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  • For Recording Purchase of Asset

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    dhan1221
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    The document outlines the accounting treatment for fixed assets and depreciation over multiple years. In the year of purchase, a journal entry is made debiting the asset account and crediting cash/accounts payable. Each subsequent year, a depreciation expense is recorded by debiting depreciation expense and crediting accumulated depreciation. Depreciation expense is also debited to the income statement. On the balance sheet, the asset remains at its original cost while accumulated depreciation is deducted or shown as a contra asset account. Gains or losses on asset disposals are recorded by debiting/crediting the asset and crediting/debiting income.

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    The document outlines the accounting treatment for fixed assets and depreciation over multiple years. In the year of purchase, a journal entry is made debiting the asset account and crediting cash/accounts payable. Each subsequent year, a depreciation expense is recorded by debiting depreciation expense and crediting accumulated depreciation. Depreciation expense is also debited to the income statement. On the balance sheet, the asset remains at its original cost while accumulated depreciation is deducted or shown as a contra asset account. Gains or losses on asset disposals are recorded by debiting/crediting the asset and crediting/debiting income.

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    Attribution Non-Commercial (BY-NC)
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    13 views2 pages

    For Recording Purchase of Asset

    Uploaded by

    dhan1221
    The document outlines the accounting treatment for fixed assets and depreciation over multiple years. In the year of purchase, a journal entry is made debiting the asset account and crediting cash/accounts payable. Each subsequent year, a depreciation expense is recorded by debiting depreciation expense and crediting accumulated depreciation. Depreciation expense is also debited to the income statement. On the balance sheet, the asset remains at its original cost while accumulated depreciation is deducted or shown as a contra asset account. Gains or losses on asset disposals are recorded by debiting/crediting the asset and crediting/debiting income.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as DOCX, PDF, TXT or read online from Scribd
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    of 2

    For recording purchase of asset (only in the year of purchase) Asset A/c Dr.

    (with the cost of asset including installation, expenses etc.) To Bank/Vendor A/c (cash/credit purchase) 2. Following two journal entries are recorded at the end of each year: (a) For crediting depreciation amount to provision for depreciation account Depreciation A/c Dr. (with the amount of depreciation) To Provision for depreciation A/c (b) For charging depreciation to profit and loss account Profit & Loss A/c Dr. (with the amount of depreciation) To Depreciation A/c 3. Balance sheet treatment In the balance sheet, the fixed asset continues to appear at its original cost on the asset side. The depreciation charged till that date appears in the provision for depreciation account, which is shown either on the liabilities side of the balance sheet or by way of deduction from the original cost of the asset concerned on the asset side of the balance sheet.

    Balance Sheet of XYZ as on 31.12.2011 Liability Asset ` ` Particulars Particulars Provision for XXX Fixed asset XXX depreciation Less: XXX XXX Depreciation

    Balance Sheet of XYZ as on 31.12.2011 Liability Asset

    Particulars Rs Particulars Rs Provision for depreciation XXX Fixed asset XXX Less: Depreciation XXX XXX

    (a) In case of profit Asset A/c Dr. To Profit and Loss A/c

    (b) In case of loss Profit and Loss A/c Dr. To Asset A/c

    (a) In case of profit Asset A/c Dr. To Profit and Loss A/c (b) In case of loss Profit and Loss A/c Dr. To Asset A/c

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