Financial accounting

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Meekha (Querist)
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08 February 2009 In computing profit of non profit organizations, the following adjustments is making me confused can any one please help me?

On receipt side- sale of furniture on 30.9.99 is 9000
payment side- furniture purchased on 1.10.99-5000

Additional information:-
Book value of furniture sold as on 1.4.99 was 12000. Depreciation is 20%p.a.

Sir, by book value we mean after adjusting depreciation is int? then how is it given that depreciation is 1200 and 500? then loss on sale of furniture as 1800.

Can you please help me Sir? Also can you tell me how will it be shown in balance sheet ? Please help sir.

CA. B.SRINIVASULU

CA. B.SRINIVASULU (Expert)
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08 February 2009 Book value as on 1-4-99 - 12000
Less : Depreciation at 20%
(proportionately upto
30-9-99) - 1200
-------
Book Value on the date of sale
10800
Less : Sold for 9000
------
Loss on sale of furniture 1800
-------

Balance sheet - Furniture
Opening Balance (say) 100000
Less : Asssets Sold 10800
Less : Depreciation 1200
Add : New furntiture 5000
--------
93000
Less Depn on 31-3-00
ON 88000 - 20% and on
5000 -10% (prop) 18100
--------
Closing Balance 84900
--------

Income tax
Say opening balance - 100000
Less : Sale value - 9000
Add : New purchase - 5000
--------
Balance 104000
Depn on 104000 at 10% 10400
---------
Closing balance 93000
--------

CA. B.SRINIVASULU

CA. B.SRINIVASULU (Expert)
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08 February 2009 Depreciation will be calcualated for disposed assets till the date of sale.

In this problem the value is 12000 and rate of deprecitaion is 20% and sold on 30.9.99.

ie. you have to charge depreciation for 6months.

= 12000 * 20% * 6 / 12 = 1200.

For new purchases the depn will be from the date of purchase.

In this problem 5000 purchased on 1-10-99.
Therefore applying same principle
= 5000 *20% * 6 / 12 = 500.

The sold asset value is 12000 - 1200 = 10800 as on the date of sale.
Sale value is 9000.
Therefore the loss is 10800-9000 = 1800.

Are you clear now.

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Meekha

Meekha (Querist)
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08 February 2009 Thank you sir. But still sir, how is that though question in the question they have given the "book value" for the furniture of value 12000, we are again depreciating? Book value means the cost minus depreciation is it not sir? so doesn't it mean that depreciation is already adjusted? Please help sir.