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| 1. |
Give the necessary journal entries when provision are created for depreciation |
| Answer» \t\tCreating Provision for Depreciation Account−\xa0Under this method, depreciation is\xa0not\xa0credited to the Assets Account; in fact, it is credited to the provision for Depreciation Account. At the year end, asset is shown at the original cost in the Balance Sheet and total depreciation up to the date of Balance Sheet is shown as Provision for Depreciation Account.\tJournal entries for depreciation are:Charging Depreciation\t\t\xa0\t\t\t\tDepreciation A/cDr.\xa0To Provision for Depreciation A/c\xa0(Depreciation charged)\xa0\tClosing of Depreciation Account\tProfit and Loss A/cDr.\xa0To Depreciation A/c\xa0(Depreciation account is transferred to Profit and Loss Account)\xa0\tWhen the asset is sold, the accumulated depreciation on that asset is credited to the Asset Account by passing the following Journal entry:\tProvision for Depreciation A/cDr.\xa0To Asset A/c\xa0(Accumulated depreciation transferred to Assets Account)\xa0\t | |