Accounting and Finance

Course Code: 21VMB0C103

Unit 3: Depreciation

Prof. Sathyanarayana K
Topics:
• Introduction
• Need for providing Depreciation
• Factors affecting Depreciation
• Depreciation Methods
• Accounting Treatment
What is Depreciation?
• The term depreciation refers to the reduction in or
loss of quality or value of a fixed asset through wear
and tear in use.
• Depreciation takes place in the case of all fixed assets
with certain possible exceptions e.g. land and antiques
etc.,
• Depreciation does take place irrespective of regular
repairs and proper maintenance of assets

According to IAS-4, “Depreciation is the allocation of

the depreciable amount of an asset over its estimated
useful life,”
Need for Providing Depreciation

• To Ascertain the Profits or Losses

• To show the Asset as its Reasonable Value
• Replacement of assets:
• To Reduce Income Tax
Factors Affecting Depreciation

Estimated
Cost of Asset Salvage Value
Factors
Affecting
Depreciation

Depreciable Life of Asset

Cost
 Methods of Depreciation

Straight line Method

Diminishing Balance Method

Machine Hour Rate Method

Sum of years Digits Method

Annuity Method

Depreciation Fund Method

Insurance Policy Method

Depletion Method.
 Depreciation

Decline in the value of an asset over a period of time

Book value at the Book Value at the
Year Depreciation
beginning of the year end of the year
2015 1,00,000 10,000 90,000
2016 90,000 10,000 80,000
2017 80,000 10,000 70,000
2018 70,000 10,000 60,000
2019 60,000 10,000 50,000
2020 50,000 10,000 40,000
2021 40,000 10,000 30,000
2022 30,000 10,000 20,000
2023 20,000 10,000 10,000
2024 10,000 10,000 -
 Depreciation

Straight line Method

 Straight line Method

Calculation of Depreciation

𝑂𝑟𝑖𝑔𝑖𝑛𝑎𝑙 𝐶𝑜𝑠𝑡 − 𝑅𝑒𝑠𝑖𝑑𝑢𝑎𝑙 𝑉𝑎𝑙𝑢𝑒

𝐴𝑛𝑛𝑢𝑎𝑙 𝐷𝑒𝑝𝑟𝑒𝑐𝑖𝑎𝑡𝑖𝑜𝑛=
𝐸𝑠𝑡𝑖𝑚𝑎𝑡𝑒𝑑 𝐿𝑖𝑓𝑒

If an asset cost is ₹ 5,00,000 and it will have a residual value of ₹ 20,000 at the end
of its useful life of 10 years, what is the amount of depreciation?

5 , 00,000 −20,000
𝐴𝑛𝑛𝑢𝑎𝑙 𝐷𝑒𝑝𝑟𝑒𝑐𝑖𝑎𝑡𝑖𝑜𝑛=
10

The amount of annual depreciation will be ₹ 48,000

 Straight line Method

1. A firm purchased a plant for a sum of ₹ 50,000 on 1st January 2015. Installation charges
are ₹ 5,000. The plant is estimated to have a scrap value of ₹ 3,000 at the end of its useful
life of five years. You are required to prepare Plant Account for five years charging
depreciation according to the Straight Line Method.

𝑂𝑟𝑖𝑔𝑖𝑛𝑎𝑙 𝐶𝑜𝑠𝑡 − 𝑅𝑒𝑠𝑖𝑑𝑢𝑎𝑙 𝑉𝑎𝑙𝑢𝑒

𝐴𝑛𝑛𝑢𝑎𝑙 𝐷𝑒𝑝𝑟𝑒𝑐𝑖𝑎𝑡𝑖𝑜𝑛=
𝐸𝑠𝑡𝑖𝑚𝑎𝑡𝑒𝑑 𝐿𝑖𝑓𝑒

55,000 −3,000
𝐴𝑛𝑛𝑢𝑎𝑙 𝐷𝑒𝑝𝑟𝑒𝑐𝑖𝑎𝑡𝑖𝑜𝑛=
5
 Straight line Method

Dr. Plant A/c Cr.

Amount Amount
Date Particulars JF Date Particulars JF
(₹) (₹)
1st Jan 2015 To Bank A/c 55,000
 Straight line Method

Dr. Plant A/c Cr.

Amount Amount
Date Particulars JF Date Particulars JF
(₹) (₹)
1st Jan 2015 To Bank A/c 55,000 31st Dec 2015 By Depreciation A/c 10,400
 Straight line Method

Dr. Plant A/c Cr.

Amount Amount
Date Particulars JF Date Particulars JF
(₹) (₹)
1st Jan 2015 To Bank A/c 55,000 31st Dec 2015 By Depreciation A/c 10,400
-“- By Balance C/d 44,600
55,000 55,000
 Straight line Method

Dr. Plant A/c Cr.

Amount Amount
Date Particulars JF Date Particulars JF
(₹) (₹)
1st Jan 2015 To Bank A/c 55,000 31st Dec 2015 By Depreciation A/c 10,400
-“- By Balance C/d 44,600
55,000 55,000
1st Jan 2016 To Balance B/d 44,600
 Straight line Method

Dr. Plant A/c Cr.

Amount Amount
Date Particulars JF Date Particulars JF
(₹) (₹)
1st Jan 2015 To Bank A/c 55,000 31st Dec 2015 By Depreciation A/c 10,400
-“- By Balance C/d 44,600
55,000 55,000
1st Jan 2016 To Balance B/d 44,600 31st Dec 2016 By Depreciation A/c 10,400
 Straight line Method

Dr. Plant A/c Cr.

