Topics
Introduction to Book-Keeping and Accountancy
- Accounting
- Book-Keeping
- Accountancy
- Book-Keeping vs. Accountancy
- Basis (Methods) of Accounting System
- Qualitative Characteristics of Accounting Information
- Basic Terms in Accounting
- Transaction
- Capital and Drawings
- Debtors, Creditors and Bad Debts
- Expenditure and Its Types
- Discount and Its Types
- Solvent Person vs. Insolvent Person
- Accounting Year
- Trading Concerns vs. Not for Profit Concerns
- Concept of Goodwill
- Fundamentals of Business Earnings
- Concepts of Assets, Liabilities and Net Worth
- Accounting Principles
- Accounting Concepts
- Core Accounting Concepts
- Accounting Standards
Meaning and Fundamentals of Double Entry Book-Keeping
Journal
- Accounting Documents
- Goods and Service Tax(GST)
- Types of Accounting Documents
- Voucher
- Tax Invoice (Under GST)
- Credit Memo
- Receipt
- Cheque
- Types of Cheques
- Books of Accounts
- Books of Accounts > Journal
- Journal Entries
- Journal Entries > Goods Account
- Journal Entries > Recording Discount in Journal
- Journal Entries > Other Important Journal Entries
Ledger
Subsidiary Books
- Concept of Subsidiary Books
- Cash Book
- Cash Book > Simple Cash Book (Single Column Cash Book)
- Cash Book > Two Column Cash Book (With Cash and Bank Columns)
- Cash Book > Petty Cash Book
- Simple Petty Cash Book
- Analytical Petty Cash Book
- Purchase Book
- Purchase Return Book
- Sales Book
- Sales Return Book
- Journal Proper
Bank Reconciliation Statement
- Accounting Documents Used in Banking
- Accounting Documents Used in Banking
- Pay-in-Slip
- Withdrawal Slip
- Bank Pass Book
- Bank Statement
- Bank Advice
- Concept of Virtual Banking
- Bank Reconciliation Statement(BRS)
- Cash Book vs Pass Book : Causes of Differences
- Time Difference(Regarding BRS)
- Errors and Omission Made by Bank or Businessman
- Formats of BRS
- Preparation of BRS
- Cash Book and Pass Book Comparison for Common Period
- Cash Book and Pass Book Balances for Different Periods
- Bank Balance as per Cash Book (Favourable / Debit Balance)
- Bank Balance as per Pass Book (Favourable / Credit Balance)
- Overdraft as per Cash Book (Unfavourable / Credit Balance)
- Overdraft as per Pass Book (Unfavourable/Debit balance)
- Reconciliation of Debtors and Creditors
Depreciation
Rectification of Errors
Final Accounts of a Proprietary Concern
Single Entry System
- Concept of Single Entry System
- Single Entry System vs. Double Entry System
- Parts of Single Entry System
- Statements of Affairs
- Statement of Profit or Loss
- Statement of Profit or Loss > Net Worth Method
- Practical Problems on Single Entry System
- Life Cycle of a Depreciable Asset
- Journal Entries: In the Year of Purchase
- Journal Entries: Second Year Onwards
- Journal Entries: During the Year of Sale
- Example under SLM Method: Purchase of Asset and Depreciation on the Same
- Example under SLM Method: Partial Sale and Depreciation on Remaining Asset
- Example under WDV Method : Purchase of Asset and Depreciation for First 2 Years
- Example under WDV Method: Partial Sale and Depreciation of Remaining Asset
- Key Takeaways
Maharashtra State Board: Class 11
Life-cycle of a Depreciable Asset
Maharashtra State Board: Class 11
Journal Entries : In the Year of Purchase
| No. | Transaction | Journal Entry | Narration |
|---|---|---|---|
| 1 | Purchase of Asset (Cash) | Asset A/c Dr. To Cash/Bank A/c |
Being asset purchased for cash payment. |
| 2 | Purchase of Asset (on Credit) | Asset A/c Dr. To Vendor’s/Party's A/c |
