. Depreciation for 2007 = = 3,400
100
34,000 ´ 10 6
4. Depreciation for 2008 (for 6 months) = ´ = 1,700
100 12
Illustration 4: On 1st April, 2004, Abhimanyu & Co. purchased a furniture of 90,000. The
estimated effective life of the furniture is 4 years with scarp value of 10,000. Calculate
depreciation on fixed line method and show furniture account of 4 years assuming that company
maintains provision for depreciation account.
Solution:

Calculation of Depreciation
Original Cost – Scrap Value 90,000 – 10,000
Depreciation = = = 20,000
Economic Life 4
Furniture Account

Date Particulars ( ) Date Particulars ( )
2004 2005
April 1 To Bank A/c 90,000 March 31 By Balance c/d 90,000
90,000 90,000
2005 2006
April 1 To Balance b/d 90,000 March 31 By Balance c/d 90,000
90,000 90,000
2006 2007 Contd...

April 1 To Balance b/d 90,000 March 31 By Balance b/d 90,000
90,000 90,000
2007 2008
224 LOVELY PROFESSIONAL UNIVERSITY
April 1 To Balance b/d 90,000 March 31 By Provision for
Depreciation A/c 80,000
By Balance c/d 10,000
90,000 90,000