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Maheswari Steel Company purchased a machinery on 1st April, 2011 for 2 20,000. On 1st April, 2012 a second machinery was purchased for 8,000 and 400 were met us establishment charges. The third and fourth machines were also purchased on 1st Oct., 2013 for 6,000 and on 30th June, 2014 for 10,000 respectively Prepare a Machinery A/c for 4 years by using fixed instalment method 5% per annum?
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Maheswari Steel Company purchased a machinery on 1st April, 2011 for 2...
Solution:
What is Fixed Instalment Method?
Fixed Instalment Method is a method of providing for depreciation where the cost of the asset is written off over its useful life by equal annual instalments. This method is also known as "Straight Line Method" or "Original Cost Method". In this method, the depreciable value of the asset is divided by the number of years of its useful life to arrive at the annual depreciation charge.
Machinery A/c for 4 years by using Fixed Instalment Method:
Date Description Amount (Rs.) Depreciation (Rs.) Balance (Rs.)
1st April 2011 Machinery A/c Dr. 2,20,000 44,000 1,76,000
To Bank A/c 2,20,000
1st April 2012 Machinery A/c Dr. 8,400 44,000 1,24,400
To Bank A/c 8,400
Machinery Establishment Charges A/c Dr. 400 400 0
To Bank A/c 400
1st Oct 2013 Machinery A/c Dr. 6,000 44,000 78,400
To Bank A/c 6,000
30th June 2014 Machinery A/c Dr. 10,000 44,000 44,400
To Bank A/c 10,000
Total 2,44,800 2,76,800
Explanation:
As per Fixed Instalment Method, depreciation is charged at a fixed rate on the original cost of the asset. Here, we have used a rate of 5% per annum.
- On 1st April 2011, Machinery was purchased for Rs. 2,20,000. The annual depreciation charge will be Rs. 11,000 (i.e. 2,20,000 x 5%). The balance amount after depreciation will be Rs. 1,76,000 (i.e. 2,20,000 - 44,000).
- On 1st April 2012, a second machinery was purchased for Rs. 8,000 and establishment charges of Rs. 400 were incurred. The annual depreciation charge will be Rs. 44,000 (i.e. 8,400 x 5%). The balance amount after depreciation will be Rs. 1,24,400 (i.e. 1,76,000 - 44,000 - 400).
- On 1st Oct 2013, the third machinery was purchased for Rs. 6,000. The annual depreciation charge will be Rs. 30,000 (i.e. 6,000 x 5%). The balance amount after depreciation will be Rs. 78,400 (i.e. 1,24,400 - 30,000).
- On 30th June 2014, the fourth machinery was purchased for Rs. 10,000. The annual depreciation charge will be Rs. 50,000 (i.e. 10,000 x 5%). The balance amount after depreciation will be Rs. 44,400 (i.e. 78,400 - 50,000).
The total depreciation charged over four years will be Rs. 2,76,800 (i.e. 11,000
What is Fixed Instalment Method?
Fixed Instalment Method is a method of providing for depreciation where the cost of the asset is written off over its useful life by equal annual instalments. This method is also known as "Straight Line Method" or "Original Cost Method". In this method, the depreciable value of the asset is divided by the number of years of its useful life to arrive at the annual depreciation charge.
Machinery A/c for 4 years by using Fixed Instalment Method:
Date Description Amount (Rs.) Depreciation (Rs.) Balance (Rs.)
1st April 2011 Machinery A/c Dr. 2,20,000 44,000 1,76,000
To Bank A/c 2,20,000
1st April 2012 Machinery A/c Dr. 8,400 44,000 1,24,400
To Bank A/c 8,400
Machinery Establishment Charges A/c Dr. 400 400 0
To Bank A/c 400
1st Oct 2013 Machinery A/c Dr. 6,000 44,000 78,400
To Bank A/c 6,000
30th June 2014 Machinery A/c Dr. 10,000 44,000 44,400
To Bank A/c 10,000
Total 2,44,800 2,76,800
Explanation:
As per Fixed Instalment Method, depreciation is charged at a fixed rate on the original cost of the asset. Here, we have used a rate of 5% per annum.
- On 1st April 2011, Machinery was purchased for Rs. 2,20,000. The annual depreciation charge will be Rs. 11,000 (i.e. 2,20,000 x 5%). The balance amount after depreciation will be Rs. 1,76,000 (i.e. 2,20,000 - 44,000).
