Depreciation

add                                                                

we can add that additional balance

Understand the concept first

Generally when you charge depreciation on fixed assets, you will pass the entry like this

Depreciation A/c 

  to Fixed Assets A/c

And you will transfer the Depreciation so charged to Profit and Loss Account A/c

Profit and Loss A/c

To Depreciation A/c

By this Fixed Assets are reduced by the extent of Depreciaion Provided. In future if you want to know the original amount of a Particular Asset, it is difficult to derive as they were restated every year 'cause of depreciation

So, inorder to Carry the Assets at original Value some organisations will account for depreciation like this

Depreciation A/c

  To Provision for Depreciation A/c (Insted of Fixed Assets) 

This Provision for Depreciation being a Credit Item will be shown in Balance sheet on liability Side or it can be shown as a dedution from Fixed Assets. This Provision for Depreciation will be accumulated with every year depreciation

Now your Question

It is given in trail balance Provision for Depreciation as Credit Balance - Obviosly it is credit only

When a fresh Depreciation is charged-- That will be added to Existing Balace

As the Entry for Fresh Depreciation

Depreciation A/c

  To Provision for Depreciation A/c ( Again Credited)

agreee with above add additional balance

Very nicely explained by Mr. Prakash.  Agreed.

nicely explained

Very Good explination Boss..............

Thanq Mates

Provision for depreciation is credit balance account.

In order to carry the asset in its original value, a depreciation fund / provision for depreciation account will be created, which will show credit balance. So the entry will read as

Depreciation a/c Dr

To Depreciation Fund a/c

Each year depreciation will be further added to the same and depreciation fund account will show accumulated balance of depreciation charged till the date of B/s.

For the year depreciation will be charged to P&L account by passing the following entry,

Profit & Loss a/c Dr

To Depreciation (for the year)

Now, on sale of the particular asset the depreciation fund created has to be reversed. Assuming profit on sale of asset then the entry would read as,

Bank a/c dr

Depreciation fund a/c dr

To Asset a/c

To Profit on sale of asset a/c

Hope u understood...

Totally in assent with Prakash

i  would thank from the bottom of my heart to all  my friends ... for explaining this concept  

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