Page 233 - DMGT104_FINANCIAL_ACCOUNTING

Date Particulars ( ) Date Particulars ( )
2006 2006
Unit 10: Accounting and Depreciation for Fixed Assets
April 1 To Cash A/c 45,000 Dec. 31 By Depreciation A/c 4,125
Oct. 1 To Cash A/c 30,000 Dec. 31 By Balance c/d 70,875
75,000 75,000
2007 2007 Notes
Jan. 1 To Balance b/d 70,875 Dec. 31 By Depreciation A/c 7,837.50
July 1 To Cash A/c 15,000 Dec. 31 By Balance c/d 77,737.50
85,875 85,875
2008 2008
Jan. 1 To Balance b/d 77,737.50 Jan. 1 By Bank (Sale of 1/3
machine) 4,500
By P&L A/c. (Loss on
sale) 7,987.50
By Depreciation A/c 6,555
By Balance c/d 58,995
77,737.50 77,737.50

Working Note:
45,000 ´ 10 9
1. Depreciation on Machine I acquired on April 1, 2006 = ´ = 3,375
100 12
30,000 ´ 10 3
Depreciation on Machine II acquired on October 1, 2006 = ´ = 750
100 12
Total Depreciation for 2006 = 3,375 + 750 = 4,125
(45,000 - 3,375) ´ 10
2. Depreciation on Machine I = = 4,162.50
100
(45,000 - 750) ´ 10
Depreciation on Machine II = = 2,925
100
15,000 ´ 10 6
Depreciation on Machine III = ´ = 750
100 12
Total Depreciation = 4,162.50 + 2,925 + 750 = 7,837.50
3. W.D.V. of one whole machine on 1st January 2008 (45,000 – 3,375 – 4,162.50)

= 37,462.50
37,462.50
W.D.V. of 1/3 of machine I = = 12,487.50
3
Sale of machine = 4,500

Loss on sale = 12,487.50 – 4,500 = 7,987.50
4. Depreciation for 2008
(37,462.50 - 12,487.50) ´ 10
Depreciation on 2/3 of Machine I = = 2,497.50
100
(30,000 - 750 - 2,925) ´ 10
Depreciation on IInd Machinery = = 2,632.50
100
(15,000 - 750) ´ 10
Depreciation on IIIrd Machinery = = 1,425
100
Total Depreciation = 2,497.50 + 2,632.50 + 1,425 = 6,555
Change in the Method of Depreciation

As per the consistency convention of accounting, if once a method of depreciation has been
adopted by the management, it should be used consistently. However, due to some statutory

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