How to solve easily provision for depreciation que ? written down value method and straight line both ?

Question

Answer

By doing rough work and make a table for machinary account and write all the depreciation value their

Answer

A. Write the given information
B. Later calculate the depreciation for given years
C. Calculate profit or loss by
1 cost of the goods
2 depression of years
Total it and minus with
3 sale value
We get profit or loss later open
D. Machinery a/C
E. Depression. A/C

Answer

Provision for Depreciation:

Provision for depreciation is an accounting technique used to allocate the cost of an asset over its useful life. It is important for businesses to account for depreciation as it reflects the decline in value of assets over time. There are two commonly used methods to calculate provision for depreciation: the written down value method and the straight-line method.

1. Written Down Value Method:

The written down value method, also known as the reducing balance method, calculates depreciation based on the asset's net book value at the beginning of each accounting period. Here's how to calculate provision for depreciation using this method:

1. Determine the initial cost of the asset: This includes the purchase price and any additional expenses incurred to bring the asset into its usable condition.

2. Determine the estimated residual value: This is the expected value of the asset at the end of its useful life. It is usually estimated based on experience or market values.

3. Calculate the depreciable amount: Subtract the estimated residual value from the initial cost of the asset.

4. Determine the depreciation rate: Decide on the percentage rate at which the asset's value will decline each year. This rate is usually determined based on the asset's expected useful life.

5. Calculate the provision for depreciation: Multiply the depreciable amount by the depreciation rate to calculate the depreciation expense for the current accounting period. Subtract this expense from the net book value of the asset to determine the new net book value for the next period.

6. Repeat the process for subsequent accounting periods until the asset's net book value reaches its estimated residual value.

2. Straight-Line Method:

The straight-line method is a simpler approach that allocates an equal amount of depreciation over the useful life of the asset. Follow the steps below to calculate provision for depreciation using this method:

1. Determine the initial cost of the asset and the estimated residual value, as explained in the written down value method.

2. Calculate the depreciable amount: Subtract the estimated residual value from the initial cost of the asset.

3. Determine the useful life of the asset: Decide on the number of years or units of production over which the asset is expected to be used.

4. Calculate the depreciation expense: Divide the depreciable amount by the useful life of the asset to determine the annual depreciation expense.

5. Allocate the depreciation expense evenly over each accounting period until the useful life of the asset is reached.

Conclusion:

Both the written down value method and the straight-line method are widely used to calculate provision for depreciation. The choice of method depends on the nature of the asset, its expected useful life, and the accounting policies of the business. It is important for businesses to accurately account for depreciation to reflect the true value of their assets and comply with accounting standards.

Answer

Ok

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Shrivanshu can u explain this in detail

Answer

In this I don't think so that there can be any easy way.  U have to make both the a/c then only u get the right ans

Similar Class 11 Doubts

Different between the straight line method and written down value method of depreciation.?

a company purchased a plant for 20000. The useful life of the plant is 8 year and the estimated residual value after 8 year is 4000. Determine the Rate of depreciation if management wants to depreciate it by straight line method.

Machine account and provision for depreciation account balance straight line method?

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