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प्रश्न
What is the annuity method?
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उत्तर
- Under this method, not only the original cost of the asset but also the amount of interest on the investment is taken into account while computing depreciation.
- The idea of considering interest is that if the investment is made in any other asset instead of the relevant fixed asset, it would have earned a certain rate of interest.
- To calculate the amount of depreciation, the annuity factor is used. The annuity factor can be found out from the annuity table or by using a formula.
- Amount of depreciation is computed as follows:
Amount of depreciation = Annuity factor × Original cost of the asset
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संबंधित प्रश्न
Answer in One Sentence only:
Why depreciation is charged even in the year of loss?
Write the word/term/phrase which can substitute the following statement:
Method of depreciation that cannot reach to zero value.
State whether the following statement is True or False with reasons:
Depreciation increases the value of the asset.
Complete the following sentence:
Depreciation is charged on ______ asset.
Complete the following sentence:
______ is the value which an asset realises at the end of its useful life.
Distinguish between straight-line method and written down value method of providing depreciation.
Raj & Co purchased a machine on 1st January 2014 for ₹ 90,000. On 1st July 2014, they purchased another machine for ₹ 60,000. On 1st January 2015, they sold the machine purchased on 1st January 2014 for ₹ 40,000. It was decided that the machine be depreciated at 10% per annum on the diminishing balance method. Accounts are closed on 31st December every year. Show the machinery account for the years 2014 and 2015.
M/s Omkar Enterprise Jalgaon acquired a Printing Machine for ₹ 75,000 on 1st Oct 2015 and spent ₹ 5,000 on its transport and installation. Another Machine for ₹ 45,000 was purchased on 1st Jan 2017. Depreciation is charged at the rate of 20% on Written Down Value Method, on 31st March every year.
Prepare Printing Machine Account for the first four years.
On 1st April 2015, Farid of Nasik purchased a Motor Car for ₹ 55,000. The scrap value of the Motor Car was estimated at ₹ 10,000 and its estimated life is 10 years. The Registration charge for the Motor Car was ₹ 5,000.
Show Motor Car Account for first four years, assuming that the books of accounts are closed on 31st March every year.
M/s Omkar Enterprise Jalgaon acquired a Printing Machine for ₹ 75,000 on 1 Oct 2015 and spent ₹ 5,000 on its transport and installation. Another Machine for ₹ 45,000 was purchased on 1st Jan 2017. Depreciation is charged at the rate of 20% on the Written Down Value Method, on 31st March every year.
Prepare Printing Machine Account for the first four years.
