Calculate depreciation using diminishing balance method

Solution

The solution is given below −

Total cost = cost of machinery + transportation + installation => 1500000 + 175000 + 75000 => Rs. 1750000/-

Depreciation rate = 12%

Year endedOpening balanceDepreciation amountClosing balance
31-03-201517500002100001540000
31-03-201615400001848001355200
31-03-201713552001626241192576
31-03-20181192576143109.121049466.88
31-03-20191049466.88125936.0256923530.8544
31-03-2020923530.8544110823.702528812707.15187
31-03-2021812707.1518797524.858224715182.293646
31-03-2022715182.29364685821.8752375629360.41841
31-03-2023629360.4184175523.250209553837.168201
31-03-2024553837.16820166460.4601841487376.70802
31-03-2025487376.7080258485.204962428891.503058
31-03-2026428891.50305851466.980367377424.52269

Calculations

Depreciation amount = opening balance * depreciation rate

Closing balance = opening balance – depreciation amount

For year 31-03-2015

Depreciation amount = 1750000 * 12% = 210000, closing balance = 1750000 – 210000 = 1540000

Similarly, Depreciation amount and closing balances are calculate for respective years

Ledger for above statements

DateParticulars
DebitCredit
1st year (2014-15)



01-04-2015Machinery A/CDr.1750000

To bank

1750000
31- marchDepreciation A/cDr.210000

To machinery A/c

210000

(depreciation charges)


31 – marchProfit/Loss A/cDr.210000

To depreciation A/c

210000

Similarly, for rest of years’ leger will be prepared (only depreciation amount will be changed)

Updated on: 13-Aug-2020

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