Advertisements
Advertisements
प्रश्न
Distinguish between straight-line method and written down value method of providing depreciation.
उत्तर
| Points of calculation | Straight-line method | Written down value method |
| 1. Basis of calculation | Depreciation is calculated on the original cost of the asset for all the years. | Depreciation is calculated on the written down value of the asset year after year. |
| 2. Amount of depreciation | The amount of depreciation is the same for all the years. | The amount of depreciation goes on decreasing year after year. |
| 3. Book value of the asset at the end of its life | The book value of the asset becomes zero when there is no scrap value or is equal to its scrap value at the end of its life. | The book value of the asset never becomes zero. |
| 4. Computation of rate of depreciation | It is easy to calculate the rate of depreciation. | It is very difficult to calculate the rate of depreciation. |
| 5. Order of calculation of depreciation amount | Amount of depreciation is calculated first, followed by the rate of depreciation. | Rate of depreciation is calculated first, followed by the amount of depreciation. |
| 6. Total charge | As the cost of repair goes on increasing with the passage of time, the total charge, i.e., the total of depreciation amount and repair amount keeps on increasing from year to year. | As the cost of repair increases and depreciation decreases with the passage of time, total of depreciation amount and repair amount charged to the profit and loss account remains almost the same from year to year. |
|
7. Suitability |
It is suitable for assets for which the repair charges are less and the possibility of obsolescence is less and the expiration of the cost of an asset depends upon the time period involved. | It is suitable for assets that are affected by technological changes and assets which require more repairs with the passage of time. |
APPEARS IN
संबंधित प्रश्न
Write the word/term/phrase which can substitute the following statement:
The type of asset on which depreciation is charged.
Write the word/term/phrase which can substitute the following statement:
Excess of Selling price of fixed asset over its Written Down Value.
For which of the following assets, the depletion method is adopted for writing off cost of the asset?
Depreciation is to be calculated from the date when ______.
Machinery was purchased on 1st January 2015 for ₹ 4,00,000. ₹ 15,000 was spent on its erection and ₹ 10,000 on its freight charges. Depreciation is charged at 10% per annum on the straight-line method. The books are closed on 31st March each year. Calculate the amount of depreciation on machinery for the first two years.
A manufacturing company purchased on 1st April 2010, a plant and machinery for ₹ 4,50,000 and spent ₹ 50,000 on its installation. After having used it for three years, it was sold for ₹ 3,85,000. Depreciation is to be provided every year at the rate of 15% per annum on the fixed installment method. Accounts are closed on 31st March every year. Calculate profit or loss on sale of machinery.
An asset is purchased for ₹ 50,000. The rate of depreciation is 15% p.a. Calculate the annual depreciation for the first two years under the diminishing balance method.
Furniture costing ₹ 5,000 was purchased on 1.1.2016, the installation charges being ₹ 1,000. The furniture is to be depreciated @ 10% p.a. on the diminishing balance method. Pass journal entries for the first two years.
A firm acquired a machine on 1st April 2015 at a cost of ₹ 50,000. Its life is 6 years. The firm writes off depreciation @ 30% p.a. on the diminishing balance method. The firm closes its books on 31st December every year. Show the machinery account and depreciation account for three years starting from 1st April 2015.
Vishal Company, Dhule, purchased Machinery costing ₹ 60,000 on 1st April 2016. They purchased further Machinery on 1st October 2017, costing ₹ 30,000, and on 1st July 2018, costing ₹ 20,000. On 1st Jan 2019, one-third of the Machinery, which was purchased on 1st April 2016, became obsolete and it was sold for ₹ 18,000.
Assume that, company account closes on 31st March every year.
Show Machinery Account for the first three(3) years and pass journal entries for the Third year, after charging depreciation at 10% p.a. on Written Down Value Method.
