Raghav & Sons purchased a car for Rs.1,00,000 on 1st January, 2012. The car was depreciated at 10% under the w.d.v. method on 1st January, 2015, they wanted to change the method of depreciation from w.d.v method to straight line method without changing the rate. Show the asset account from 2012 to 2015.
Answers
Illustration–1 (Straight Line Method)
Soloman purchases a machine for Rs. 1,00,000 and 1 January 2,000. Its estimated useful life is 5 years and scarpt Values Rs. 10,000. It is decided to write off depreciation under straight lien method. Pass necessary journal entries for five years and open necessary account in the ledger for the same period. The accounting period ends on 321 March every years.
Solution:
Annual Depreciation = = Rs. 18,000 per year
Rate of Derpreciation = = 18%
Journal Entries
Date Particulars Debit Credit
Rs. Rs.
2000
Jan. 1 Machinery Account Dr. 1,00,000
To Bank Account 1,00,000
(Purchase of machine)
31 Mar. Depreciation Account Dr. 4,500
To Machinery Account 4,500
(Depreciation on machinery for 3 months)
Profit and Loss Account Dr. 4,500
To Depreciation Account 4,500
(Depreciation charged to profit and loss A/c)
2001
31 Mar. Depreciation Account Dr. 18,000
To Machinery Account 18,000
(Depreciation of machinery for one year)
31 Mar. Profit and loss account 18,000
To depreciation Account 18,000
(Depreciation chargess transferred to profit and loss account)
2002
31 Mar. Depreciation Account Dr. 18,000
To Machinery Account 18,000
(Annual Depreciation charges
Profit and Loss Account Dr. 18,000
To Depreciation Account 18,000
(Depreciation charges transferred to profit and loss account)
2003
31 Mar. Depreciation Account Dr. 18,000
To Machinery Account 18,000
(Annual depreciation charges)
Profit and Loss account 18,000
To Depreciation Account 18,000
(Transfer of annual depreciation to profit and loss account)
2004
31 Mar. Depreciation Account Dr. 18,000
To Machinery Account 18,000
(Annual depreciation charges)
Profit and loss Account Dr. 18,000
To Depreciation Account 18,000
(Transfer of depreciation charges to profit and loss account)
31 Dec. Bank Account Dr. 10,000
To Machinery Account 10,000
(Machinery sold for Rs. 10,000 as scrap)
2005
21 Mar. Depreciation Account Dr. 13,500
To Machinery Account 13,500
(Depreciation charges for 9 months on Rs. 1,00,000 @ 18%)
31 Mar. Profit Loss Account Dr. 13,500
To Depreciation Account 13,500
(Transfer of depreciation account to profit and loss account)
Dr. Machinery Account Cr.
1 Jan. 2000 Rs. 31 March 2000 Rs.
To bank Account 1,00,000 By Depreciation Account 4,500
By Balance c/d 95,500
1,00,000 1,00,000
1 April 2000 31 March 2001
To Balance b/d 95,500 By Depreciation Account 18,000
By Balance c/d 77,500
95,500 95,500
1 April 2001 31 March 2002
To Balance b/d 77,500 By Depreciation Account 18,000
By Balance c/d 59,500
77,500 77,500
1 April 2002 31 March 2003
To Balance b/d 59,500 By Depreciation Account 18,000
By Balance c/d 41,500
59,500 59,500
1 April 2003 31 March 2004
To Balance b/d 41,500 By Depreciation Account 18,000
By Balance c/d 23,500
41,500 41,500
1 April 2004 31 December 2004
To Balance b/d 23,500 By Bank Account 10,000
(Scrap)
31 March 2005
By March 2005 13,500
(for 9 months)
23,500 23,500