Question

The amount of depreciation is reducing year by year, So this method is also known Diminishing or Reducing balnce method. On 1 st January 2005,A machinery costing rupees 100000 was purchased and depreciation is changed 20% per year. Prepare machinery account upto 31st December 2008 under 1)Fixed installment method (original cost method) 2)written down value method (book value method )​

Answer 1

Answer is in the Attachment ;

The machinery Account in fixed installment method and in written value method are attached.. Go through it.

Straight Line Method :

• Depreciation is calculated on original cost

• Amount of Depreciation Same every year.

• The value of asset can be written down to zero or scrap value

Wtitten Down Value Method :

• Depreciation is calculated on the book value the assets.

• Amount of Depreciation declines year after year.

• The value of assets will not become zero.