- On 1st April 2012, a second machinery was purchased for Rs. 8,000 and establishment charges of Rs. 400 were incurred. The annual depreciation charge will be Rs. 44,000 (i.e. 8,400 x 5%). The balance amount after depreciation will be Rs. 1,24,400 (i.e. 1,76,000 - 44,000 - 400).
- On 1st Oct 2013, the third machinery was purchased for Rs. 6,000. The annual depreciation charge will be Rs. 30,000 (i.e. 6,000 x 5%). The balance amount after depreciation will be Rs. 78,400 (i.e. 1,24,400 - 30,000).
- On 30th June 2014, the fourth machinery was purchased for Rs. 10,000. The annual depreciation charge will be Rs. 50,000 (i.e. 10,000 x 5%). The balance amount after depreciation will be Rs. 44,400 (i.e. 78,400 - 50,000).
The total depreciation charged over four years will be Rs. 2,76,800 (i.e. 11,000
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Maheswari Steel Company purchased a machinery on 1st April, 2011 for 2 20,000. On 1st April, 2012 a second machinery was purchased for 8,000 and 400 were met us establishment charges. The third and fourth machines were also purchased on 1st Oct., 2013 for 6,000 and on 30th June, 2014 for 10,000 respectively Prepare a Machinery A/c for 4 years by using fixed instalment method 5% per annum?
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Maheswari Steel Company purchased a machinery on 1st April, 2011 for 2 20,000. On 1st April, 2012 a second machinery was purchased for 8,000 and 400 were met us establishment charges. The third and fourth machines were also purchased on 1st Oct., 2013 for 6,000 and on 30th June, 2014 for 10,000 respectively Prepare a Machinery A/c for 4 years by using fixed instalment method 5% per annum? for B Com 2024 is part of B Com preparation. The Question and answers have been prepared according to the B Com exam syllabus. Information about Maheswari Steel Company purchased a machinery on 1st April, 2011 for 2 20,000. On 1st April, 2012 a second machinery was purchased for 8,000 and 400 were met us establishment charges. The third and fourth machines were also purchased on 1st Oct., 2013 for 6,000 and on 30th June, 2014 for 10,000 respectively Prepare a Machinery A/c for 4 years by using fixed instalment method 5% per annum? covers all topics & solutions for B Com 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Maheswari Steel Company purchased a machinery on 1st April, 2011 for 2 20,000. On 1st April, 2012 a second machinery was purchased for 8,000 and 400 were met us establishment charges. The third and fourth machines were also purchased on 1st Oct., 2013 for 6,000 and on 30th June, 2014 for 10,000 respectively Prepare a Machinery A/c for 4 years by using fixed instalment method 5% per annum?.
Maheswari Steel Company purchased a machinery on 1st April, 2011 for 2 20,000. On 1st April, 2012 a second machinery was purchased for 8,000 and 400 were met us establishment charges. The third and fourth machines were also purchased on 1st Oct., 2013 for 6,000 and on 30th June, 2014 for 10,000 respectively Prepare a Machinery A/c for 4 years by using fixed instalment method 5% per annum? for B Com 2024 is part of B Com preparation. The Question and answers have been prepared according to the B Com exam syllabus. Information about Maheswari Steel Company purchased a machinery on 1st April, 2011 for 2 20,000. On 1st April, 2012 a second machinery was purchased for 8,000 and 400 were met us establishment charges. The third and fourth machines were also purchased on 1st Oct., 2013 for 6,000 and on 30th June, 2014 for 10,000 respectively Prepare a Machinery A/c for 4 years by using fixed instalment method 5% per annum? covers all topics & solutions for B Com 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Maheswari Steel Company purchased a machinery on 1st April, 2011 for 2 20,000. On 1st April, 2012 a second machinery was purchased for 8,000 and 400 were met us establishment charges. The third and fourth machines were also purchased on 1st Oct., 2013 for 6,000 and on 30th June, 2014 for 10,000 respectively Prepare a Machinery A/c for 4 years by using fixed instalment method 5% per annum?.
Solutions for Maheswari Steel Company purchased a machinery on 1st April, 2011 for 2 20,000. On 1st April, 2012 a second machinery was purchased for 8,000 and 400 were met us establishment charges. The third and fourth machines were also purchased on 1st Oct., 2013 for 6,000 and on 30th June, 2014 for 10,000 respectively Prepare a Machinery A/c for 4 years by using fixed instalment method 5% per annum? in English & in Hindi are available as part of our courses for B Com.
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