Being asset purchased on credit from supplier. |
| 3 | Installation or other charges paid | Asset A/c Dr. To Cash/Bank A/c |
Being expenses incurred to make the asset usable. |
| 4 | Depreciation charged (on Asset A/c method) | Depreciation A/c Dr. To Asset A/c |
Being depreciation provided at the end of the year. |
| 5 | Transfer of Depreciation to Profit & Loss A/c | Profit & Loss A/c Dr. To Depreciation A/c |
Being depreciation expense transferred to P&L. |
Maharashtra State Board: Class 11
Journal Entries : Second Year Onwards
| Step | Transaction | Journal Entry | Narration |
|---|---|---|---|
| 1 | Charging Depreciation | Depreciation A/c Dr. To Asset A/c |
Being depreciation charged |
| 2 | Transfer of Depreciation balance to Profit & Loss A/c (Year End) | Profit & Loss A/c Dr. To Depreciation A/c |
Being balance of Depreciation A/c transferred to Profit & Loss A/c |
Maharashtra State Board: Class 11
Journal Entries : During the Year of Sale
| Step No. | Transaction | Journal Entry | Narration |
|---|---|---|---|
| 1 | Depreciation up to date of sale | Depreciation A/c Dr. To Asset A/c |
Being depreciation charged till date of sale. |
| 2 | Sale at Book Value | Bank A/c Dr. To Asset A/c |
Being asset sold for book value. |
| 3 | Sale at Profit | Bank A/c Dr. To Asset A/c (W.D.V.) To Profit on Sale of Asset A/c |
Being asset sold at profit. |
| 4 | Transfer of Profit | Profit on Sale of Asset A/c Dr. To Profit & Loss A/c |
Being profit transferred to P&L Account. |
| 5 | Sale at Loss | Bank A/c Dr. Loss on Sale of Asset A/c Dr. To Asset A/c (W.D.V.) |
Being asset sold at loss. |
| 6 | Transfer of Loss | Profit & Loss A/c Dr. To Loss on Sale of Asset A/c |
Being loss transferred to P & L Account. |
Maharashtra State Board: Class 11
Example under SLM Method: Purchase of Asset and Depreciation on the Same
Scenario
On April 1, 2022, ABC Ltd. purchased 4 computers at ₹1,00,000 each (total ₹400,000) by cheque.
Rate: 20% SLM
Depreciation: ₹400,000 × 20% = ₹80,000 per year
| Date | Particulars | L.F. | Dr (₹) | Cr (₹) |
|---|---|---|---|---|
| 2022 Apr 1 |
Computers A/c ....... Dr. | 4,00,000 | ||
| To Bank A/c | 4,00,000 | |||
| (Being four computers purchased for office use) | ||||
| 2023 Mar 31 |
Depreciation A/c ... Dr. | 80,000 | ||
| To Computers A/c | 80,000 | |||
| (Being 20% depreciation charged on computers for F.Y. 2022–23) | ||||
| 2023 Mar 31 |
Profit & Loss A/c ... Dr. | 80,000 | ||
| To Depreciation A/c | 80,000 | |||
| (Being depreciation transferred to Profit & Loss Account) |
Ledger Accounts:
Dr. Computers Account Cr.
| Date | Particulars | J.F. | Amount (₹) | Date | Particulars | J.F. | Amount (₹) |
|---|---|---|---|---|---|---|---|
| 2022 Apr 1 | To Bank A/c | 4,00,000 | 2023 Mar 31 | By Depreciation A/c | 80,000 | ||
| Mar 31 | By Balance c/d | 3,20,000 | |||||
| 4,00,000 | 4,00,000 | ||||||
| 2023 Mar 31 | To Balance b/d | 3,20,000 | 2024 Mar 31 | By Depreciation A/c | 80,000 | ||
| Mar 31 | By Balance c/d | 2,40,000 | |||||
| 3,20,000 | 3,20,000 |
Dr. Depreciation Account Cr.
| Date | Particulars | J.F. | Amount (₹) | Date | Particulars | J.F. | Amount (₹) |
|---|---|---|---|---|---|---|---|
| 2023 Mar 31 | To Computers A/c | 80,000 | 2023 Mar 31 | By Profit & Loss A/c | 80,000 | ||
| 80,000 | 80,000 |
Maharashtra State Board: Class 11
Example under SLM Method: Partial Sale and Depreciation on Remaining Asset
EFG Ltd had the following transactions and balances for their equipment as on 1st April, 2024.
