Question

1. A company whose accounting year is the calendar year, purchased on 1-1-93 a

machine for Rs. 40,000. It purchased further machinery on

1

stOctober, 1993 for Rs. 20,000 and on 1st July, 1994 for Rs. 10,000. On 1-7-95, 1/4thof

the machinery installed on 1-1-93 became obsolute and was sold for Rs.

6,800.Provide depreciation at 10% p.a. Show the machinery account for all the three

years under Diminishing Balance method.​

Answer 1

Depreciation is the rear and tear in the value of fixed assets.

Depreciation means loss in the value of fixed asset which occurs due to obsolesce or by the usage the asset value get depreciated.

Depreciation is of two types -

Straight Line Method

Diminishing Balance Method

Straight line method - In this method depreciation is applied on the purchase vale of asset, which means the value of depreciation is fixed.

Diminishing Balance Method - In this depreciation keeps on changing as depreciation is charged on the depreciated value of asset not only on the purchase value of asset.  

While solving this question ,I have assumed that the machinery which is purchased on 1 January 1993 for 40,000 , the whole machinery is getting sold on 1 July 1995.