Amount Amount
Date Particulars JF Date Particulars JF
(₹) (₹)
1st Jan 2015 To Bank A/c 55,000 31st Dec 2015 By Depreciation A/c 10,400
-“- By Balance C/d 44,600
55,000 55,000
1st Jan 2016 To Balance B/d 44,600 31st Dec 2016 By Depreciation A/c 10,400
-“- By Balance C/d 34,200
44,600 44,600
 Straight line Method

Dr. Plant A/c Cr.

Amount Amount
Date Particulars JF Date Particulars JF
(₹) (₹)
1st Jan 2015 To Bank A/c 55,000 31st Dec 2015 By Depreciation A/c 10,400
-“- By Balance C/d 44,600
55,000 55,000
1st Jan 2016 To Balance B/d 44,600 31st Dec 2016 By Depreciation A/c 10,400
-“- By Balance C/d 34,200
44,600 44,600
1st Jan 2017 To Balance B/d 34,200
 Straight line Method

Dr. Plant A/c Cr.

Amount Amount
Date Particulars JF Date Particulars JF
(₹) (₹)
1st Jan 2015 To Bank A/c 55,000 31st Dec 2015 By Depreciation A/c 10,400
-“- By Balance C/d 44,600
55,000 55,000
1st Jan 2016 To Balance B/d 44,600 31st Dec 2016 By Depreciation A/c 10,400
-“- By Balance C/d 34,200
44,600 44,600
1st Jan 2017 To Balance B/d 34,200 31st Dec 2017 By Depreciation A/c 10,400
 Straight line Method

Dr. Plant A/c Cr.

Amount Amount
Date Particulars JF Date Particulars JF
(₹) (₹)
1st Jan 2015 To Bank A/c 55,000 31st Dec 2015 By Depreciation A/c 10,400
-“- By Balance C/d 44,600
55,000 55,000
1st Jan 2016 To Balance B/d 44,600 31st Dec 2016 By Depreciation A/c 10,400
-“- By Balance C/d 34,200
44,600 44,600
1st Jan 2017 To Balance B/d 34,200 31st Dec 2017 By Depreciation A/c 10,400
-“- By Balance C/d 23,800
34,200 34,200
 Straight line Method

Dr. Plant A/c Cr.

Amount Amount
Date Particulars JF Date Particulars JF
(₹) (₹)
1st Jan 2015 To Bank A/c 55,000 31st Dec 2015 By Depreciation A/c 10,400
-“- By Balance C/d 44,600
55,000 55,000
1st Jan 2016 To Balance B/d 44,600 31st Dec 2016 By Depreciation A/c 10,400
-“- By Balance C/d 34,200
44,600 44,600
1st Jan 2017 To Balance B/d 34,200 31st Dec 2017 By Depreciation A/c 10,400
-“- By Balance C/d 23,800
34,200 34,200
1st Jan 2018 To Balance B/d 23,800
 Straight line Method

Dr. Plant A/c Cr.

Amount Amount
Date Particulars JF Date Particulars JF
(₹) (₹)
1st Jan 2015 To Bank A/c 55,000 31st Dec 2015 By Depreciation A/c 10,400
-“- By Balance C/d 44,600
55,000 55,000
1st Jan 2016 To Balance B/d 44,600 31st Dec 2016 By Depreciation A/c 10,400
-“- By Balance C/d 34,200
44,600 44,600
1st Jan 2017 To Balance B/d 34,200 31st Dec 2017 By Depreciation A/c 10,400
-“- By Balance C/d 23,800
34,200 34,200
1st Jan 2018 To Balance B/d 23,800 31st Dec 2018 By Depreciation A/c 10,400
 Straight line Method

Dr. Plant A/c Cr.

Amount Amount
Date Particulars JF Date Particulars JF
(₹) (₹)
1st Jan 2015 To Bank A/c 55,000 31st Dec 2015 By Depreciation A/c 10,400
-“- By Balance C/d 44,600
55,000 55,000
1st Jan 2016 To Balance B/d 44,600 31st Dec 2016 By Depreciation A/c 10,400
-“- By Balance C/d 34,200
44,600 44,600
1st Jan 2017 To Balance B/d 34,200 31st Dec 2017 By Depreciation A/c 10,400
-“- By Balance C/d 23,800
34,200 34,200
1st Jan 2018 To Balance B/d 23,800 31st Dec 2018 By Depreciation A/c 10,400
-“- By Balance C/d 13,400
23,800 23,800
 Straight line Method

Dr. Plant A/c Cr.

Amount Amount
Date Particulars JF Date Particulars JF
(₹) (₹)
1st Jan 2015 To Bank A/c 55,000 31st Dec 2015 By Depreciation A/c 10,400
-“- By Balance C/d 44,600
55,000 55,000
1st Jan 2016 To Balance B/d 44,600 31st Dec 2016 By Depreciation A/c 10,400
-“- By Balance C/d 34,200
44,600 44,600
1st Jan 2017 To Balance B/d 34,200 31st Dec 2017 By Depreciation A/c 10,400
-“- By Balance C/d 23,800
34,200 34,200
1st Jan 2018 To Balance B/d 23,800 31st Dec 2018 By Depreciation A/c 10,400
-“- By Balance C/d 13,400
23,800 23,800
1st Jan 2018 To Balance B/d 13,400
 Straight line Method

Dr. Plant A/c Cr.