- Book value at the start of 2024 = ₹256,000 (₹64,000 each).
- Equipment A—sold at book value ₹64,000 on 1st April, 2024
- Equipment B—sold for ₹55,000 on 1st October 2024
- Equipment C—sold for ₹75,000 on 1st October, 2024
- Equipment D—retained
Depreciation is calculated @10% using the SLM method.
In the books of EFG Ltd
Journal
| Date | Particulars | Dr (₹) | Cr (₹) |
|---|---|---|---|
| 2024 Apr 1 |
Bank A/c .................. Dr. | 64,000 | |
| To Equipment A/c | 64,000 | ||
| (Being Equipment A sold at book value) | |||
| 2024 Oct 1 |
Bank A/c ........................................ Dr. | 55,000 | |
| Loss on Sale of Equipment A/c ......Dr. | 5,800 | ||
| To Equipment A/c | 60,800 | ||
| (Being Equipment B sold for ₹55,000, loss ₹5,800.) | |||
| 2024 Oct 1 |
Bank A/c .................. Dr. | 75,000 | |
| To Equipment A/c | 60,800 | ||
| To Profit on Sale of Equipment A/c | 14,200 | ||
| (Being Computer C sold for ₹75,000, profit ₹17,400.) | |||
| 2024 Oct 31 |
Depreciation A/c ... Dr. | 6,400 | |
| To Equipment A/c | 6,400 | ||
| (Being depreciation charged on Equipment B and C) | |||
| 2025 March 31 |
Profit & Loss A/c ... Dr. | 5,800 | |
| To Loss on Sale of Equipment A/c | 5,800 | ||
| (Being loss transferred to P & L Account) | |||
| 2025 March 31 |
Profit on Sale of Equipment A/c Dr. | 14,200 | |
| To Profit & Loss A/c | 14,200 | ||
| (Being profit transferred to P & L Account) | |||
| 2025 March 31 |
Depreciation A/c ... Dr. | 6,400 | |
| To Equipment A/c | 6,400 | ||
| (Being depreciation charged on remaining equipment) | |||
| 2025 March 31 |
Profit & Loss A/c ... Dr. | 12,800 | |
| To Depreciation A/c | 12,800 | ||
| (Being depreciation transferred to P & L Account) |
Working Notes:
1. Sale of Equipment B
| Particulars | ₹ |
|---|---|
| Book value of Computer B as on 1-4-2024 | 64,000 |
| Less: Depreciation for 6 months | 3,200 |
| Book Value as on 1-10-2024 | 60,800 |
The company will incur a loss of 5,800, as selling price (55,000) is lower than book value on 1.10.2024 (60,800)
2. Sale of Equipment C
| Particulars | ₹ |
|---|---|
| Cost of Computer C as on 1-4-2024 | 64,000 |
| Less: Depreciation for 6 months | 3,200 |
| Book Value as on 1-10-2024 | 60,800 |
The company will earn a profit of 14,200, as selling price (75,000) is higher than book value on 1.4.2025 (60,800)
Maharashtra State Board: Class 11
Example under WDV Method : Purchase of Asset and Depreciation for First 2 Years
Scenario:
-
On April 1, 2023, ABC Ltd. purchases a machine for ₹1,00,000.
-
Depreciation rate: 20% p.a. (WDV method)
-
The accounting year ends March 31.
