Provision for Depreciation (Simplify)

Provision for depreciation account is the liability of business. We accumulate all the depreciation in a reserve and its name is provision for depreciation. By making  provision for depreciation account, we need not to credit depreciation in fixed asset's account. At the end of each accounting year, we show fixed asset at their original purchase value in the balance sheet.


When we sell the asset, we transfer its accumulated provision for depreciation in that asset's credit side from provision for depreciation account. After this, that asset will come on the current book value and then we compare it with the sale value of asset. If sale value of asset is more than current book value of asset after adjusting from provision for depreciation, it will be profit on sale of asset and profit and loss account will be the debit in that asset's account.

If we do not sell the asset, we have to transfer all year's depreciation to provision for depreciation account and provision for depreciation account will show in the liability side. When any asset crosses to its working life, its total provision will transfer to that asset's credit side. Original cost of asset will equal to the total amount of provision of depreciation which we accumulate in provision for depreciation account. Now, when we compare original cost of asset with the provision value, our asset will become zero. Because deduction of profit is just in books but there is no outflow cash, it means we have all provision for depreciation in cash form in our wallet. So, take all the amount from provision for depreciation account and buy new machine.


Provision for Depreciation Account's Proforma

 Amount in $  Amount in $
To balance C/d  XXXX By Depreciation Account (
End of First year )
XXXX
To balance C/d XXXX By Balance B/d
By
Depreciation Account (End of second year )
XXXX
To Asset Account ( 1/2
Machine Sold and total balance of PFD's 1/2 transfer to asset account )
To balance C/d (1/2 accumulated depreciation )
 XXXX
XXXX
By Balance b/d (Beginning
of the year)
By Depreciation (End of year)
XXXX
XXXX

COMMENTS

Comments on this Website: 2
Loading...
.
Share above Content to Your Friends



Name

access account accountant Accounting accounting definitions accounting ebook Accounting education accounting procedure accounting process outsourcing Accounting Software advance advertising africa Amalgamation amendments announcements Annuity assets audit auditing Australia B.Com. balance sheet bank Bank reconciliation banking basic accounting BBA benefits best bill black money blog bloggers book keeping bookkeeping Branch Accounting - full tutorial budget Budget variance business businessman CA calculator canada capital capital budgeting career cash cash book cash flow statement Chiense children china class coaching coins college commerce commerce students company computer computer accounting conference Contact vinod kumar corporate accounting cost cost accounting cost center cost centre CPA credit credit card cs currency data Debit and credit debit cards debt debtor degree depletion depreciation documents dollar domain Downloads Dubai e-accounting earning education Education Loans email employee EPF ERP euromoney examination excel excise duty expenses facebook factor of loan fans feature fifo FII fiji finacle finance Financial financial accounting fire insurance flickr flow forensic forex formula france fraud free fun function fund GAAP GDP gdr germany gold goodwill goodwill accounting google google apps google apps google base google buzz google calendar Google docs google finance google fusion tables google talk govt. GST guide health Hindi Hindi Language history holding company How to treat FBT in Tally 9 HRA ICAI ICAWI ICICI Bank IFRS income income statement Income Tax India indian railway Indonesia inflation inflation accounting infographics information inspiration insurance insurance accounting interest international Internet Introduction of Tally 9 inventory investment invoice IT Japan Job costing journal entries Kalculate keyboard kindle kuwait laptop law LBT learning lease lecture ledger leducation Leverage Analysis liabilities lifo linkedin loan logical point loss loss of profit M.Com. m.phil malaysia management accounting manual accounting manufacturing account market marketing mastercard material MBA MCA media migration mobile money ms word ms. excel multi currency in tally 9 Multicurrency Accounting mutual fund national security new and sacrifice ratio new york times new zealand news NGO nonprofit-accounting North Georgia Mountains NPV NSE odbc office oman online application online accounting otcei pakistan parents pay pal pdf pie chart pie chart of income pnb podcast ppf presentation price privacy policy prize money prof. vinod kumar profit profit and loss account project management provision purchase puzzles quickbooks Quote quotes quotes of svtuition rating agency ratio analysis RBI readers real estate rectification of errors remote control reports reserves responsibility accounting retirement revenue Revenue reserves review risk rupees salary sale saudi arabia saving sbi scholarship school SEBI security service tax share share trading Shares shri lanka singapore sms social accounting society solution South Africa stock stock exchange structure student students study subsidiary company svtuition swiss bank tally tally 9 Tally 7.2 Tally 9 Tally.ERP 9 tanzania tax Tax Accounting TDS teacher teaching technology test testimonial testimonials thailand tips trading trading on equity transaction trend trial balance tuition twitter UAE UGC - NET Commerce UK United Arab Emirates university usa valuation VAT Video Voucher and vouching wikipedia working capital youtube
false
ltr
item
Accounting Education: Provision for Depreciation (Simplify)
Provision for Depreciation (Simplify)
Accounting Education
http://www.svtuition.org/2011/05/provision-for-depreciation.html
http://www.svtuition.org/
http://www.svtuition.org/
http://www.svtuition.org/2011/05/provision-for-depreciation.html
true
2410664366776677676
UTF-8
Not found any lecture VIEW ALL Readmore Reply Cancel reply Delete By Home PAGES Lectures View All RECOMMENDED FOR YOU Category ARCHIVE SEARCH ALL Lectures Not found any lecture match with your request, please help to write it and send it to our email at vinod@svtuition.org for making this website free accounting and finance encyclopedia. Back Home Sunday Monday Tuesday Wednesday Thursday Friday Saturday Sun Mon Tue Wed Thu Fri Sat January February March April May June July August September October November December Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec just now 1 minute ago $$1$$ minutes ago 1 hour ago $$1$$ hours ago Yesterday $$1$$ days ago $$1$$ weeks ago more than 5 weeks ago Followers Follow THIS CONTENT IS PREMIUM Please share to unlock