After studying this lesson, you will be able to:
In other words, the process of allocation of the cost of a fixed asset over its useful life is known as depreciation.
Working Notes:
Cost of 1st Machine – Rs. 5,82,000 + Rs. 18,000 – Rs. 6,00,000 Profit/Loss on sale of 1st
Machine = Cost of 1st July – Sale Value
(Rs. 4,86,000 – Rs. 24,300) Rs. 4,61,700 – Rs. 2,86,000 Loss on Sale of Machine
= Rs. 1,75,700
Working Notes:
Depreciation charged on Sold Machinery
Depreciation on Remaining Machinery
Provisions
Notes: Provision is a charge against profits it means provision has to be made irrespective of business enterprise it earning enough profits or incurring losses.
Examples of Provisions: Provision for Depreciation on assets, Provision for Repairs and Renewals of assets. Provision for Taxation, Provision for Discount on Debtors, Provision for Bad and Doubtful Debts.
Capital Reserves may be created out of profits such as Profit on sale of any fixed asset, Profit on revaluation of assets, Profit from forfeiture of shares, Profit prior to incorporation of company.
44 videos|75 docs|18 tests
|
44 videos|75 docs|18 tests
|
|
Explore Courses for B Com exam
|