Year 1 Depreciation:
-
Depreciation = ₹1,00,000 × 20% = ₹20,000
-
Book value at year-end = ₹1,00,000 – ₹20,000 = ₹80,000
Year 2 Depreciation:
-
Depreciation = ₹80,000 × 20% = ₹16,000
-
Book value at year-end = ₹80,000 – ₹16,000 = ₹64,000
In the books of ABC Ltd
Journal
| Date | Particulars | Debit (₹) | Credit (₹) |
|---|---|---|---|
| 2023 Apr 1 |
Machinery A/c .............. Dr. | 1,00,000 | |
| To Bank A/c | 1,00,000 | ||
| (Being purchase of machinery) | |||
| 2024 Mar 31 |
Depreciation A/c .......... Dr. | 20,000 | |
| To Machinery A/c | 20,000 | ||
| (Being depreciation for Year 1) | |||
| 2024 Mar 31 |
Profit & Loss A/c ........ Dr. | 20,000 | |
| To Depreciation A/c | 20,000 | ||
| (Being transfer of depreciation to P&L Account) | |||
| 2025 Mar 31 |
Depreciation A/c .......... Dr. | 16,000 | |
| To Machinery A/c | 16,000 | ||
| (Being depreciation for Year 2) | |||
| 2025 Mar 31 |
Profit & Loss A/c ........ Dr. | 16,000 | |
| To Depreciation A/c | 16,000 | ||
| (Being transfer of depreciation to P&L Account) |
Maharashtra State Board: Class
Example under WDV Method: Partial Sale and Depreciation of Remaining Asset
Scenario:
-
On April 1, 2023, DEF Ltd. purchases 2 machines @ ₹1,00,000 each (total ₹2,00,000), 20% depreciation WDV.
-
On September 30, 2024 (after 1.5 years), Machine 1 is sold for ₹70,000 (middle of the second accounting year); Machine 2 is retained.
Calculations
Machine 1 (to be sold):
Year 1 depreciation: ₹1,00,000 × 20% = ₹20,000 ⇒ WDV: ₹80,000
- Depreciation for half a year before sale: ₹80,000 × 20% × 6/12 = ₹8,000
- Book Value on sale: ₹80,000 – ₹8,000 = ₹72,000
-
Sale for ₹70,000 ⇒ Loss on sale: ₹2,000
Machine 2 (retained):
-
Year 1 depreciation: ₹1,00,000 × 20% = ₹20,000 ⇒ WDV: ₹80,000
-
Year 2 depreciation (full year): ₹80,000 × 20% = ₹16,000 ⇒ Year-end WDV: ₹64,000
In the books of DEF Ltd
Journal
| Date | Particulars | Debit (₹) | Credit (₹) |
|---|---|---|---|
| 2023 Apr 1 |
Machinery A/c ............... Dr. | 2,00,000 | |
| To Bank A/c | 2,00,000 | ||
| (Being purchase of machinery) | |||
| 2024 Mar 31 |
Depreciation A/c ........... Dr. | 40,000 | |
| To Machinery A/c | 40,000 | ||
| (Being depreciation charged for year 1 for both machines) | |||
| 2024 Mar 31 |
Profit & Loss A/c ......... Dr. | 40,000 | |
| To Depreciation A/c | 40,000 | ||
| (Being transfer of depreciation to P&L Account) | |||
| 2024 Sep 30 |
Depreciation A/c ........... Dr. | 8,000 | |
| To Machinery A/c | 8,000 | ||
| (Being depreciation charged on Machine 1 for half year) | |||
| 2024 Sep 30 |
Bank A/c ................... Dr. | 70,000 | |
| Loss on Sale of Machinery A/c.......Dr. |
2,000 | ||
| To Machinery A/c | 72,000 | ||
| (Being Machine 1 sold at loss) | |||
| 2024 Sep 30 |
Profit & Loss A/c ......... Dr. | 2,000 | |
| To Loss on Sale of Machinery A/c | 2,000 | ||
| (Being transfer of loss to P&L account) | |||
| 2025 Mar 31 |
Depreciation A/c ........... Dr. | 16,000 | |
| To Machinery A/c | 16,000 | ||
| (Being depreciation charged on Machine 2 for Year 2) | |||
| 2025 Mar 31 |
Profit & Loss A/c ......... Dr. | 16,000 | |
| To Depreciation A/c | 16,000 | ||
| (Being transfer of depreciation to P&L Account) |
Maharashtra State Board: Class 11
Key Takeaways
- Journal entries for both methods follow the same debit-to-depreciation and credit-to-asset format, but the annual amounts are computed differently.
- Real-life business flows—purchase, annual use, and asset sale at book value, profit, or loss—are recorded through standardized entries and require clear ledger maintenance for asset(s), depreciation, and profit & loss.
- When assets are sold partially, each item's value, profit/loss, and remaining depreciation must be tracked individually, with leftover assets depreciated further on their new book values.
- The WDV method gives higher depreciation in early years and aligns better with actual wear and tax authority expectations, while also requiring slightly more complex calculations and record-keeping.
