The document outlines financial accounting principles related to depreciation, including its definition, causes, and effects on financial statements. It's divided into methods of depreciation such as straight line and diminishing balance, providing examples and calculations for each. Additionally, it discusses the treatment of depreciation in profit and loss statements, and introduces concepts like deferred tax, current tax, and various measures of profit.

1. Post-Mid Term
Financial Accounting for Managers
PART-I (Depreciation and Financial Statement)
C.A. (Dr.) Pramod Kumar Pandey

2. DEPRECIATION

3. DEPRECIATION
 Decrease in value of Non-Current Assets like Building, Machinery,
Furniture etc. is called Depreciation
 It is a method for spreading the cost of assets over its useful life.
 Depreciation is charged to give effect to Matching Concept because
Depreciation shows portion of cost of assets used to generate
revenue in Business
 Deprecation is a non-cash expenditure

4. Causes for Depreciation
• Wear and tear due to actual use
• Efflux of time
• Obsolescence due to new inventions and technology
• Physical reasons like rust, moisture etc.
• Irregular repairs and maintenance

5. Entries required for Depreciation
Events Entries
When Assets purchased Assets a/c Dr.
to Bank a/c Cr.
When Depreciation charged Depreciation expense a/c Dr.
to Accumulated Depreciation a/c Cr.
When Depreciation transferred to P&L a/c P&L a/c Dr.
to Depreciation expense a/c Cr.

6. Treatment of Depreciation in Financial
Statements
• In Statement of Profit & Loss, Depreciation is shown as an Expense
• In Balance Sheet, Accumulated Depreciation is deducted from cost
• Cost minus Accumulated Depreciation is called Written Down Value
(WDV)
• Two popular methods for charging Depreciation are (a) Straight Line
Method (b) Diminishing Balance Method

7. Straight Line Method (SLM)
• This method charges equal amount of Depreciation each year
• This method is also known as Original Cost Method and Fixed
Installment Method
• Method for Depreciation Amount IN SLM
Depreciation Amount

8. Example-1: Straight Line
• Jackson Limited purchased a Machine for ₹ 1,00,000. it has an
expected life of 5 years at the end of which it can be disposed off at a
price of ₹ 20,000. Assuming company charges depreciation by SLM.
Compute. depreciation amount annually and depreciation rate.
• Depreciation Amount
, , ,
• Depreciation rate = × 100 = 16%

9. Example-2: Straight Line
X Ltd. Purchased a machine for Rs. 4,00,000 on 1st April, 2015.
it has life of 5 years with zero scrap value. Assuming Company
charges Depreciation on Straight line basis, calculate
Depreciation for all the five years.

10. Solution:2 (Depreciation = Original cost x %)
Year Computation Depreciation
1 400000 x 20% 80000
2 400000 x 20% 80000
3 400000 x 20% 80000
4 400000 x 20% 80000
5 400000 x 20% 80000
Total Depreciation 400000
Note: Rate of Depreciation = Cost-Scrap value/Life = 400000-0/5=
80000, 80000/400000 x 100 = 20%

11. Diminishing Balance Method
• This method is also called Reducing balance method
• Under this method depreciation amount reduces each year
• Depreciation is charged on (Original Cost – Accumulated Depreciation) x
rate %
• As compared to SLM, this method charges less depreciation. Thus a
Company will be able to show higher profits if it follows Diminishing
Balance Method as compared to SLM.

12. Example-1: Diminishing Balance Method
X Ltd. Purchased a machine for Rs. 4,00,000 on 1st April, 2015.
it has life of 5 years with zero scrap value. Assuming Company
charges Depreciation on Diminishing Balance Method@ 20%
each year, calculate Depreciation for all the five years.

