DEPARTMENT OF TECHNICAL EDUCATION

ANDHRA PRADESH

Name : Y.Yella Reddy

Designation : HCCP
Branch : DCCP
Institute :026,S.G.Govt.Polytechnic,Adilabad
Year/Semester : III Semester
Subject : Accountancy-II
Subject Code : CCP-302
Topic : Depreciation
Duration : 50 Min.
Sub Topic : Problems on Fixed Instalment
Method
Teaching Aids : Animation
CCP302.26 1
Objectives

On completion of this period you would be

able to solve

 Problems on Fixed Instalment Method

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Recap:

In the last class we learned about the calculation of

Depreciation under Fixed Instalment Method.

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 Illustration

 An asset is purchased for Rs.55,000.

 Depreciation is to be provided annually according to
the straight line method.
 The useful life of the asset is 10 yrs and the
residual value is Rs.5,000.
 Find out the rate of depreciation and prepare the
asset account and depreciation account for the first
3 years.

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 Solution:-

Depreciation = Cost – Estimated scrap value

Estimated life of the asset

=55,000 – 5,000 / 10 = 5,000

Every year Depreciation is to be provided for

Rs. 5,000

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 Asset Account
Dr Cr
Year Particulars Rs. Particulars Rs.
I yr To Cash a/c 55,000 By Depreciation 5,000
,, Balance c/d 50,000
55,000 55,000
II yr To Bal b/d 50,000 By Depreciation 5,000
,, Bal c/d 45,000
50,000 50,000
III yr To Bal b/d 45,000 By Depreciation 5,000
,, Bal c/d 40,000
45,000 45,000

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 Depreciation Account
Dr Cr
Rs. Rs.
I yr To Asset a/c 5,000 By P&L a/c 5,000

5,000 5,000
II yr To Asset a/c 5,000 By P&L a/c 5,000

5,000 5,000
III To Asset a/c 5,000 By P&L a/c 5,000
yr

5,000 5,000

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 Illustration
• Raju & Co. acquired a machine on 1st July, 2000 at
a cost of Rs. 55,000 and spent Rs. 5,000 on its
installation.
The firm writes off depreciation at 10% every year
under Fixed Installment method.
The books are closed on 31st December every
year.
Show the machinery a/c and the depreciation a/c for
3 years.

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Solution:

(Depreciation = Cost of asset X Rate of depreciation

/100)
Cost of asset = 55,000 + 5,000 = 60,000
Rate of Depreciation = 10%
Depreciation = 60,000 X 10/100 = 6000
Every year a provision of Rs.6,000 is made towards
depreciation.

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 Machinery Account
Dr. Cr
Date Particulars Rs. Date Particulars Rs.
2000 2000 By Depreciation
July 1 To Cash a/c 55,000 Dec. 31 For 6 Months 3000
" To Cash a/c 5,000 By Balance c/d 57000
60000 60000

2001 2001
Jan 1 To Bal b/d 57000 Dec. 31 By Depreciation 6000
By Balance c/d 51000
57000 57000

2002 2002
Jan 1 To Bal b/d 51000 Dec. 31 By Depreciation 6000
By Balance c/d 45000
51000 51000

2003
Jan. 1 To Bal b/d 45000
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 Depreciation Account
Dr. Cr
Date Particulars Rs. Date Particulars Rs.
2000 2000
Dec.31 To Machinery a/c 3,000 Dec. 31 By Profit & Loss a/c 3000

2001 2001
Dec. 31 To Machinery a/c 6000 Dec. 31 By Profit & Loss a/c 6000

2002 2002
Dec. 31 To Machinery a/c 6000 Dec. 31 By Profit & Loss a/c 6000

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Assignment

Solve first five problems from your text book

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Summary
 So far we have learnt
 Calculation of Depreciation under Straight
line method
 Preparation of Asset Account
 Preparation of Depreciation Account

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