Amount Amount
Date Particulars JF Date Particulars JF
(₹) (₹)
1st Jan 2015 To Bank A/c 55,000 31st Dec 2015 By Depreciation A/c 10,400
-“- By Balance C/d 44,600
55,000 55,000
1st Jan 2016 To Balance B/d 44,600 31st Dec 2016 By Depreciation A/c 10,400
-“- By Balance C/d 34,200
44,600 44,600
1st Jan 2017 To Balance B/d 34,200 31st Dec 2017 By Depreciation A/c 10,400
-“- By Balance C/d 23,800
34,200 34,200
1st Jan 2018 To Balance B/d 23,800 31st Dec 2018 By Depreciation A/c 10,400
-“- By Balance C/d 13,400
23,800 23,800
1st Jan 2019 To Balance B/d 13,400 31st Dec 2019 By Depreciation A/c 10,400
-“- By Balance C/d 3,000
13,400 13,400
 Straight line Method

On 1st April 2018 ABC Ltd, purchased a small plant for ₹ 4,50,000, on 1st October in the
same year additional plant was purchased costing ₹ 2,22,500. On 1st October 2019 plant
purchased on 1st April 2018 was sold for ₹ 1,80,000. On 1st October 2020 fresh plat was
purchased for ₹ 5,40,000 and the plant purchased on 1st October 2018 was sold for
₹1,89,000. Depreciation is provided at 10% p.a on the straight-line method for the year
ending 31st March. Show the Plant account up to 31st March 2021.
 Straight line Method

On 1st April 2018 ABC Ltd, purchased a small plant for ₹ 4,50,000, on 1st October in the
same year additional plant was purchased costing ₹ 2,22,500. On 1st October 2019 plant
purchased on 1st April 2018 was sold for ₹ 1,80,000. On 1st October 2020 fresh plat was
purchased for ₹ 5,40,000 and the plant purchased on 1st October 2018 was sold for
₹1,89,000. Depreciation is provided at 10% p.a on the straight-line method for the year
ending 31st March. Show the Plant account up to 31st March 2021.
 Straight line Method

Dr. Plant A/c Cr.

Amount
Date Particulars JF Date Particulars J F Amount (₹)
(₹)
01.04.2018 To Bank A/c 4,50,000
 Straight line Method

On 1st April 2018 ABC Ltd, purchased a small plant for ₹ 4,50,000, on 1st October in the
same year additional plant was purchased costing ₹ 2,22,500. On 1st October 2019 plant
purchased on 1st April 2018 was sold for ₹ 1,80,000. On 1st October 2020 fresh plat was
purchased for ₹ 5,40,000 and the plant purchased on 1st October 2018 was sold for
₹1,89,000. Depreciation is provided at 10% p.a on the straight-line method for the year
ending 31st March. Show the Plant account up to 31st March 2021.
 Straight line Method

Dr. Plant A/c Cr.

Amount
Date Particulars JF Date Particulars J F Amount (₹)
(₹)
01.04.2018 To Bank A/c 4,50,000
01.10.2018 To Bank A/c 2,22,500
 Straight line Method

Dr. Plant A/c Cr.

Amount
Date Particulars JF Date Particulars J F Amount (₹)
(₹)
01.04.2018 To Bank A/c 4,50,000 31.03.2019 By Depreciation A/c:
01.10.2018 To Bank A/c 2,22,500 Bought on 01.04 45,000
 Straight line Method

Dr. Plant A/c Cr.

Amount
Date Particulars JF Date Particulars J F Amount (₹)
(₹)
01.04 2018 To Bank A/c 4,50,000 31.03.2019 By Depreciation A/c:
01.10.2018 To Bank A/c 2,22,500 Bought on 01.04 45,000
Bought on 01.10 11,125
 Straight line Method

Dr. Plant A/c Cr.

Amount
Date Particulars JF Date Particulars J F Amount (₹)
(₹)
01.04 2018 To Bank A/c 4,50,000 31.03.2019 By Depreciation A/c:
01.10.2018 To Bank A/c 2,22,500 Bought on 01.04 45,000
Bought on 01.10 11,125

6,72,500 6,72,500
 Straight line Method

Dr. Plant A/c Cr.

Amount
Date Particulars JF Date Particulars J F Amount (₹)
(₹)
01.04 2018 To Bank A/c 4,50,000 31.03.2019 By Depreciation A/c:
01.10.2018 To Bank A/c 2,22,500 Bought on 01.04 45,000
Bought on 01.10 11,125
31.03.2019 By Balance C/d 6,16,375
6,72,500 6,72,500
 Straight line Method

Dr. Plant A/c Cr.

Amount
Date Particulars JF Date Particulars J F Amount (₹)
(₹)
01.04 2018 To Bank A/c 4,50,000 31.03.2019 By Depreciation A/c:
01.10.2018 To Bank A/c 2,22,500 Bought on 01.04 45,000
Bought on 01.10 11,125
31.03.2019 By Balance C/d 6,16,375
6,72,500 6,72,500
01.04.2019 To Balance B/d 6,16,375
 Straight line Method

On 1st April 2018 ABC Ltd, purchased a small plant for ₹ 4,50,000, on 1st October in the
same year additional plant was purchased costing ₹ 2,22,500. On 1st October 2019 plant
purchased on 1st April 2018 was sold for ₹ 1,80,000. On 1st October 2020 fresh plat was
purchased for ₹ 5,40,000 and the plant purchased on 1st October 2018 was sold for
₹1,89,000. Depreciation is provided at 10% p.a on the straight-line method for the year
ending 31st March. Show the Plant account up to 31st March 2021.
 Straight line Method

Dr. Plant A/c Cr.

