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A machinery purchased for ₹100000.the machinery was to be deprecated at the rate of 15% per annum on fixed instalment method., prevision for deprecation account is not maintained., provision for deprecation account is maintained?
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A machinery purchased for ₹100000.the machinery was to be deprecated a...
Provision for Depreciation Account
Depreciation is a non-cash expense that reduces the value of an asset over time. There are two methods of accounting for depreciation - the fixed installment method and the provision for depreciation method. In the fixed installment method, a fixed amount is charged as depreciation each year. In the provision for depreciation method, a certain percentage of the original cost of the asset is set aside each year as a provision for depreciation.
When Provision for Depreciation Account is Not Maintained
When provision for depreciation account is not maintained, the depreciation is charged directly to the asset account. In this case, the machinery purchased for ₹100,000 would be depreciated at the rate of 15% per annum on the fixed installment method. This means that ₹15,000 would be charged as depreciation each year.
When Provision for Depreciation Account is Maintained
When provision for depreciation account is maintained, the depreciation is charged to a separate account called the provision for depreciation account. This account accumulates the depreciation charged each year. This allows for better tracking of the depreciation expenses and ensures that the asset's value is accurately reflected in the books.
Benefits of Maintaining Provision for Depreciation Account
- Provides a clear record of depreciation expenses
- Helps in accurately determining the book value of the asset
- Ensures compliance with accounting standards
- Facilitates better financial analysis and decision-making
In conclusion, maintaining a provision for depreciation account is essential for accurate financial reporting and asset valuation. It helps in tracking depreciation expenses and ensures that the asset's value is reflected correctly in the books.
Depreciation is a non-cash expense that reduces the value of an asset over time. There are two methods of accounting for depreciation - the fixed installment method and the provision for depreciation method. In the fixed installment method, a fixed amount is charged as depreciation each year. In the provision for depreciation method, a certain percentage of the original cost of the asset is set aside each year as a provision for depreciation.
When Provision for Depreciation Account is Not Maintained
When provision for depreciation account is not maintained, the depreciation is charged directly to the asset account. In this case, the machinery purchased for ₹100,000 would be depreciated at the rate of 15% per annum on the fixed installment method. This means that ₹15,000 would be charged as depreciation each year.
When Provision for Depreciation Account is Maintained
When provision for depreciation account is maintained, the depreciation is charged to a separate account called the provision for depreciation account. This account accumulates the depreciation charged each year. This allows for better tracking of the depreciation expenses and ensures that the asset's value is accurately reflected in the books.
Benefits of Maintaining Provision for Depreciation Account
- Provides a clear record of depreciation expenses
- Helps in accurately determining the book value of the asset
- Ensures compliance with accounting standards
- Facilitates better financial analysis and decision-making
In conclusion, maintaining a provision for depreciation account is essential for accurate financial reporting and asset valuation. It helps in tracking depreciation expenses and ensures that the asset's value is reflected correctly in the books.
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A machinery purchased for ₹100000.the machinery was to be deprecated at the rate of 15% per annum on fixed instalment method., prevision for deprecation account is not maintained., provision for deprecation account is maintained?
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A machinery purchased for ₹100000.the machinery was to be deprecated at the rate of 15% per annum on fixed instalment method., prevision for deprecation account is not maintained., provision for deprecation account is maintained? for UPSC 2024 is part of UPSC preparation. The Question and answers have been prepared according to the UPSC exam syllabus. Information about A machinery purchased for ₹100000.the machinery was to be deprecated at the rate of 15% per annum on fixed instalment method., prevision for deprecation account is not maintained., provision for deprecation account is maintained? covers all topics & solutions for UPSC 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for A machinery purchased for ₹100000.the machinery was to be deprecated at the rate of 15% per annum on fixed instalment method., prevision for deprecation account is not maintained., provision for deprecation account is maintained?.
A machinery purchased for ₹100000.the machinery was to be deprecated at the rate of 15% per annum on fixed instalment method., prevision for deprecation account is not maintained., provision for deprecation account is maintained? for UPSC 2024 is part of UPSC preparation. The Question and answers have been prepared according to the UPSC exam syllabus. Information about A machinery purchased for ₹100000.the machinery was to be deprecated at the rate of 15% per annum on fixed instalment method., prevision for deprecation account is not maintained., provision for deprecation account is maintained? covers all topics & solutions for UPSC 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for A machinery purchased for ₹100000.the machinery was to be deprecated at the rate of 15% per annum on fixed instalment method., prevision for deprecation account is not maintained., provision for deprecation account is maintained?.
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