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DEPRECIATION

DEPRECIATION. DEPRECIATION. DEPRECIATION. DEPRECIATION. Methods of charging Depreciation. DIMINISHING BALANCE METHOD. STRAIGHT LINE METHOD. Click on the tabs. Straight Line Method. Under this method, the amount of depreciation remains the same from year after year.

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DEPRECIATION

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  1. DEPRECIATION

  2. DEPRECIATION

  3. DEPRECIATION

  4. DEPRECIATION

  5. Methods of charging Depreciation DIMINISHING BALANCE METHOD STRAIGHT LINE METHOD Click on the tabs

  6. Straight Line Method Under this method, the amount of depreciation remains the same from year after year. • Yearly Depreciation = Original cost - Estimated scrap value • Estimated life of asset

  7. Diminishing Balance Method Under this method, the value of the asset will goes on diminishing year after year. Example: 1st yr – 10,000 x 10 = 1000 100 2nd yr – (10,000 - 1000) x 10 = 900 100 3rd Yr - (10,000 – 1000- 900) x 10= 810 100

  8. Question -Joise Textile Ltd Purchased a second hand machinery on 1st January, 2009 for ` 70,000 and spend ` 10,000 on its erection. On 1st April 2010 it purchased additional machinery costing ` 48000. On 1st September 2011, the machinery purchased on 1st January 2009 was sold off for ` 42000 and on the same date fresh plant was purchased at a cost of ` 75000. Depreciation is provided at 10% P.A. Accounts are closed on 31st December. Show machinery account for 3 years.

  9. SOLUTION DIMINISHING BALANCE METHOD STRAIGHT LINE METHOD

  10. Straight Line Method MACHINERY ACCOUNT

  11. Diminishing Balance Method MACHINERY ACCOUNT

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