Depreciation of Furniture using Fixed Instalment Method:

Fixed instalment method is a depreciation method in which equal amounts are deducted from the cost of the asset each year over its useful life. In this method, the scrap value of the asset is not considered.

Calculation of Depreciation:

In this case, the cost of the furniture is Rs. 5,200 and the scrap value is Rs. 200. The useful life of the furniture is 10 years. Therefore, the depreciable value of the furniture is Rs. 5,200 - Rs. 200 = Rs. 5,000.

The annual depreciation amount using the fixed installment method can be calculated as follows:

Annual Depreciation = Depreciable Value / Useful Life
= Rs. 5,000 / 10
= Rs. 500 per year

Balance of Furniture Account at the end of Third Year:

At the end of the first year, the balance of the furniture account will be Rs. 5,200 - Rs. 500 = Rs. 4,700. At the end of the second year, the balance of the furniture account will be Rs. 4,700 - Rs. 500 = Rs. 4,200.

At the end of the third year, the balance of the furniture account will be Rs. 4,200 - Rs. 500 = Rs. 3,700.

Therefore, the balance of the furniture account at the end of the third year will be Rs. 3,700.

Explanation:

Depreciation is the systematic allocation of the cost of an asset over its useful life. The fixed installment method is one of the depreciation methods used by businesses to depreciate their assets. In this method, the same amount of depreciation is charged each year over the useful life of the asset.

In this case, the cost of the furniture is Rs. 5,200 and the scrap value is Rs. 200. The useful life of the furniture is 10 years. Therefore, the annual depreciation using the fixed installment method is calculated as Rs. 500 per year.

At the end of the third year, the balance of the furniture account is calculated by deducting the accumulated depreciation from the cost of the furniture. Therefore, the balance of the furniture account at the end of the third year will be Rs. 3,700.