Question

21. The machinery costing Rs. 8,000, with accumulated depreciation of Rs. 6,700 and sold of Rs. 2,000, would result in a?

Answer 1

Explanation:

Correct option is

debit depreciation expense Rs.2000; credit equipment Rs.2000

Reduction in value of tangible fixed assets due to normal usage, wear and tear, new technology or unfavorable market conditions is called Depreciation. Journal entry for depreciation depends on whether the provision for depreciation/accumulated depreciation account is maintained or not. 

Assets such as plant and machinery, buildings, vehicles, furniture etc. which are expected to last more than one year, but not for an infinite number of years are subject to depreciation. Below journal entry for depreciation assumes that depreciation is charged directly to the asset account.