Here also there are 2 methods of depreciation

1.WDV Method (Written down Value Method)

2.SLM Method (Straight Line Method)

 

WDV Method

Suppose Asset Value is 5000 and Depreciation Rate is 10% WDV.

Depreciation will be computed as follows

 Particulars

Year 1

Year 2

Year 3

Opening Value

5000

4500

4050

Less Dep 10%

500

450

405

Closing Value

4500

4050

3645

 

However,it is shown as follows in Balance Sheet as follows

 Particulars

Year 1

Year 2

Year 3

Gross block

5000

5000

5000

Less Accumulated Dep

500

950

1355

Net Block

4500

4050

3645

 

Hence Depreciation is not charged to Fixed Assets,It is booked in Accumlated Depreciation A/c

 

Entry Passed

Year 1

Depreciation A/c  Dr 500

                   To Accumulated Dep           500

 

Year 2

Depreciation A/c  Dr 450

                    To Accumulated Dep          450

 

Year 3

Depreciation A/c  Dr 405

                     To Accumulated Dep          405

 

SLM Method

EXAMPLE

Suppose Asset Value is 5000 and Depreciation Rate is 10% WDV.

Depreciation will be computed as follows

Particulars Year 1 Year 2 Year 3
Opening Value 5000 4500 4000
Less Dep 10% 500 500 500
Closing Value 4500 4000 3500

However,it is shown as follows in Balance Sheet as follows

 

 Particulars

Year 1

Year 2

Year 3

Gross block

5000

5000

5000

Less Accumulated Dep

500

1000

1500

Net Block

4500

4000

3500

 

Entry Passed here also is

Depreciation A/c  Dr 500

                   To Accumulated Dep          500

 

Depreciation A/c  Dr 500

                  To Accumulated Dep          500

 

Depreciation A/c  Dr 500

                 To Accumulated Dep          500

 

  1. Accounts and Finance
  2. Step 3 Passing Book Closure Entries
Ask Download

About the Author

CA Maninder Singh's photo - Expert in Practical Accounts, Taxation and Efiling
CA Maninder Singh
CA Maninder Singh is a Chartered Accountant for the past 6 years. He provides courses for Practical Accounts, Taxation and Efiling at teachoo.com .
Jail