Depreciation
By
Asok Nadhani
15.1
Introduction
Depreciation denotes
permanent and continuous decrease in the book value of fixed assets over efflux
of time. But it does not refer to any physical deterioration or decrease in its
market value.
- Depreciation is
the process of allocating the cost of a fixed asset, less any residual or
salvage value, over its estimated useful life in a rational and systematic
manner.
- It is a process
of allocation, not of valuation. Depreciation includes amortization of assets
whose useful life is pre-determined.
- Depreciation is
charged to comply matching concept over the period of useful life of the asset (not
on physical life of the asset).
15.2
Depreciable Assets
i
These are assets which:
a are expected to
be used during more than one accounting period; and
b
have a limited useful life; and
c
are held by an enterprise for use and not for the
purpose of sale in the ordinary course of
business.
ii Freehold Land
a Purchase Price.
b Installation and
commissioning cost.
15.2.1 Cost of Depreciable Assets
Cost of Depreciable Assets come arises of its:
15.3 Depreciable Amount
It is the historical cost,
(or other amount substituted for historical cost) of a depreciable asset in the
financial statement, less estimated residual value. The depreciable amount of a
depreciable asset should be allocated on a systematic basis to each accounting
period during the useful life of the asset.
15.4
Depreciation- Is it a source of fund
i)
Under no circumstances depreciation is a source of
fund (though it is a popular wrong phenomenon).
ii)
The accounting for depreciation is an internal
transaction of allocating the cost of a fixed asset less any residual or
salvage value over its estimated useful life of an asset. Depreciation is
simply a book entry and it has no outside connection (a fund cannot be created
just through passing a book entry). It is actually a non cash expense.
iii)
Depreciation affects taxable income and hence
affects income tax payable.
15.5
Depletion, Amortization and Obsolescence of Asset
Depletion:
It
refers to the physical deterioration of natural resources or wasting assets
like mineral reserves, oil reserves, mines, quarries etc. The life of such
asset is normally expressed in terms of
quantity rather than in years.
Depreciation rate (r) =
Cost of the asset / estimated quantity likely to be available
Example: A mine was purchased for Rs.10, 00,000. Minerals in the mine were expected
to be 20, 00,000 tons. In the first year, 1, 00,000 tons of minerals were used.
What is the depreciation for the first year?
Solution:
Depreciation rate (r) = Cost
of the asset /estimated quantity likely to be available
i.e. Rs.10, 00,000 /20,
00,000 tons x Re.0.50/Ton
And Depreciation = r
(Depreciation rate) x production of the year (i.e. minerals extracted)
=0.50 x 1, 00,000
tons = Rs.50, 000.
Amortization:
The
term amortization is used for providing depreciation on intangible assets like Goodwill,
Patent, Trademark, Computer Software etc. The asset value is written over the
life of the asset.
Obsolescence:
It
refers to the economic deterioration by way of technological development, taste
etc.
15.6
Accounting Entry for Depreciation
There are two way to record depreciation in the books.
i)
When no Provision for Depreciation Account is not maintained:
In such case,
depreciation is ultimately charged to Profit & Loss Account and the cost of
asset is reduced. The books show only the written down value of the asset after
providing depreciation.
ii)
When Provision for Depreciation Account is
maintained:
In such case,
depreciation is charged to Profit & Loss Account. However, the original
cost is not reduced, instead depreciation for each year is accumulated to a
separate account viz. Provision for Depreciation Account.
When no Provision for Depreciation Account is maintained (only WDV
balance is maintained)
|
When Provision for Depreciation Account is maintained (Both original
cost & Accumulated Depreciation is maintained.)
|
|||
1.
|
On purchase of Asset
Asset A/c
To Bank A/c
|
Dr.
|
On purchase of Asset
Asset A/c
To Bank A/c
|
Dr.
|
2.
|
For providing depreciation
Depreciation A/c
To Asset A/c
|
Dr.
|
For providing depreciation
Depreciation A/c
To Provision for
Depreciation A/c
|
Dr.
|
Profit & Loss A/c
To Depreciation A/c
|
Dr.
|
Profit & Loss A/c
To Depreciation A/c
|
Dr.
|
|
3.
|
On sale of asset as scrap
Bank A/c
To Asset A/c
|
Dr.
|
If the asset is sold as scrap, Asset Disposal Account is maintained.
