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can you answer this

M.Sriram Shenoy (CA Final) (814 Points)

25 January 2008

Why Closing Stock and depreciation does not appear on Trial Balance? Even if effect can be given to Closing stock to bring it into accounts, why doesn't depreciation appear?

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16 Replies

CA. Dashrath Maheshwari (TaXpert) (15090 Points)
Replied 25 January 2008

closing stock is out of full value of purchase and opening stock, which are already included in the trial balance therefore closing stock can not be form part of trial except in a situation that purchase and opening stock is not there in tb. and consumption is there.

CA. Dashrath Maheshwari (TaXpert) (15090 Points)
Replied 25 January 2008

If you take WDV of fixed assets as part of TB then you have to take depreciation reserve in TB else its already accounted for in profit& loss and fixed assets so no need to take it again.

Kapil Bajaj (Service) (112 Points)
Replied 25 January 2008

???????????????????
i cant get u Mr. Maheshwari.

venkat (CA Student) (58 Points)
Replied 26 January 2008

Hi Depreciation logic i could not understand.. can you please elaborate it. Thanks in advance Regards, Venkat

let live (student) (91 Points)
Replied 26 January 2008

hi, The reason why closing stock is not taken into account in a trial balance is because a trial balance is a balance of all ledger account a given point in time.It records only transactions which have a two way effect for EG:Purchases where goods are bought against cash or credit and sales where goods are sold against cash or credit..But closing stock is not a transaction having a two way effect any given point in time.It is only an indication of the goods lying in the factory at the end of the year.It is therefore showed below the trial balance and not in the trial balance.However in order to derive at the exact gross profit the closing stock is taken into consideration in the trading account and also appears as an asset in the balance sheet.In some case the closing stock appears as an adjusted purchase account in the trial balance and in this case it does not appear in the trading account but appears only in the balance sheet.

venkat (CA Student) (58 Points)
Replied 27 January 2008

hi the closing stock logic, i understood... but the depreciation logic i could not get.. could anybody please calrify? Regards Venkat

CA. Dashrath Maheshwari (TaXpert) (15090 Points)
Replied 28 January 2008

Trial balance is nothing but a balance sheet only.
which takes all closing balances and tally them.
because of double entry system, trial should always match.
In depreciation if we charge depreciation on fixed asset by crediting fixed asset and debiting depreciation and in finalization we debit profit and loss account and credit back to depreciation then depreciation account will became zero therefore it will not come in final trial balance.
but when we accumulate depreciation in reserve account and shows fixed assets on original cost in trial balance then we should show depreciation reserve on the cr-side of trial balance.

CA. Dashrath Maheshwari (TaXpert) (15090 Points)
Replied 28 January 2008

if got the point or not got , just PM me,,,

venkat (CA Student) (58 Points)
Replied 28 January 2008

got it... great.. thanks a lot for the explanation.. Regards Venkat

(Guest)

Dear sir

Please let me Know how we can done Deprication reserve entry. And What Effect On Account or profi or Liabilities.

thanks

shabbir saba

kuwait

CA. Dashrath Maheshwari (TaXpert) (15090 Points)
Replied 04 September 2008

Dear Shabbir,

On the end of the year, calculate the depreciation and pass the following entry to make depreciation reserve:

Depreciation A/c DR. xxxx.xx

To Depreciation Reserve A/c xxxx.xx

(Being depreciation provided on fixed assets as per the sheet attached)

Note: Attach the printout of your depreciation calculation with the above voucher.

The above entry will not affect the Fixed Assets but it will affect the Net profit ...and the Reserve Account.

By making depreciation reserve account you can carry your fixed assets in the books on their respective cost.

Even you can revalue your fixed asset by making capital reserve account in Reserve & Surplus Group of Balance Sheet.

**DM

(Guest)

Foreign contribution - general cash Incorporation entries.

Please?

CA. Dashrath Maheshwari (TaXpert) (15090 Points)
Replied 20 September 2008

Foreign contribution:

Rule 8 of the Foreign Contribution (Regulation) Rules, 1976, provides that a separate set of accounts and records shall be maintained exclusively for foreign contribution received and utilized.

Such accounts shall be maintained on an yearly basis from April to March. A certificate from a Chartered Accountant in Form FC-3 along with a balance sheet and statement of receipt and payment shall be submitted, in duplicate, to the Secretary to Government of India, Ministry of Home Affairs, New Delhi, within four months after the closure of the year

**DM

(Guest)

Hi,

Can somebody explain how to pass entries for depreciation in Tally Software? Under which group depreciation will come?How can we make sure that it does not get reflected in TB. But when you pass entries for depreciation by debiting depreciation and crediting the fixed assets, the WDV of asset will appear in TB. But the amount written down on asset has to be shown somewhere in TB for it to tally. How does it work out. Please clarify.

Regards,

Mohammed