Depreciation

Depreciation is the reduction in the value of fixed assets due to its use or obsolescence. Generally depreciation is charged at some percentage on the value of fixed asset.

Example: The Trial balance shows the value of furniture on 31.3.2004 as Rs.60,000. Adjustment: Furniture is to be depreciated at 10%.

Adjusting Entry

Date	Particulars	L.F	Debit Rs.	Credit Rs.
2004
31-Mar	Depreciation A/c                                                                                                             Dr		6,000
	To Furniture A/c			6,000
	(10% depreciation on furniture)

 

To bring depreciation into Profit and Loss account the following transfer entry is required.

Transfer Entry

Date	Particulars	L.F	Debit Rs.	Credit Rs.
2004
31-Mar	Profit & Loss A/c                                                                                                    Dr		6,000
	To Depreciation A/c			6,000
	(10% depreciation on furniture transferred to Profit and Loss account)

 

Depreciation will be shown

i) on the debit side of Profit and Loss account and

ii) on the assets side of the Balance Sheet by way of deduction from the value of concerned asset.

Profit & Loss Account
for the year ending 31st March, 2004
Dr.                                                                                                                                                                                                                                             Cr.

Particulars	Rs.	Particulars	Rs.
To Depreciation on Furniture	6,000

 

Balance Sheet as on 31st March, 2004

Liabilities	Rs.	Rs.	assets	Rs	Rs
			Furniture	60,000
			Less: Depreciation @10%	__6,000	54,000