Amount
Date Particulars JF Date Particulars J F Amount (₹)
(₹)
01.04 2018 To Bank A/c 4,50,000 31.03.2019 By Depreciation A/c:
01.10.2018 To Bank A/c 2,22,500 Bought on 01.04 45,000
Bought on 01.10 11,125
31.03.2019 By Balance C/d 6,16,375
6,72,500 6,72,500
01.04.2019 To Balance B/d 6,16,375 01.10.2019 By Bank A/c 1,80,000
 Straight line Method

Dr. Plant A/c Cr.

Amount
Date Particulars JF Date Particulars J F Amount (₹)
(₹)
01.04 2018 To Bank A/c 4,50,000 31.03.2019 By Depreciation A/c:
01.10.2018 To Bank A/c 2,22,500 Bought on 01.04 45,000
Bought on 01.10 11,125
31.03.2019 By Balance C/d 6,16,375
6,72,500 6,72,500
01.04.2019 To Balance B/d 6,16,375 01.10.2019 By Bank A/c 1,80,000
01.10.2019 -”- Depreciation A/c 22,500
 Straight line Method

Calculation of Profit/Loss on Sale of Machinery

Particulars Amount Selling Price 180,000

Purchase Price 450,000 Less: Book Value 382,500
Less Depn (2019) 45,000 Loss on Sale (202,500)
405,000
Less: Depn (Oct 2019) 22,500
Book Value 382,500
 Straight line Method

Dr. Plant A/c Cr.

Amount
Date Particulars JF Date Particulars J F Amount (₹)
(₹)
01.04 2018 To Bank A/c 4,50,000 31.03.2019 By Depreciation A/c:
01.10.2018 To Bank A/c 2,22,500 Bought on 01.04 45,000
Bought on 01.10 11,125
31.03.2019 By Balance C/d 6,16,375
6,72,500 6,72,500
01.04.2019 To Balance B/d 6,16,375 01.10.2019 By Bank A/c 1,80,000
01.10.2019 -”- Depreciation A/c 22,500
 Straight line Method

Dr. Plant A/c Cr.

Amount
Date Particulars JF Date Particulars J F Amount (₹)
(₹)
01.04 2018 To Bank A/c 4,50,000 31.03.2019 By Depreciation A/c:
01.10.2018 To Bank A/c 2,22,500 Bought on 01.04 45,000
Bought on 01.10 11,125
31.03.2019 By Balance C/d 6,16,375
6,72,500 6,72,500
01.04.2019 To Balance B/d 6,16,375 01.10.2019 By Bank A/c 1,80,000
01.10.2019 -”- Depreciation A/c 22,500
01.10.2019 - “ – P&L A/c 2,02,500
 Straight line Method

On 1st April 2018 ABC Ltd, purchased a small plant for ₹ 4,50,000, on 1st October in the
same year additional plant was purchased costing ₹ 2,22,500. On 1st October 2019 plant
purchased on 1st April 2018 was sold for ₹ 1,80,000. On 1st October 2020 fresh plat was
purchased for ₹ 5,40,000 and the plant purchased on 1st October 2018 was sold for
₹1,89,000. Depreciation is provided at 10% p.a on the straight-line method for the year
ending 31st March. Show the Plant account up to 31st March 2021.
 Straight line Method

Dr. Plant A/c Cr.

Amount
Date Particulars JF Date Particulars J F Amount (₹)
(₹)
01.04 2018 To Bank A/c 4,50,000 31.03.2019 By Depreciation A/c:
01.10.2018 To Bank A/c 2,22,500 Bought on 01.04 45,000
Bought on 01.10 11,125
31.03.2019 By Balance C/d 6,16,375
6,72,500 6,72,500
01.04.2019 To Balance B/d 6,16,375 01.10.2019 By Bank A/c 1,80,000
01.10.2019 -”- Depreciation A/c 22,500
01.10.2019 - “ – P&L A/c 2,02,500
31.03.2020 -”- Depreciation A/c 22,250
 Straight line Method

Dr. Plant A/c Cr.

Amount
Date Particulars JF Date Particulars J F Amount (₹)
(₹)
01.04 2018 To Bank A/c 4,50,000 31.03.2019 By Depreciation A/c:
01.10.2018 To Bank A/c 2,22,500 Bought on 01.04 45,000
Bought on 01.10 11,125
31.03.2019 By Balance C/d 6,16,375
6,72,500 6,72,500
01.04.2019 To Balance B/d 6,16,375 01.10.2019 By Bank A/c 1,80,000
01.10.2019 -”- Depreciation A/c 22,500
01.10.2019 - “ – P&L A/c 2,02,500
31.03.2020 -”- Depreciation A/c 22,250

6,16,375 6,16,375
 Straight line Method

Dr. Plant A/c Cr.

Amount
Date Particulars JF Date Particulars J F Amount (₹)
(₹)
01.04 2018 To Bank A/c 4,50,000 31.03.2019 By Depreciation A/c:
01.10.2018 To Bank A/c 2,22,500 Bought on 01.04 45,000
Bought on 01.10 11,125
31.03.2019 By Balance C/d 6,16,375
6,72,500 6,72,500
01.04.2019 To Balance B/d 6,16,375 01.10.2019 By Bank A/c 1,80,000
01.10.2019 -”- Depreciation A/c 22,500
01.10.2019 - “ – P&L A/c 2,02,500
31.03.2020 -”- Depreciation A/c 22,250
31.03.2020 By Balance C/d 1,89,125
6,16,375 6,16,375
 Straight line Method

Dr. Plant A/c Cr.