(i) On transferring asset to Asset Disposal A/c
Asset Disposal A/c (original cost)
To Asset A/c
|
Dr.
|
(ii) On transferring accumulated depreciation on disposed asset
Provision for Depreciation A/c
To Asset Disposal A/c
|
Dr.
|
|||
(iii) On sale of asset
Bank A/c
To Asset Disposal A/c
|
Dr.
|
|||
4.
|
If profit arises from sale
Asset A/c
To Profit & Loss A/c
|
Dr.
|
If profit arises from sale
Asset Disposal A/c
To Profit & Loss A/c
|
Dr.
|
5.
|
If Loss arises from sale
Profit & Loss A/c
|
Dr.
|
Profit & Loss A/c
|
Dr.
|
To Asset A/c
|
To Assets Disposal A/c
|
|||
Note: Profit or Loss
on sale of the asset is as sort of over or under depreciation of the asset.
15.7
Methods of Depreciation
There are several methods of depreciation:
15.7.1
Straight Line Method
i)
Under this method, the amount of depreciation
remains same to each period. A fixed amount is charged as depreciation every
year. At the end of the life of the asset, the amount of the asset becomes zero.
ii)
Annual Depreciation= (Original Cost of the asset –
Scrap value) / Estimated useful life.
iii)
It is also known as Fixed Instalment Method,
Original Cost method.
iv)
Advantage:
- Easy to
calculate and easily understandable.
- It reduces the
book value of the asset to zero.
v)
Disadvantage: Value of the asset decreases but the
depreciation amount remains same.
Example: A
machine costing purchased on 1st
January, 2009 Rs.1, 00,000. Salvage value Rs.10,000 and a life of
10 years. The accounting year ends on 31st, Dec. What will be the
depreciation for the year?
Solution
Depreciation
for the year = (1,00,000 – 10,000) / 10 = Rs.9,000.
15.7.2
Diminishing Balance Method
i)
Under this method, instead of a fixed amount, a
fixed rate on the reduced balance of the asset is charged as depreciation every
year. As a constant percentage is applied to the written value of the asset,
the amount of depreciation will reduce every year.
ii)
It is also known as Reducing Balance Method, Written
Down Value Method (WDV).
iii)
Depreciation rate (r) = 1- (s / c) 1/n, where
Salvage value= s
Cost of asset = c
No. of Years=n
Example: Machinery
was bought for Rs.50, 000 two years ago. The current book value of the
machinery is Rs.36, 125. If the depreciation is charged as per written down
value method:
Rate of Depreciation = 1 – (36,125
/ 50,000) ½ = 1 – (0.7225)1/2 = 1 - (0.85) = 0.15 or = 15%
Advantage:
i.
This method results higher depreciation in the
beginning years but lower in the later years.
ii.
An asset’s book value can not be less than its
estimated salvage value.
iii.
It is applicable for the income tax purpose.
iv.
Salvage value is not deducted while computing
depreciable base.
Disadvantage:
i.
It is very complicated method.
ii.
This method can not be applied for assets having
short life span.
iii.
In early years depreciation is more when the asset
is new. But later it reduces when asset becomes older.
15.7.2.1 Distinction
between Straight Line and Diminishing Balance Method
Straight Line
|
Diminishing Balance
|
1.
Depreciation is calculated on the original cost each year.
|
1.
Depreciation is calculated on written down value.
|
2. Amount of
depreciation is equal each year.
|
2. Amount of depreciation declines each year.
|
3. Amount of
depreciation is lower than diminishing balance method in earlier years.
|
3. Amount of
depreciation is higher than straight line method in earlier years.
|
4. If
estimated salvage value is nil, asset is fully written off.
|
4. Asset is not fully written off.
|
5. This method
does not take into consideration expenses on increasing repairs and
maintenance over time.
|
5. This method
takes into consideration expenses on repairs and maintenance. Amount of
depreciation declines and expenses on repairs increases as the asset becomes
older. Thus total charges are approximately equalized.
|
Example: Chand
& Co. purchased plants on 1st
January, 2007 for Rs.2,00,000. Out of them, a plant, which was
purchased for Rs.50,000 sold out on 30th June, 2009 was sold for Rs.35,000. The
company closes its books on 31st December and it maintains Provision
for Depreciation Account. Prepare Plant & Machinery Account and Provision
for Depreciation Account for all the years’ upto the year ending 31st December, 2009
taking into account depreciation @ 10% p.a. on straight line basis and also
show Plant & Machinery Disposal Account.
