4. 20 years ago, Mr. Mohan use the machine but purchased it on April 01, 2010, for 2,80,000 and spent 10,000 on its carriage and 10,000 on its installation. It is estimated that its working life is 10 years and after 10 years its scrap value will be 20,000. a. Prepare Machine and Depreciation accounts for the first four years by providing depreciation on a straight-line method. Accounts are closed on March 31st every year. b. Prepare Machine account, Depreciation account, and Provision for depreciation account (or accumulated depreciation account) for the first four years by providing depreciation using the diminishing line method. Accounts are closed on March 31st every year.
4. 20 years ago, Mr. Mohan use the machine but purchased it on April 01, 2010, for 2,80,000 and spent 10,000 on its carriage and 10,000 on its installation. It is estimated that its working life is 10 years and after 10 years its scrap value will be 20,000. a. Prepare Machine and Depreciation accounts for the first four years by providing depreciation on a straight-line method. Accounts are closed on March 31st every year. b. Prepare Machine account, Depreciation account, and Provision for depreciation account (or accumulated depreciation account) for the first four years by providing depreciation using the diminishing line method. Accounts are closed on March 31st every year.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
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Transcribed Image Text:4. 20 years ago, Mr. Mohan use the machine but purchased it on April 01, 2010, for
2,80,000 and spent 10,000 on its carriage and 10,000 on its installation. It
is estimated that its working life is 10 years and after 10 years its scrap value will
be € 20,000.
a. Prepare Machine and Depreciation accounts for the first four years by providing
depreciation on a straight-line method. Accounts are closed on March 31st every
year.
b. Prepare Machine account, Depreciation account, and Provision for depreciation
account (or accumulated depreciation account) for the first four years by
providing depreciation using the diminishing line method. Accounts are closed on
March 31st every year.
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