Amount
Date Particulars JF Date Particulars J F Amount (₹)
(₹)
01.04 2018 To Bank A/c 4,50,000 31.03.2019 By Depreciation A/c:
01.10.2018 To Bank A/c 2,22,500 Bought on 01.04 45,000
Bought on 01.10 11,125
31.03.2019 By Balance C/d 6,16,375
6,72,500 6,72,500
01.04.2019 To Balance B/d 6,16,375 01.10.2019 By Bank A/c 1,80,000
01.10.2019 -”- Depreciation A/c 22,500
01.10.2019 - “ – P&L A/c 2,02,500
31.03.2020 -”- Depreciation A/c 22,250
31.03.2020 By Balance C/d 1,89,125
6,16,375 6,16,375
01.04.2020 To Balance B/d 1,89,125
 Straight line Method

On 1st April 2018 ABC Ltd, purchased a small plant for ₹ 4,50,000, on 1st October in the
same year additional plant was purchased costing ₹ 2,22,500. On 1st October 2019 plant
purchased on 1st April 2018 was sold for ₹ 1,80,000. On 1st October 2020 fresh plat was
purchased for ₹ 5,40,000 and the plant purchased on 1st October 2018 was sold for
₹1,89,000. Depreciation is provided at 10% p.a on the straight-line method for the year
ending 31st March. Show the Plant account up to 31st March 2021.
 Straight line Method

Dr. Plant A/c Cr.

Amount
Date Particulars JF Date Particulars J F Amount (₹)
(₹)
01.04 2018 To Bank A/c 4,50,000 31.03.2019 By Depreciation A/c:
01.10.2018 To Bank A/c 2,22,500 Bought on 01.04 45,000
Bought on 01.10 11,125
31.03.2019 By Balance C/d 6,16,375
6,72,500 6,72,500
01.04.2019 To Balance B/d 6,16,375 01.10.2019 By Bank A/c 1,80,000
01.10.2019 -”- Depreciation A/c 22,500
01.10.2019 - “ – P&L A/c 2,02,500
31.03.2020 -”- Depreciation A/c 22,250
31.03.2020 By Balance C/d 1,89,125
6,16,375 6,16,375
01.04.2020 To Balance B/d 1,89,125
01.10.2020 To Bank A/c 5,40,000
 Straight line Method

On 1st April 2018 ABC Ltd, purchased a small plant for ₹ 4,50,000, on 1st October in the
same year additional plant was purchased costing ₹ 2,22,500. On 1st October 2019 plant
purchased on 1st April 2018 was sold for ₹ 1,80,000. On 1st October 2020 fresh plat was
purchased for ₹ 5,40,000 and the plant purchased on 1st October 2018 was sold for
₹1,89,000. Depreciation is provided at 10% p.a on the straight-line method for the year
ending 31st March. Show the Plant account up to 31st March 2020.
 Straight line Method

Dr. Plant A/c Cr.

Amount
Date Particulars JF Date Particulars J F Amount (₹)
(₹)
01.04 2018 To Bank A/c 4,50,000 31.03.2019 By Depreciation A/c:
01.10.2018 To Bank A/c 2,22,500 Bought on 01.04 45,000
Bought on 01.10 11,125
31.03.2019 By Balance C/d 6,16,375
6,72,500 6,72,500
01.04.2019 To Balance B/d 6,16,375 01.10.2019 By Bank A/c 1,80,000
01.10.2019 -”- Depreciation A/c 22,500
01.10.2019 - “ – P&L A/c 2,02,500
31.03.2020 -”- Depreciation A/c 22,250
31.03.2020 By Balance C/d 1,89,125
6,16,375 6,16,375
01.01.2020 To Balance B/d 1,89,125 01.10.2020 By Bank A/c 1,89,000
01.10.2020 To Bank A/c 5,40,000
 Straight line Method

On 1st April 2018 ABC Ltd, purchased a small plant for ₹ 4,50,000, on 1st October in the
same year additional plant was purchased costing ₹ 2,22,500. On 1st October 2019 plant
purchased on 1st April 2018 was sold for ₹ 1,80,000. On 1st October 2020 fresh plat was
purchased for ₹ 5,40,000 and the plant purchased on 1st October 2018 was sold for
₹1,89,000. Depreciation is provided at 10% p.a on the straight-line method for the year
ending 31st March. Show the Plant account up to 31st March 2020.
 Straight line Method

Dr. Plant A/c Cr.

Amount
Date Particulars JF Date Particulars J F Amount (₹)
(₹)
01.04 2018 To Bank A/c 4,50,000 31.03.2019 By Depreciation A/c:
01.10.2018 To Bank A/c 2,22,500 Bought on 01.04 45,000
Bought on 01.10 11,125
31.03.2019 By Balance C/d 6,16,375
6,72,500 6,72,500
01.04.2019 To Balance B/d 6,16,375 01.10.2019 By Bank A/c 1,80,000
01.10.2019 -”- Depreciation A/c 22,500
01.10.2019 - “ – P&L A/c 2,02,500
31.03.2020 -”- Depreciation A/c 22,250
31.03.2020 By Balance C/d 1,89,125
6,16,375 6,16,375
01.04.2020 To Balance B/d 1,89,125 01.10.2020 By Bank A/c 1,89,000
01.10.2020 To Bank A/c 5,40,000 01.10.2020 -”- Depreciation A/c 11,125
 Straight line Method

Calculation of Profit/Loss on Sale of Machinery

Particulars Amount Selling Price 1,89,000

Purchase Price 2,22,500 Less: Book Value 1,78,000
Less Depn (2019) 11,125 Profit on Sale 11,000
2,11,375
Less: Depn (2020) 22,250
1,89,125
Less: Depn (Oct 2020) 11,125
Book Value 1,78,000
 Straight line Method

Dr. Plant A/c Cr.