13. Solution:1 (Depreciation = Original cost-Accumulated Depreciation x %)
Year Original Cost – Accumulated Depreciation) x
20%
Depreciation Amount
1 (400000-0) x 20% 80000
2 (400000-80000) x 20% 64000
3 (400000-144000) x 20% 51200
4 (400000-195200) x 20% 40960
5 (400000-236160) x 20% 32768
Total Depreciation 268928

14. Example-2: Diminishing Balance Method
Z Ltd. Purchased a Computer for Rs. 4,20,000 on 1st April, 2015. it has
life of 5 years with zero scrap value. Assuming Company charges
Depreciation on Diminishing Balance Method@ 10% each year,
calculate Depreciation, Accumulated Depreciation and Written Down
Value for all the five years.

15. Solution:2
Year Depreciation Expense Accumulate
d
Depreciatio
n
Written Down Value (WDV)
1 420000 x 10% = 42000 42000 420000-42000 = 378000
2 (420000-42000) x 10% = 37800 79800 420000-79800 = 340200
3 (420000 – 79800) x 10% =
34020
113820 420000-113820 = 306180
4 (420000-113820) x 10% =
30618
144438 420000 – 144438 = 275562
5 (420000-144438) x 10% =
27556
171994 420000-171994 = 248006

16. Example-3: Diminishing Balance Method
P Limited has purchased a furniture for Rs. 300000. it charges
depreciation @20% on diminishing balance method and falls in tax
bracket of 40%. Compute Depreciation expense and Profit after taxes
for the company from following year wise Profit before taxes
Year Profit Before Taxes
1 120000
2 130000
3 110000
4 140000

17. Solution-3: Computation of Depreciation Expense
Year Depreciation Expense
1 300000 x 20% =60000
2 (300000-60000) x 20% = 48000
3 (300000-108000) x 20% = 38400
4 (300000-146400) x 20% = 30720

18. Computation of Profit after Taxes
Year Profit
before
Depreciatio
n and Tax
Depreciation
Expense
Profit after
depreciation
before tax
Tax @ 40% Profit after
Tax
1 120000 60000 60000 24000 36000
2 130000 48000 82000 32800 49200
3 110000 38400 71600 28640 42960
4 (140000) 30720 (170720) (68288) (239008)

19. Mix Problem-1
• A machine was purchased by a X Ltd for ₹90000. The scrap value at
the end of its expected useful life of 4years is estimated ₹ 24000.
Calculate the amount of depreciation and Net Book Value (NBV) for
the four years using Straight Line Method.
• Also, calculate the depreciation charges and NBV for the machine for
four years using reducing balance method at a rate of 60%.
• Assume that the business owning the machine has made a profit
before depreciation of ₹20000 for each of the four years in which the
asset was held. Calculate the profit after depreciation for each year
under each depreciation method, and comment on your findings.

20. Solution: Straight Line Method
Annual Depreciation Charge = Cost – Scrap value
Useful life in years
= 90000 -24000
4
= ₹16500

21. Straight Line Method: Continued
Year Cost ₹ Depreciation
₹
Accu: dep ₹ NBV ₹
1 90000 16500 16500 73500
2 90000 16500 33000 57000
3 90000 16500 49500 40500
4 90000 16500 66000 24000

22. Reducing Balance Method
Year Cost ₹ Dep ₹ Accu dep ₹ NBV ₹
1 90000 54000 54000 36000
2 90000 21600 75600 14400
3 90000 8640 84240 5760
4 90000 3456 87696 2304

23. Effect of Depreciation on Tax: Straight line Method
Year Profit before dep ₹ Dep ₹ Profit after dep ₹
1 20000 16500 3500
2 20000 16500 3500
3 20000 16500 3500
4 20000 16500 3500

24. Effect of Depreciation on Tax: Diminishing Bal.Method
Year Profit before dep
₹
Dep ₹ Profit after dep ₹
1 20000 54000 (34000)
2 20000 21600 (1600)
3 20000 8640 11360
4 20000 3456 16544

25. Analysis
• Under straight line method since the depreciation amount is the
same throughout the years the profit after depreciation also remains
the same in all years
• whereas in reducing balance method the depreciation amount is
higher in the initial years and has a negative effect on profit. In the
initial years the profit is negative and later on the depreciation
amount decreases as years pass by and is reflected in the increase in
profit.

