Example1_depreciation

Example – 1 A company purchased 3 computers @ Rs. 100,000 each on Baishakh 1, 2065. The company purchased additional two computers @ Rs. 75,000 each on Kartik 1,2065. On Chaitra 31, 2067 two computer purchased on Baishaks 1, 2065 has been sold for a total amount of Rs. 60, 000. Company closes accounts at Chaitra end each year. Depreciation is provided at 20% p.a. using diminishing balance method.

Required: Computer Account from 2065 to 2067 

[Ans: loss on sales 42,400, balance: 137,600]

Step-1: Draw the Format Given below: 

Step 2: Calculation of Profit or Loss when the Assets(Machinery) Sold:

Working Note:

Total Original Cost of (Sold ) Machinery (assets)         xxx
Less: Total Depreciation of Used full Life (…………)     xxx
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(CP) Book value of assets after charging  total depreciation  XXX
(SP) Sales value of Assets(machinery)                                        XXX
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Profit if (SP-CP) : xxx  --- Post it into Dr. side of machinery account

or Loss if (CP- SP) : xxx --- Post it into Cr. side of machinery account

Example – 2 A company purchased 3 motorcycles at Rs. 200,000 each on January 1, 2008. The company purchased other two motorcycles at a cost of Rs. 600,000 on July 1, 2008. On December 31, 2010, the company sold 2 motorcycles, purchased on January 1, 2008 for Rs. 350,000. Accounts of the company are closed at the end of December each year and depreciation is charged at 15% per annum using fixed installment method

Required: Motorcycle Account from 2008 to 2010

[Ans: profit on sales 13,000, balance: 485,000]

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