Amount
Date Particulars JF Date Particulars J F Amount (₹)
(₹)
01.04 2018 To Bank A/c 4,50,000 31.03.2019 By Depreciation A/c:
01.10.2018 To Bank A/c 2,22,500 Bought on 01.04 45,000
Bought on 01.10 11,125
31.03.2019 By Balance C/d 6,16,375
6,72,500 6,72,500
01.04.2019 To Balance B/d 6,16,375 01.10.2019 By Bank A/c 1,80,000
01.10.2019 -”- Depreciation A/c 22,500
01.10.2019 - “ – P&L A/c 2,02,500
31.03.2020 -”- Depreciation A/c 22,250
31.03.2020 By Balance C/d 1,89,125
6,16,375 6,16,375
01.04.2020 To Balance B/d 1,89,125 01.10.2020 By Bank A/c 1,89,000
01.10.2020 To Bank A/c 5,40,000 01.10.2020 -”- Depreciation A/c 11,125
 Straight line Method

Dr. Plant A/c Cr.

Amount
Date Particulars JF Date Particulars J F Amount (₹)
(₹)
01.04 2018 To Bank A/c 4,50,000 31.03.2019 By Depreciation A/c:
01.10.2018 To Bank A/c 2,22,500 Bought on 01.04 45,000
Bought on 01.10 11,125
31.03.2019 By Balance C/d 6,16,375
6,72,500 6,72,500
01.04.2019 To Balance B/d 6,16,375 01.10.2019 By Bank A/c 1,80,000
01.10.2019 -”- Depreciation A/c 22,500
01.10.2019 - “ – P&L A/c 2,02,500
31.03.2020 -”- Depreciation A/c 22,250
31.03.2020 By Balance C/d 1,89,125
6,16,375 6,16,375
01.04.2020 To Balance B/d 1,89,125 01.10.2020 By Bank A/c 1,89,000
01.10.2020 To Bank A/c 5,40,000 01.10.2020 -”- Depreciation A/c 11,125
01.10.2020 To Profit & Loss A/c 11,000
 Straight line Method

Dr. Plant A/c Cr.

Amount
Date Particulars JF Date Particulars J F Amount (₹)
(₹)
01.04 2018 To Bank A/c 4,50,000 31.03.2019 By Depreciation A/c:
01.10.2018 To Bank A/c 2,22,500 Bought on 01.04 45,000
Bought on 01.10 11,125
31.03.2019 By Balance C/d 6,16,375
6,72,500 6,72,500
01.04.2019 To Balance B/d 6,16,375 01.10.2019 By Bank A/c 1,80,000
01.10.2019 -”- Depreciation A/c 22,500
01.10.2019 - “ – P&L A/c 2,02,500
31.03.2020 -”- Depreciation A/c 22,250
31.03.2020 By Balance C/d 1,89,125
6,16,375 6,16,375
01.04.2020 To Balance B/d 1,89,125 01.10.2020 By Bank A/c 1,89,000
01.10.2020 To Bank A/c 5,40,000 01.10.2020 -”- Depreciation A/c 11,125
01.10.2020 To Profit & Loss A/c 11,000 31.03.2021 -”- Depreciation A/c 27,000
 Straight line Method

Dr. Plant A/c Cr.

Amount
Date Particulars JF Date Particulars J F Amount (₹)
(₹)
01.04 2018 To Bank A/c 4,50,000 31.03.2019 By Depreciation A/c:
01.10.2018 To Bank A/c 2,22,500 Bought on 01.04 45,000
Bought on 01.10 11,125
31.03.2019 By Balance C/d 6,16,375
6,72,500 6,72,500
01.04.2019 To Balance B/d 6,16,375 01.10.2019 By Bank A/c 1,80,000
01.10.2019 -”- Depreciation A/c 22,500
01.10.2019 - “ – P&L A/c 2,02,500
31.03.2020 -”- Depreciation A/c 22,250
31.03.2020 By Balance C/d 1,89,125
6,16,375 6,16,375
01.04.2020 To Balance B/d 1,89,125 01.10.2020 By Bank A/c 1,89,000
01.10.2020 To Bank A/c 5,40,000 01.10.2020 -”- Depreciation A/c 11,125
01.10.2020 To Profit & Loss A/c 11,000 31.03.2021 -”- Depreciation A/c 27,000

7,40,125 7,40,125
 Straight line Method

Dr. Plant A/c Cr.

Amount
Date Particulars JF Date Particulars J F Amount (₹)
(₹)
01.04 2018 To Bank A/c 4,50,000 31.03.2019 By Depreciation A/c:
01.10.2018 To Bank A/c 2,22,500 Bought on 01.04 45,000
Bought on 01.10 11,125
31.03.2019 By Balance C/d 6,16,375
6,72,500 6,72,500
01.04.2019 To Balance B/d 6,16,375 01.10.2019 By Bank A/c 1,80,000
01.10.2019 -”- Depreciation A/c 22,500
01.10.2019 - “ – P&L A/c 2,02,500
31.03.2020 -”- Depreciation A/c 22,250
31.03.2020 By Balance C/d 1,89,125
6,16,375 6,16,375
01.04.2020 To Balance B/d 1,89,125 01.10.2020 By Bank A/c 1,89,000
01.10.2020 To Bank A/c 5,40,000 01.10.2020 -”- Depreciation A/c 11,125
01.10.2020 To Profit & Loss A/c 11,000 31.03.2021 -”- Depreciation A/c 27,000
31.03.2021 By Balance C/d 5,13,000
7,40,125 7,40,125
 Straight line Method

Dr. Plant A/c Cr.