Solution:
Working
Note:
Calculation
of depreciation on sale of plant
Rs.
|
|
Acquisition cost on
|
50,000
|
Less: Depreciation for 2007 @ 10% p.a
|
5,000
|
Book
value on
|
45,000
|
Less: Depreciation for 2008 @ 10% p.a
|
5,000
|
Book
value on
|
40,000
|
Less: Depreciation upto
|
2,500
|
37,500
|
|
35,000
|
|
Loss
on sale
|
2,500
|
Depreciation on the remaining Plant &
Machinery will be 10% on Rs.1,50,000 i.e. (2,00,000 – 50,000)
|
15,000
|
Provision for Depreciation on disposed plant
upto 2008 = 5,000+5,000 = Rs.10,000
In the books of Chand & Co.
Plant & Machinery Account
Dr.
|
Cr.
|
|||||
Date
|
Particulars
|
Rs.
|
Date
|
Particulars
|
Rs.
|
|
2007
Jan.1
|
To Bank A/c
|
2007
Dec.31
|
By Balance c/d
|
2,00,000
|
||
- Purchase
|
2,00,000
|
|||||
2,00,000
|
2,00,000
|
|||||
2008
Jan.1
|
To Balance b/d
|
2,00,000
|
2008
Dec.31
|
By Balance c/d
|
2,00,000
|
|
2009
Jan.1
|
To Balance b/d
|
2,00,000
|
2009
June30
|
By Plant & Machinery Disposal A/c (original cost)
|
50,000
|
|
Dec.31
|
By Balance c/d
|
1,50,000
|
||||
2,00,000
|
2,00,000
|
|||||
Provision for Depreciation Account
Dr.
|
Cr.
|
||||
Date
|
Particulars
|
Rs.
|
Date
|
Particulars
|
Rs.
|
2007
Dec.31
|
To Balance c/d
|
20,000
|
2007
Dec.31
|
By Depreciation A/c
|
20,000
|
2008
Dec.31
|
To Balance c/d
|
40,000
|
2008
Jan.1
Dec.31
|
By Balance b/d
By Depreciation A/c
|
20,000
20,000
|
40,000
|
40,000
|
||||
2009
June30
Dec.31
|
To Plant & Machinery Disposal A/c
To Balance c/d
|
2,500
52,500
|
2009
Dec.31
|
By Balance b/d
By Depreciation A/c (W.N 1)
|
40,000
15,000
|
55,000
|
55,000
|
Plant & Machinery Disposal Account
Dr.
|
Cr.
|
||||
Date
|
Particulars
|
Rs.
|
Date
|
Particulars
|
Rs.
|
2009
June30
|
To Plant & Machinery A/c
|
50,000
|
2009
June30
|
By Provision for Depreciation A/c (W.N 1)
|
10,000
|
By Depreciation A/c (W.N 1)
|
2,500
|
||||
By Bank A/c (sale)
|
35,000
|
||||
By Profit & Loss A/c (loss) (W.N 1)
|
2,500
|
||||
50,000
|
50,000
|
Note:
The provision for depreciation on disposed assets of
Rs.2,500 will be transferred to Plant & Machinery Disposal Account.
15.7.3
Sinking Fund Method
i)
Under this method, the amount retained by writing
off depreciation is invested in a fund, known as Sinking Fund or Depreciation
Fund.
ii)
The amount written off as depreciation is kept
aside and invested in readily saleable securities (like govt. securities). The
interest is also reinvested. After the expiry of life of the assets, the
securities are sold and new assets are purchased from the sale proceeds.
Journal entries are to be passed for Sinking Fund Method.
a)
In first year, entries passed in
(1)
|
Depreciation Account
|
Dr.
|
With the installment calculated from the sinking fund table
|
To Sinking
Fund Account
|
|||
(2)
|
Sinking Fund Investment
|
Dr.
|
Amount invested in securities
|
To Bank
|
b)
Entries passed In subsequent years -
(1)
|
Bank A/c
|
Dr.
|
With the amount of interest received on investment.
The interest received transferred to the credit of Sinking Fund A/c.
With the annual installments.
