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 ended	Opening balance	Depreciation amount	Closing balance
31-03-2015	1750000	210000	1540000
31-03-2016	1540000	184800	1355200
31-03-2017	1355200	162624	1192576
31-03-2018	1192576	143109.12	1049466.88
31-03-2019	1049466.88	125936.0256	923530.8544
31-03-2020	923530.8544	110823.702528	812707.15187
31-03-2021	812707.15187	97524.858224	715182.293646
31-03-2022	715182.293646	85821.8752375	629360.41841
31-03-2023	629360.41841	75523.250209	553837.168201
31-03-2024	553837.168201	66460.4601841	487376.70802
31-03-2025	487376.70802	58485.204962	428891.503058
31-03-2026	428891.503058	51466.980367	377424.52269

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

Date	Particulars		Debit	Credit
1st year (2014-15)
01-04-2015	Machinery A/C	Dr.	1750000
	To bank			1750000
31- march	Depreciation A/c	Dr.	210000
	To machinery A/c			210000
	(depreciation charges)
31 – march	Profit/Loss A/c	Dr.	210000
	To depreciation A/c			210000

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

Mandalika

Updated on: 2020-08-13T11:13:06+05:30

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