Page 120 - ISCDEBK-XI

Depreciation 15.5

Dr. PROVISION FOR DEPRECIATION ACCOUNT Cr.
Date Particulars ` Date Particulars `
2019 2019
Oct. 1 To Machinery A/c 42,400 April 1 By Balance b/d 1,16,000
(WN 1) Oct. 1 By Depreciation A/c (WN 1) 6,400
2020 2020
March 31 To Balance c/d 1,44,000 March 31 By Depreciation A/c (WN 2) 64,000
1,86,400 1,86,400
2020
April 1 By Balance b/d 1,44,000
Working Notes:
1. Depreciation provided on Machinery sold till 1st October, 2019:
`
For 2017–18 20,000
20
For 2018–19 (` 1,00,000 – ` 20,000) × 16,000
100
20 6
For 2019–20 (` 1,00,000 – ` 20,000 – ` 16,000) ×  6,400
100 12 42,400
2. Calculation of Depreciation provided for 2019–20:
Balance of Provision for Depreciation on 1st April, 2019 1,16,000
Add: Depreciation provided on Machinery sold 6,400
1,22,400
Less: Accumulated Depreciation on Machinery sold (WN 1) 42,400
Depreciation on the remaining Machinery 80,000
Cost of remaining Machinery (` 5,00,000 – ` 1,00,000) 4,00,000
Less: Depreciation on remaining Machinery (As above) 80,000
3,20,000
Depreciation provided during 2019–20 = ` 3,20,000 × 20/100 = ` 64,000.
Illustration 4.
On 1st April, 2016, X Ltd. purchased from Y Ltd. a plant costing ` 4,00,000 on instalment basis
payable as follows: `
On 1st April, 2016 1,00,000

On 1st October, 2016 1,00,000
On 1st April, 2017 1,00,000
On 1st April, 2018 1,00,000
The company spent ` 10,000 on transportation and installation of the plant. It was decided to
provide for depreciation by Straight Line Method. Useful life of the plant was estimated at
5 years. It was also estimated that at the end of the useful life, realisable value of the plant
would be ` 12,000 (gross) and dismantling cost of plant, to be paid by company was estimated
at ` 2,000. The plant was destroyed by fire on 31st March, 2020 and an insurance claim of
` 50,000 was admitted by the insurance company.
Prepare Plant Account and Provision for Depreciation Account if the company closes its books
on 31st March every year.