Depreciation accounting

Reducing balance method

Under this method the depreciation is

charged at a percentage on the written down
value of an asset.
 Question:
If the machinery is purchased for Rs 10,000 on 1St April 2012
and depreciation is charged on diminishing balance method , find
depreciation for the three years

Answer :
For 2012 : Depreciation on Rs10,000 10,000x10/100 = 1,000
For 2013 : Depreciation on Rs 9,000 (10,000-1,000) 9,000x10/100 = 900
For 2014 : Depreciation on 8,100 (9,000-900) 8,100x10/100 =810
Question 2

On 1st april 2012 R Chand Ltd purchase a machinery

for Rs 60,000 and spent Rs 10,000 on its erection. The
machinery is depreciated @ 20% per annum. Prepare
Machinery Account for the first two years under
diminishing balance method

Total cost of machinery = 60,000+ 10,000

= 70,000
 Machinery Account
Dr          Cr

Date Particulars Amount   Date Particulars Amount

1/4/2012 To Bank 70,000   31-3-13 By Depreciation 14,000

         (70,000x20/100)  

         By Balanced b/d 56,000

    70,000       70,000

1/4/2013 To Balanced b/d 56,000   31-3-14 By Depreciation  

         (56,000x20/100) 11,200

         By Balanced b/d 44,800

    56,000       56,000
 Additions made
Question 3
Page no 1.109

On 1st january 2007, a company brought a plant and machinery

costing Rs 45,000 and spent Rs 5,000 on its erection.
Addition made on 1st July 2009 for the value of Rs 20,000. Depreciation is
provided @ 10% per annum . Prepare plant and machinery account for 4
years under
1. Fixed Instalment System
2. Diminishing Balance Method
Fixed Instalment Method
Plant and Machinery Account
Dr Cr
Date Particulars Amount  Date Particulars Amount
1/4/2007 To Bank 50,000 31-3-13 By Depreciation 5,000
  (45,000+5,000)      
      By Balanced b/d 45,000
  50,000   50,000
1/4/2008 To Balanced b/d 45,000 31-3-14 By Depreciation 5,000
       
      By Balanced b/d 40,000
  45,000   45,000
1/4/2009 TO Balanced b/d 40,000 31-3-13 By Depreciation 6,000
1/7/2009 To Bank 20,000   (5,000+1,000)  
      By Balanced b/d 54,000
  60,000   60,000
1/4/2013 To Balanced b/d 54,000 31-3-14 By Depreciation 7,000
      (5,000+2,000)  
      By Balanced b/d 47,000
    54,000      54,000
Diminishing balance method
Plant and Machinery Account
Dr Cr
Date Particulars Amount  Date Particulars Amount
1/4/2007 To Bank 50,000 31-3-13 By Depreciation 5,000
  (45,000+5,000)      
      By Balanced b/d 45,000
  50,000   50,000
1/4/2008 To Balanced b/d 45,000 31-3-14 By Depreciation 4,500
       
      By Balanced b/d 40,500
  45,000   45,000
1/4/2009 TO Balanced b/d 40,500 31-3-13 By Depreciation 5,050
1/7/2009 To Bank 20,000   (4,050+1,000)  
      By Balanced b/d 55,450
  60,500   60,500
1/4/2013 To Balanced b/d 55,450 31-3-14 By Depreciation 5,545
      (5,000+2,000)  
      By Balanced b/d 49,905
    55,450      55,450