The annual installment plus interest earned.
|
To Interest on
Sinking Fund Investment A/c
|
|||
(2)
|
Interest on Sinking Fund Investment A/c
|
Dr.
|
|
To Sinking
Fund A/c
|
|||
(3)
|
Depreciation A/c
|
Dr.
|
|
To Sinking
Fund A/c
|
|||
(4)
|
Sinking Fund Investment A/c
|
Dr.
|
|
To Bank
|
|||
Note: First two
entries may be combined in one entry.
|
|||
c)
Entries passed in the last year-
(1)
|
Bank A/c
|
Dr.
|
With the amount of interest received on investments.
|
To Interest on Sinking
Fund A/c
|
|||
(2)
|
Interest on Sinking Fund Investment A/c
|
Dr.
|
With the amount of interest to transfer Sinking Fund.
|
To Sinking Fund A/c
|
|||
(3)
|
Depreciation A/c
|
Dr.
|
|
To Sinking Fund A/c
|
|||
(4)
|
Bank A/c
|
Dr.
|
With the net sale proceeds of Sinking Fund Investment A/c.
|
To Sinking Fund
Investment A/c
|
|||
(5)
|
Sinking Fund Investment A/c
|
Dr.
|
Profit or (Loss) transferred to Sinking Fund Account.
|
To Sinking Fund A/c
|
|||
Or
|
|||
Sinking Fund A/c
|
Dr.
|
||
To Sinking Fund
Investment A/c
|
|||
(6)
|
Sinking Fund A/c
|
Dr.
|
With the book value of the asset.
|
To Asset A/c
|
|||
(7)
|
Sinking Fund A/c
|
Dr.
|
Any balance remaining in the Sinking Fund Account transferred
|
To Profit & Loss A/c
|
to Profit & Loss A/c.
|
||
Or
|
|||
Profit & Loss A/c
|
Dr.
|
||
To Sinking Fund A/c
|
Example:
A lease was purchased for Rs.40,000. It is to be
replaced at the end of 3 years. It is expected that the investment will yield a
net interest of 4% p.a. A Sinking fund is made to collect the necessary amount.
The Sinking fund investment realized Rs.19,000. The new lease cost Rs.43,000.
As per the Sinking fund table shows = Re.1
at the end of 3 years @ 4 % p.a. annual investment of Rs. 0.235490
Solution:
For Rs.40,000 , depreciation = 40,000 x
0.235490 = Rs.9,419.60
Journal Entries
Dr.
|
Cr.
|
||||
Date
|
Particulars
|
L/F No.
|
Amount
Rs.
|
Amount
Rs.
|
|
1st year
|
|||||
Opening
|
Lease A/c
|
Dr.
|
40,000
|
||
To Bank A/c
|
40,000
|
||||
(Purchase of lease for 3 years)
|
|||||
Closing
|
Depreciation Account
|
Dr.
|
9,419.60
|
||
To Sinking Fund Account
|
9,419.60
|
||||
(Annual installment of depreciation)
|
|||||
Sinking Fund Investment
|
Dr.
|
9,419.60
|
|||
To Bank
|
9,419.60
|
||||
(Annual installment invested)
|
|||||
2nd year
|
Bank A/c
|
Dr.
|
376.78
|
||
To Interest on Sinking
Fund Investment A/c
|
376.78
|
||||
(Interest received on Investment Rs. 9,419.6 @ 4% p.a)
|
|||||
Interest on Sinking Fund Investment A/c
|
Dr.
|
376.78
|
|||
To Sinking Fund A/c
|
376.78
|
||||
(Interest on Sinking Fund Investment transferred to Sinking Fund)
|
|||||
Depreciation A/c
|
Dr.
|
9,419.60
|
|||
To Sinking Fund A/c
|
9,419.60
|
||||
(Amount of depreciation transferred to Sinking Fund A/c)
|
|||||
Sinking Fund Investment A/c
|
Dr.
|
9,796.38
|
|||
To Bank (9,419.6 + 376.78)
|
9,796.38
|
||||
Amount invested to cover annual depreciation and interest)
|
|||||
3rd year
|
Bank A/c (9,419.6 +9,796.38 @ 4% )
|
Dr.
|
768.64
|
||
To Interest on Sinking
Fund Investment A/c
|
768.64
|
||||
(Interest received on investment )
|
|||||
Interest on Sinking Fund Investment A/c
|
Dr.
|
768.64
|
|||
To Sinking Fund A/c
|
768.64
|
||||
(Interest on Sinking Fund Investment transferred to Sinking Fund)
|
|||||
Depreciation A/c
|
Dr.
|
9,419.60
|
|||
To Sinking Fund A/c
|
9,419.60
|
||||
(Amount of depreciation transferred to Sinking Fund A/c)
|
|||||
Bank A/c
|
Dr.
