Question

Sachin Associates purchased furniture for Rs 40,000 on 1st April 2008. On 1st July 2010 a part of furniture was sold out for Rs 4,000 the original cost of which on 1st April 2008 was Rs 8,000. It was decided to provide depreciation by Diminishing Balance Method @ 10% p.a. on 31st March every year.
You are required to prepare Furniture Account for first three year and also pass the journal entries.

Answer 1

Furniture Account
Dr.	Cr.
Date	Particulars	Amount (Rs)	Date	Particulars	Amount (Rs)
2008			2009
Apr 1	Bank A/c	40,000	Mar 31	Depreciation A/c	4,000
			Mar 31	Balance c/d ( 40,000 – 4,000)	36,000
		40,000			40,000
2009			2010
Apr 1	Balance b/d	36,000	Mar 31	Depreciation A/c	3,600
			Mar 31	Balance c/d (36,000 – 3,600)	32,400
		36,000			36,000
2010			2010
Apr 1	Balance b/d	32,400	July 1	Depreciation A/c (for 3 months)	162
			July 1	Bank A/c	4,000
			July 1	Profit & Loss A/c (loss on sale)	2,318
			2011
			Mar 31	Depreciation A/c	2,592*
			Mar 31	Balance c/d	23,328
		32,400			32,400

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
2008-09
Apr 1	Furniture A/c	Dr.		40,000
	To Bank A/c				40,000
	(Furniture purchased)
Mar 31	Depreciation A/c	Dr.		4,000
	To Furniture A/c				4,000
	(Depreciation charged on furniture)
Mar 31	Profit & Loss A/c	Dr.		4,000
	To Depreciation A/c				4,000
	(Depreciation transferred to Profit and Loss A/c)
2009-10
Mar 31	Depreciation A/c	Dr.		3,600
	To Furniture A/c				3,600
	(Depreciation charged on furniture)
Mar 31	Profit & Loss A/c	Dr.		3,600
	To Depreciation A/c				3,600
	(Depreciation transferred to Profit and Loss A/c)
2010-11
Jul 1	Depreciation A/c	Dr.		162
	Bank A/c	Dr.		4,000
	Loss on Sale of Machinery A/c	Dr.		2,318
	To Machinery A/c				6,480
	(Machinery sold)
Mar 31	Depreciation A/c	Dr.		2,592
	To Furniture A/c				2,592
	(Depreciation charged on furniture)
Mar 31	Profit & Loss A/c	Dr.		2,754
	To Depreciation A/c				2,754
	(Depreciation transferred to Profit and Loss A/c)

Working Notes: Calculation of Loss on sale of Machinery

Particulars	Amount
Cost of Furniture as on April 1, 2008	8,000
Less: Depreciation 2008-09	(800)
Value of Furniture as on Mar 31, 2009	7,200
Less: Depreciation 2009-10	(720)
Value of Furniture as on Mar 31, 2010	6,480
Less: Depreciation for 3 months	(162)
Value of Furniture as on Jul. 01,2010	6,318
Less: Sale Value	(4,000)
Loss on Sale	2,318

*Depreciation on remaining value of Furniture (32,400-6,480) = 25,920 × 10% = Rs 2,592