Amount
Date Particulars JF Date Particulars J F Amount (₹)
(₹)
01.04 2018 To Bank A/c 4,50,000 31.03.2019 By Depreciation A/c:
01.10.2018 To Bank A/c 2,22,500 Bought on 01.04 45,000
Bought on 01.10 11,125
31.03.2019 By Balance C/d 6,16,375
6,72,500 6,72,500
01.04.2019 To Balance B/d 6,16,375 01.10.2019 By Bank A/c 1,80,000
01.10.2019 -”- Depreciation A/c 22,500
01.10.2019 - “ – P&L A/c 2,02,500
31.03.2020 -”- Depreciation A/c 22,250
31.03.2020 By Balance C/d 1,89,125
6,16,375 6,16,375
01.04.2020 To Balance B/d 1,89,125 01.10.2020 By Bank A/c 1,89,000
01.10.2020 To Bank A/c 5,40,000 01.10.2020 -”- Depreciation A/c 11,125
01.10.2020 To Profit & Loss A/c 11,000 31.03.2021 -”- Depreciation A/c 27,000
31.03.2021 By Balance C/d 5,13,000
7,40,125 7,40,125
01.04.2021 To Balance B/d 5,13,000
 Straight line Method

Dr. Depreciation A/c Cr.

Amount
Date Particulars JF Date Particulars J F Amount (₹)
(₹)
31.03 2019 To Plant A/c:
Bought on 01.04 45,000
Bought on 01.10 11,125
31.03.2019 By Balance C/d 56,125
56,125 56,125
01.04.2019 To Balance B/d 56,125
01.10.2019 -”- Plant A/c 22,500
31.03.2020 -”- Plant A/c 22,250

31.03.2020 By Balance C/d 1,00,125

1,00,125 1,00,125
01.04.2020 To Balance B/d 1,00,125
01.10.2020 To Plant A/c 11,125
31.03.2021 To Plant A/c 27,000
31.03.2021 By Balance C/d 1,38,250
1,38,250 1,38,250
01.04.2021 To Balance B/d 1,38,250
Diminishing Balance Method
 Diminishing Balance Method

A Firm purchased a plant on 1st January 2019 for ₹10,00,000. Prepare a plant account for three
years charging depreciation @ 10% p.a on WDV Method.

Dr. Plant A/c Cr.

Amount Amount
Date Particulars JF Date Particulars JF
(₹) (₹)
01.01.2019 To Bank A/c 10,00,000
 Diminishing Balance Method

Dr. Plant A/c Cr.

Amount Amount
Date Particulars JF Date Particulars JF
(₹) (₹)
01.01.2019 To Bank A/c 10,00,000 31.12.2019 By Depreciation A/c 1,00,000
 Diminishing Balance Method

Dr. Plant A/c Cr.

Amount Amount
Date Particulars JF Date Particulars JF
(₹) (₹)
01.01.2019 To Bank A/c 10,00,000 31.12.2019 By Depreciation A/c 1,00,000

10,00,000 10,00,000
 Diminishing Balance Method

Dr. Plant A/c Cr.

Amount Amount
Date Particulars JF Date Particulars JF
(₹) (₹)
01.01.2019 To Bank A/c 10,00,000 31.12.2019 By Depreciation A/c 1,00,000
31.12.2019 -”- Balance C/d 9,00,000
10,00,000 10,00,000
01.01.2020 To Balance B/d 9,00,000
 Diminishing Balance Method

Calculation of Depreciation for 2nd Year

Cost of Machinery 10,00,000

Less: 1st Year Depreciation @ 10% 1,00,000
Book Value at the end of Year 1 9,00,000

Depreciation for 2nd Year:

10% on Book Value at the beginning of 2nd year:
i.e 10% on Rs.9,00,000 = 90,000
 Diminishing Balance Method

Dr. Plant A/c Cr.

Amount Amount
Date Particulars JF Date Particulars JF
(₹) (₹)
01.01.2019 To Bank A/c 10,00,000 31.12.2019 By Depreciation A/c 1,00,000
31.12.2019 -”- Balance C/d 9,00,000
10,00,000 10,00,000
01.01.2020 To Balance B/d 9,00,000 31.12.2020 By Depreciation A/c 90,000
 Diminishing Balance Method

Dr. Plant A/c Cr.

Amount Amount
Date Particulars JF Date Particulars JF
(₹) (₹)
01.01.2019 To Bank A/c 10,00,000 31.12.2019 By Depreciation A/c 1,00,000
31.12.2019 -”- Balance C/d 9,00,000
10,00,000 10,00,000
01.01.2020 To Balance B/d 9,00,000 31.12.2020 By Depreciation A/c 90,000

9,00,000 9,00,000
 Diminishing Balance Method

Dr. Plant A/c Cr.

