DEPARTMENT OF TECHNICAL EDUCATION

ANDHRA PRADESH

Name : Y.Yella Reddy

Designation : HCCP
Branch : DCCP
Institute :026,S.G.Govt.Polytechnic,Adilabad
Year/Semester : III Semester
Subject : Accountancy-II
Subject Code : CCP-302
Topic : Depreciation
Duration : 50 Min.
Sub Topic : Problems on Diminishing Balance
Method
Teaching Aids : PPT,Animations.
CCP302.30 1
Objectives

On completion of this period you would be able to solve

 Some more problems on Diminishing Balance Method.

CCP302.30 2
Recap:

In the last class we have solved problems on

Diminishing Balance method.

CCP302.30 3
Illustration

 A company which adopts calendar year as

accounting year purchased a machinery for
Rs.30,000 on 1-1-2004.
 Depreciation is credited to machinery a/c at 10%
under the Reducing Balance Method.

 Show the machinery account for three years.

CCP302.30 4
 Solution:-

Machinery Account
Dr Cr
Date Particulars Rs. Date Particulars Rs.

1-1-04 To Cash a/c 30,000 31-12-04 By Depreciation 3,000

______ ______
30,000 (30,000*10/100) 27,000
30,000
,, Balance
1-1-05 To Bal b/d. 27,000 31-12-05 c/d 2,700
______ 24,300
27,000 By Depreciation 27,000
1-1-06 To Bal b/d. 24,300 31-12-06 2,430
,, Bal c/d
______ 21,870
24,300 24,300
By Depreciation
1-1-07 To Bal b/d. 21,870 CCP302.30 5
,, Bal c/d
Illustration

1. Kumar Traders purchased a second hand

machinery on 1-1-2002 for Rs. 23,000 and
spent Rs. 2,000 on its repairs.
It was decided to depreciate the machinery at
20% every year on 31st December at
Diminishing Balance Method.
Prepare Machinery a/c from 2002 to 2004
and show profit or loss as it was sold on 31st
December 2004 for Rs. 10,800.

CCP302.30 6 6
 Solution:
Working Notes:
Calculation of Loss on sale of Machinery
Rs.
Value of Machinery on 1-1-2004 16,000
Less: Depreciation for the year 2004 3,200
12,800
Less: amount realized on sale 10,800
Loss on sale 2,000

CCP302.30 7
 Machinery Account
Dr. Cr
Date Particulars Rs. Date Particulars Rs.
2002 To Bank a/c 2002 By Depreciation
Jan 1 (23000+2000) 25,000 Dec. 31 5000
By Balance c/d 20000
25000 25000

2003 2003
Jan 1 To Bal b/d 20000 Dec. 31 By Depreciation 4000
By Balance c/d 16000
20000 20000

2004 2004
Jan 1 To Bal b/d 16000 Dec. 31 By Depreciation 3200
By Bank a/c 10800
By Profit & Loss a/c
(Loss on sale) 2000
16000 16000

CCP302.30 8
Summary

In this session we have solved

 Problems on Diminishing Balance Method

CCP302.30 9
Assignment

 Kavya purchased a second hand machinery on 1-1-2002

for Rs. 48,000 and spent Rs. 2,000 on its repairs.
 It was decided to depreciate the machinery at 10%
every year on 31st December at Diminishing Balance
Method.
 Prepare Machinery a/c from 2002 to 2004 and show
profit or loss as it was sold on 31st December 2004 for
Rs. 20,800.

CCP302.30 10