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Depreciation, Provisions and Reserves
describe in detail two methods of recording deprec...

Question:
Describe in detail two methods of recording depreciation. Also give the necessary journal entries.

Answer:

The two methods of recording depreciation are:-

a) Direct method : In this the depreciation gets charged by debiting depreciation account and crediting the asset account

The journal entries under this method are- Depreciation account to asset account, profit and loss account to Depreciation account.

b) Indirect method : In this the amount of depreciation is debited to depreciation account and credited to provision for depreciation account.

The journal entries under this method are- Bank account to asset account, Asset account to profit and loss account.

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Mr. Sunrise started a business for buying and selling of stationery with ₹ 5,00,000 as an initial investment. Of which he paid ₹ 1,00,000 for furniture, ₹ 2,00,000 for buying stationery items. He employed a sales person and clerk. At the end of the month he paid ₹ 5,000 as their salaries. Out of the stationery bought he sold some stationery for ₹ 1,50,000 for cash and some other stationery for ₹ 1,00,000 on credit basis to Mr. Ravi. Subsequently, he bought stationery items of ₹ 1,50,000 from Mr. Peace. In the first week of next month there was a fire accident and he lost ₹ 30,000 worth of stationery. A part of the machinery, which cost ₹ 40,000, was sold for ₹ 45,000.

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Question:
Describe in detail two methods of recording depreciation. Also give the necessary journal entries.

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Question: Describe in detail two methods of recording depreciation. Also give the necessary journal entries.

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Question:
Describe in detail two methods of recording depreciation. Also give the necessary journal entries.