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15.2 Double Entry Book Keeping—CBSE XI

 Depreciation can be recorded either by:
(i) crediting the depreciation to respective Asset Account; or
(ii) crediting the depreciation to Provision for Depreciation Account.
 Accumulated Depreciation: It is the total depreciation charged as expense in different
accounting periods.
 Methods of Recording (Accounting) Depreciation: Depreciation can be recorded in the
books of account in the following two methods: (i) When Depreciation is charged or credited
to Assets Account: Under this method, depreciation is charged directly to the Asset Account.
(ii) When Depreciation is credited to Provision for Depreciation Account or Accumulated
Depreciation Account: Under this method, depreciation is credited to Provision for Depreciation
Account.
 These are two Methods of charging depreciation:
(i) Straight Line Method and (ii) Written Down Value Method.

 Gain (Profit) on Sale of Fixed Asset: Sale Proceeds – Book value as on date of sale.
 Loss on Sale of Fixed Asset: Book value as on date of sale – Sale Proceeds.
 Asset Disposal Account: An account to which the balance in Asset Account is transferred.
Also, the amount received on sale is credited to the account and the resultant gain (profit) or
loss is transferred to the Profit & Loss Account.

Important Points for Asset Disposal Account
• Asset Disposal Account is debited with the Historical Cost of the asset (i.e., cost at
which it was purchases less depreciation provided till date) disposed off, i.e., sold.
• Asset Disposal Account is credited with (a) the Accumulated Depreciation on the
asset sold, and (b) the Sale Proceeds of the asset sold.
• Excess of debit side total over credit side total means loss on sale of asset and is
transferred to debit of Profit & Loss Account.
• Excess of credit side total over debit side total means gain (profit) on sale of asset
and is transferred to the credit of Profit & Loss Account.

Solved Questions

1. Following balances appear in the books of Goyal Brothers:

Date Particulars `
1st April, 2023 Machinery A/c 8,00,000
Provision for Depreciation A/c 3,20,000
On 1st April, 2023, they decide to sell a machine for ` 2,00,000 which was purchased
on 1st April, 2020 for ` 3,00,000. Prepare a Machinery Account and Provision
for Depreciation Account on 31st March, 2024 assuming that the firm has been
charging depreciation at 10% p.a. on the Straight Line Method.