Amount Amount
Date Particulars JF Date Particulars JF
(₹) (₹)
01.01.2019 To Bank A/c 10,00,000 31.12.2019 By Depreciation A/c 1,00,000
31.12.2019 -”- Balance C/d 9,00,000
10,00,000 10,00,000
01.01.2020 To Balance B/d 9,00,000 31.12.2020 By Depreciation A/c 90,000
31.12.2020 -”- Balance C/d 8,10,000
9,00,000 9,00,000
01.01.2021 To Balance B/d 8,10,000
 Diminishing Balance Method

Calculation of Depreciation for 3rd Year

Cost of Machinery 10,00,000

Less: 1st Year Depreciation @ 10% 1,00,000
Book Value at the end of Year 1 9,00,000
Less: 2nd Year Depreciation 90,000
Book Value at the end of Year 2 8,10,000

Depreciation for 3rd Year:

10% on Book Value at the beginning of 3rd year:
i.e 10% on Rs.8,10,000 = 81,000
 Diminishing Balance Method

Dr. Plant A/c Cr.

Amount Amount
Date Particulars JF Date Particulars JF
(₹) (₹)
01.01.2019 To Bank A/c 10,00,000 31.12.2019 By Depreciation A/c 1,00,000
31.12.2019 -”- Balance C/d 9,00,000
10,00,000 10,00,000
01.01.2020 To Balance B/d 9,00,000 31.12.2020 By Depreciation A/c 90,000
31.12.2020 -”- Balance C/d 8,10,000
9,00,000 9,00,000
01.01.2021 To Balance B/d 8,10,000 31.12.2021 By Depreciation A/c 81,000
 Diminishing Balance Method

Dr. Plant A/c Cr.

Amount Amount
Date Particulars JF Date Particulars JF
(₹) (₹)
01.01.2019 To Bank A/c 10,00,000 31.12.2019 By Depreciation A/c 1,00,000
31.12.2019 -”- Balance C/d 9,00,000
10,00,000 10,00,000
01.01.2020 To Balance B/d 9,00,000 31.12.2020 By Depreciation A/c 90,000
31.12.2020 -”- Balance C/d 8,10,000
9,00,000 9,00,000
01.01.2021 To Balance B/d 8,10,000 31.12.2021 By Depreciation A/c 81,000

8,10,000 8,10,000
 Diminishing Balance Method

Dr. Plant A/c Cr.

Amount Amount
Date Particulars JF Date Particulars JF
(₹) (₹)
01.01.2019 To Bank A/c 10,00,000 31.12.2019 By Depreciation A/c 1,00,000
31.12.2019 -”- Balance C/d 9,00,000
10,00,000 10,00,000
01.01.2020 To Balance B/d 9,00,000 31.12.2020 By Depreciation A/c 90,000
31.12.2020 -”- Balance C/d 8,10,000
9,00,000 9,00,000
01.01.2021 To Balance B/d 8,10,000 31.12.2021 By Depreciation A/c 81,000
31.12.2021 -”- Balance C/d 7,29,000
8,10,000 8,10,000
01.01.2022 To Balance B/d 7,29,000
 Diminishing Balance Method

On 1st April 2018 ABC Ltd, purchased a small plant for ₹ 4,50,000, on 1st October in the
same year additional plant was purchased costing ₹ 2,22,500. On 1 st October 2019 plant
purchased on 1st April 2018 was sold for ₹ 1,80,000. On 1st October 2020 fresh plat was
purchased for ₹ 5,40,000 and the plant purchased on 1st October 2018 was sold for ₹
1,89,000. Depreciation is provided at 10% p.a on the WDV method for the year ending
31st March. Show the Plant account up to 31st March 2021.
 Diminishing Balance Method
Dr. Plant A/c Cr.
Amount
Date Particulars JF Date Particulars J F Amount (₹)
(₹)
01.04 2018 To Bank A/c 4,50,000 31.03.2019 By Depreciation A/c:
01.10.2018 To Bank A/c 2,22,500 Bought on 01.04 45,000
Bought on 01.10 11,125
31.03.2019 By Balance C/d 6,16,375
6,72,500 6,72,500
01.04.2019 To Balance B/d 6,16,375 01.10.2019 By Bank A/c 1,80,000
01.10.2019 -”- Depreciation A/c 20250
01.10.2019 - “ – P&L A/c 2,04,750
31.03.2020 -”- Depreciation A/c 21,138
31.03.2020 By Balance C/d 1,90,237
6,16,375 6,16,375
01.04.2020 To Balance B/d 1,90,237 01.10.2020 By Bank A/c 1,89,000
01.10.2020 To Bank A/c 5,40,000 01.10.2020 -”- Depreciation A/c 9,512
01.10.2020 To Profit & Loss A/c 8,274 31.03.2021 -”- Depreciation A/c 27,000
31.03.2021 By Balance C/d 5,13,000
7,38,511 7,38,5111
01.04.2021 To Balance B/d 5,13,000
 Diminishing Balance Method

Calculation of Profit/Loss on Sale of Machinery

Particulars Amount Selling Price 180,000

Purchase Price 450,000 Less: Book Value 384,750
Less Depn (2019) 45,000 Loss on Sale (204,750)
405,000
Less: Depn (Oct 2019) 20,250
Book Value 384,750
 Diminishing Balance Method

Calculation of Profit/Loss on Sale of Machinery

Particulars Amount Selling Price 1,89,000

Purchase Price 2,22,500 Less: Book Value 1,80,726
Less Depn (2019) 11,125 Profit on Sale 8,274
2,11,375
Less: Depn (2020) 21,138
1,90,238
Less: Depn (Oct 2020) 9,512
Book Value 1,80,726