Question

The original cost of furniture amounted to ₹ 4,000 and it is decided to write off 5% on the original cost as Depreciation at the end of each year. Show the Ledger Account as it will appear during the first four years. Show also how the same account will appear if it was decided to write off 5% p.a. on the diminishing balance of the asset each year.

Answer 1

Furniture Account (Original Cost Method)
Dr.									Cr.
Date		Particulars	J.F.	Amount (₹)	Date	Particulars	J.F.	Amount (₹)
I year					I year
Jan.01		Bank		4,000	Dec.31	Depreciation		200
					Dec.31	Balance c/d		3,800
				4,000				4,000
II year					II year
Jan.01		Balance b/d		3,800	Dec.31	Depreciation		200
					Dec.31	Balance c/d		3,600
				3,800				3,800
III year					III year
Jan.01		Balance b/d		3,600	Dec.31	Depreciation		200
					Dec.31	Balance c/d		3,400
				3,600				3,600
IV year					IV year
Jan.01		Balance b/d		3,400	Dec.31	Depreciation		200
					Dec.31	Balance c/d		3,200
				3,400				3,400

Note:

Furniture Account (Diminishing Balance Method)
Dr.									Cr.
Date		Particulars	J.F.	Amount (₹)	Date	Particulars	J.F.	Amount (₹)
I year					I year
Jan.01		Bank		4,000	Dec.31	Depreciation		200
					Dec.31	Balance c/d		3,800
				4,000				4,000
II year					II year
Jan.01		Balance b/d		3,800	Dec.31	Depreciation		190
					Dec.31	Balance c/d		3,610
				3,800				3,800
III year					III year
Jan.01		Balance b/d		3,610	Dec.31	Depreciation		181
					Dec.31	Balance c/d		3,429
				3,610				3,610
IV year					IV year
Jan.01		Balance b/d		3,429	Dec.31	Depreciation		171
					Dec.31	Balance c/d		3,258
				3,429				3,429

Note: Depreciation p.a. =