|
19,000
|
|||
To Sinking Fund Investment
A/c
|
19,000
|
||||
(sale of sinking Fund)
|
|||||
Sinking Fund A/c
|
Dr.
|
20,000
|
|||
To Lease A/c
|
20,000
|
||||
(Transfer of Sinking fund on its expiry.)
|
|||||
Sinking Fund A/c [19,000 – (9,419.6 + 9,796.38)]
|
Dr.
|
215.98
|
|||
To Sinking Fund Investment
A/c
|
215.98
|
||||
(transfer of loss on sale of investment)
|
|||||
Profit & Loss A/c
|
Dr.
|
215.98
|
|||
To Sinking Fund A/c
|
215.98
|
||||
(The Sinking Fund closed by transferring to P& L A/c.)
|
|||||
New Lease A/c
|
Dr.
|
43,000
|
|||
To Bank A/c
|
43,000
|
||||
(New lease purchased)
|
15.7.4 Sum of Years of
Digit Method
i)
This is just a variant of the Diminishing Balance
Method. This method is not used in India
ii)
Like Diminishing Balance Method, the depreciation
on initial year is higher and gradually diminishes over time. Like Straight
line method the asset value will ultimately become zero.
iii)
The formula is used here-
Annual
depreciation= Residual value x No. of years (including the present years) of
remaining life of the asset / Total of all digits of the life of the asset (in
years).
Example: Calculate the
depreciation
Rs.
|
||
Cost of the asset
|
=
|
1,00,000
|
Salvage value
|
=
|
5,000
|
Estimated life
|
=
|
10 years
|
Solution:
Residual Value= (1,00,000 – 5,000) = Rs.95,000
Estimated life = 10
years
Total of all digits of the life of the asset = 10+9+8+7+6+5+4+3+2+1=55
Therefore, depreciation to be charged for the
1st year = 95,000 x
10/55 = Rs.17,273
2nd year = 95,000 x 9/55 = Rs.15,545 and so, on for later years.
15.7.5 Annuity Method
Under this method,
depreciation amount is taken from annuity table. The amount of depreciation
includes a portion of the asset and a portion of its expected income
(interest).
Calculation method: 1st
year interest is calculated on the book value of asset.
Next year- on that balance of the year asset
which is on the 1st day of the next year and so on.
Example:
Lease
for 5 year Rs.10, 000. Rate of interest 5%. The corresponding annuity rate is 0.230975.
The depreciation per year:
Depreciation of Re.1 in one
year is 0.230975
So the depreciation of
Rs.10, 000 in one year is 0.230975 x Rs.10, 000 = Rs.2, 309.75.
15.7.6 Machine Hour Rate
Method
i)
Under this method the life of an asset, especially
plant or machinery, is calculated in hours (not in years for which it will be
used). Here, total effective working hours are estimated (estimated hrs. – idle
time) during the whole life of the machine and it divides the cost of the
machine. Machine Hour Rate = (Cost of the machine – Scrap value) / Effective
Working hrs.
ii)
This method does not consider depreciation when a
machine not in use.
Example:
Original cost of a machine Rs.60,000. Estimated scrap value Rs.10,000. Expected
effective working hours are 25,000 hrs. The depreciation charge per machine
hour would be as follows-
Solution:
Depreciation per machine hour rate = (60,000 – 10,000) / 25,000 = Rs.2./hr.
15.7.7 Production Unit
Method
This method is mostly used
for wasting assets like mines, quarries, oil etc, like as depletion method.
15.7.8 Insurance Policy
Method
This method is similar to
Sinking Fund Method. The depreciation charged is the amount of premium payable to
take out an insurance policy with an insurance company (instead of investing
money in securities). The policy should mature immediately after the expiry of the
useful life of the asset. The received policy amount is invested to replace the
asset.
15.8
Changes in Method of Depreciation
i
The depreciation method selected should be applied
consistently from period to period. A change from one method of providing
depreciation to another should be made:
- if the adoption
of the new method is required by statute,
- for compliance
with an accounting standard,
- if the change
would result in a more appropriate presentation of the financial statements.
ii
When such a change in the method of depreciation is
made, depreciation should be recalculated in accordance with the new method
from the date of the asset coming into use.
iii
The deficiency or surplus arising from
retrospective recomputation of depreciation in accordance with the new method
should be adjusted in the accounts in the year in which the method of
depreciation is changed.
