depreciation accounting

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mridul savio Pinto

articled trainee

769 Points Posted on 20 December 2010

the balance in the accumulated provision for depreciation account of a company as at the beginning of the year 2008-2009 was 200000 when the original cost of the assest amounted to 1000000 .the companty charges 10pc depreciation on straight line method either the assests are sold or purchased ,the assest costing 500000 with accumulated provision as at the beginning of the year was disposed off for 80000 during the year

1.depreciation for the current year ?

2.the balance of the accumulated depreciation accounty at the end of the year considering the current year's depreciation charge would be ?

Replies (2)

muraligopoavarapu

article student

66 Points Posted on 02 January 2011

1.)Depreciation for the year (1000000-500000)*10/100= 50000

Total accumulated deprication year ended is 120000+50000=170000

2.)the closing balance of accumulated depriciation is not considered as depriciation for the year

Rahul Agarwal

N.A.

91 Points Posted on 08 January 2011

the above answer is wrong. here's the right one:

company charges depn even if the assets are sold during the year, so the depn of the cost of asset sold (i.e 5,00,000) should also be included.

Q1: as the outstanding balance in the asset column is 10,00,000 the depn for the year is 1,00,000

Q2: now the depn a/c will show 3,00,000 (2,00,000 outstanding and 1,00,000 present) but to reflect the true accounts you have to deduct the outstanding amount of 80,000 for which the asset was disposed off.. so the correct outstanding amount at the end of financial year will be 2,20,000.