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Accounting Entry of Depriciation

Ajay (Job) (118 Points)

06 April 2010

Hi,

Please tell me the accounting treatment of depriciation.

Thanks of all in advance.

Regards,

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SACHIN KUMAR GARG (Final Student) (105 Points)
Replied 06 April 2010

depreciation Dr

To Asset A/c

and

P&L a/c dr

To Depreciation

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Gajendra R. Tiwari (Senior Manager-Accounts & CA IPCC Student) (429 Points)
Replied 06 April 2010

Agreed.

(Guest)

Another method of charging depreciation is Provision method... Under this method , the asset value is shown at its gross value in B/s and depreciation for that asset is charged to P&l and trfd to an account called Provision for depreciation or Accumukated dep. a/c..

THe entry will be....

P&l A/c Dr..

To provision for dep. or accumulated dep a/c.

Every year dep. start accumulating in that a/c and is shown on liabilities side of B/s... THe corresponding asset continues to appear at its gross value , until its sold..

On the date of sale, prov. bal is trfd to asset a/c by passing an entry:

PRov. for dep. or accumulated dep. A/c Dr.

To asset A/c....

Thereafter final sale entry is passed:

Bank a/c Dr.

To Asset A/c....

IF sale value is more than asset book value as on date of sale after trfring dep., its profit on sale of asset and vice versa it will be loss on sale of asset....

Profit take to P&l Cr. side and Loss take to p&l Dr. side..

Hope you understood

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Ajay (Job) (118 Points)
Replied 08 April 2010

Hi Mr Faiz,

Thanks,please let me know if assets is purchase after a half year of before half year then at the situation how will i charged depriciation .

Please let me know the entire provision regarding depriciation in Accounting.

(Guest)

Dear Ajay sir,

In that case dep. will be charged for the period it remains in use.. For e.g suppose asset is put to use on 25th march2010, then calculate dep. for 6 days only on that asset value depending upon the method you are following(SLM or WDVor any other method used by you) Suppose you follow SLM, and asset value is INR200000 and rate of dep. is 10%p.a then dep. for 1st year will be :

Rs 200000*10/100*6/365 ==== Rs 329(approx). From next year dep will be flat 20000rs for full year provided you follow SLM and dont sell off your asset upto its useful life...

Another case when asset is put to use in first year of purchase for 6 months then provide dep. for 6 months as similar to calculation above... In that case your dep will be for first year only Rs.10000/=

Hope you have understood.

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Ajay (Job) (118 Points)
Replied 08 April 2010

Thanks a lot dear Faiz.

pravin singh (article) (60 Points)
Replied 10 December 2011

Dear,

if provision for depreciation entry is passed for 6 months,what would be the effect in balance sheet and profit and loss account.Will it effect tha value of the assets

looking forward for a positive reply

Regards,

pravin