- deficiency
should be charged in the statement of profit and loss,
- surplus should
be credited to the statement of profit and loss.
iv
Such a change should be treated as a change in
accounting policy and its effect should be quantified and disclosed.
15.8.1 Accounting entries
for change in Depreciation Method
The rate of change
in depreciation is to be adjusted for under depreciation or over depreciation.
The following steps should be taken-
Step 1. Total depreciation provided on asset under
existing method will be calculated up to end of the previous year under the
existing method.
Step 2. Total depreciation on asset from the date
of retrospective effect to the date of change by would be computed adopting the
new method of depreciation.
Step 3. Difference between the new method and
existing method will be calculated. It will be transferred to Profit & Loss
A/c.
Step 4. Depreciation will be charged from the date
of change by adopting the new method.
Example:
A Company had a
balance of Rs.4,05,000 on 1st
January, 2003 in its Machinery
account. 10% p.a. depreciation was charged by diminishing balance method. On 1st
July, 2003, the company sold a part of machinery for Rs.87,500, which was
purchased on 1st January, 2001 for Rs.1,20,000 as a part of it
become unless, and on the same date i.e. , on 1st July, 2003, the
company purchased a new machine for Rs.2,50,000. On 31st December, 2003 , the
Directors of the company decide to adopt the fixed installment method of
depreciation from 1st
January, 2001 instead of diminishing balance method. The rate of
depreciation will remain the same.
Prepare Machinery
account in the books of company for the year ending 2003.
(CA-PE-I,
2004-Nov)
Solution
Working Notes:
1.
Computation of W.D.V. as on 1.7.03 and profit or loss
on sale of machinery:
Rs.
|
||
Cost of machinery on 1.1.01
|
1,20,000
|
|
Less : Depreciation @ 10%
|
12,000
|
|
W.D.V. as on 1.1.02
|
1,08,000
|
|
Less : Depreciation @ 10%
|
10,800
|
|
W.D.V. as on 1.1.03
|
97,200
|
|
Less : Depreciation @ 10% up to
|
4,860
|
|
W.D.V. as on 1.7.03
|
92,340
|
|
Less :
|
87,500
|
|
Loss on sale
|
4,840
|
|
2
Computation of Book value of unsold machinery as
on 01.01.01.
|
Rs.
|
|
Book value of the machine whose W.D.V. as on 1.1.03
|
1,20,000
|
|
Then the cost of machine as on 01.01.01= Rs.* 3,07,800 x (1,20,000 / 97,200)=
|
3,80,000
|
|
*Book
value of remaining machine as on 1.1.2003 = 4,05,000 – 97,200 (W.N - 2) =
Rs.3,07,800
15
Amount of Additional depreciation due to change in
the method of depreciation :
F.I.M
Rs.
|
W.D.V.M Rs.
|
||
Cost of machine on 1.1.01
|
3,80,000
|
3,80,000
|
|
Less : depreciation @ 10% p.a.
|
38,000
|
38,000
|
|
W.D.V. as on 1.1.02
|
3,42,000
|
3,42,000
|
|
Less : depreciation @ 10% p.a.
|
38,000
|
34,200
|
|
W.D.V. as on 1.1.03
|
3,04,000
|
3,07,800
|
|
\ The difference
in depreciation charged to P & L A/c= Rs.(3,07,800 – 3,04,000) = Rs.3,800.
Machinery
Account
Dr.
|
Cr.
|
||||||
Date
|
Particulars
|
Rs.
|
Date
|
Particulars
|
Rs.
|
||
2003
|
2003
|
||||||
Jan. 1
|
To Balance b/d
|
July 1
|
By Bank
(
|
87,500
|
|||
(W.N.1)
|
97,200
|
||||||
(4,05,000-97,200)
|
3,07,800
|
4,05,000
|
|||||
To Bank A/c
(Purchase of new machinery)
|
2,50,000
|
July 1
|
By Depreciation (W.N.1)
|
4,860
|
|||
July 1
|
By Profit & Loss A/c (W.N.1)
(Loss on disposal)
|
4,840
|
|||||
Dec. 31
|
By Profit & Loss A/c (W.N.3)
(Adjustment for additional depreciation)
|
3,800
|
|||||
By Depreciation A/c
|
|||||||
(W.N.3)
|
38,000
|
||||||
12,500
|
50,500
|
||||||
By Balance c/d
|
5,03,500
|
||||||
6,55,000
|
6,55,000
|
||||||
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