26. Misc. Problems on Depreciation:2
• Zohn & Sons provides you the following extracts of its Trial Balance on
31st December, 2017
• Rate of Depreciation on Building is 20% Straight line and on Furniture
10% on Diminishing balance method.
• Required: Compute depreciation expense for the year on Building and
Furniture and Show treatment in Balance Sheet
Particulars Dr. ₹ Cr. ₹
Building at cost 300000
Furniture at cost 200000
Accumulated Depreciation on Building 180000
Accumulated Depreciation on Furniture 38000

27. Solution:2
• Depreciation on Building = 300000 × 20% = ₹ 60,000
• Depreciation on Furniture = (200000-38000) × 10% = ₹ 16200
• Balance Sheet extracts
Non- Current Assets
Building 300000
Less accumulated Depreciation (240000)
60000
Furniture 200000
Less accumulated Depreciation (54200) 145800

28. Misc. Problem:3
• On January 1st 2017, Fashion brothers bought Equipment for
₹ 20, 00000 for cash. It charges depreciation at the rate of 6.25% on
Straight line basis and closes its books of accounts on December 31st
every year.
• Required: Pass entries on January 1st and December 31st, 2017.

29. Solution:3
1st January, 2017 Equipment a/c Dr. 20,00000
To cash 20,00000
31st December, 2017 Depreciation expense a/c Dr. 1,25,000
To accumulated Depreciation 1,25,000

30. Financial Statement of Company

31. Financial Statement of Company
1. Balance sheet
2. Statement of Profit and Loss
3. Cash Flow Statement
4. Statement of Changes in Equity
5. Notes to Accounts

32. Statement of Profit and Loss of Service operations
From the following information prepare Statement of Profit and Loss of Y Ltd which
is involved in service of Motor vehicles for the year ended 2018-19
Particulars ₹ (Crores)
Service Revenue 200.5
Interest on Fixed Deposit 42.42
Salary to staff 14.5
Travelling expenses 12.6
Rent Expenses 3.54
Interest on loan 10.46
Auditor’s fee 6.45
Tax expense 5.34
Depreciation 7.98

33. Statement of Profit and Loss of Y Ltd for the year ended 2018-19
Particulars ₹ (Crores)
I. Income
a) Revenue from operation
Service Revenue 200.5
b) Other income
Interest on Fixed Deposit 42.42
Total income 242.92

34. II Expenses
a) Employee benefit expenses
Salary to staff 14.5
b) Finance cost
Interest on loan 10.46
c) Depreciation and Amortization
Depreciation 7.98
d) Other expenses
Travelling expenses 12.6
Rent Expenses 3.54
Auditor’s fee 6.45
Total Expenses 55.53
III. Profit before tax (I –II) 187.39
IV. Tax expense 5. 34
V. Profit after taxes (IV-V) 182.05

35. Statement of Profit and Loss of Manufacturer and Trader
From the following information prepare Statement of Profit and Loss of Y Ltd which
is involved in Manufacturing of Motor vehicles for the year ended 2018-19
Particulars ₹ (Crores)
Sales 400.89
Interest on investment 100.6
Salary to staff 35.76
Cost of material consumed 42.5
Purchase of stock in trade 67.89
Changes in inventories of Work in progress, Stock in trade and Finished goods 34.32
Rent Expenses 54.78
Interest on loan 45.89
Tax expense 32.69
Depreciation 40.64

36. Statement of Profit and Loss of Y Ltd for the year ended 2018-19
Particulars ₹ (Crores)
I. Income
a) Revenue from operation
Sales 400.89
b) Other income
Interest on Investment 100.6
Total income 501.49

37. II Expenses
a) Cost of material consumed 42.5
b) Purchase of stock in trade 67.89
c) Changes in inventories of Work in progress, Stock in trade and Finished goods 34.32
d) Employee benefit expenses
Salary to staff 35.76
e) Finance cost
Interest on loan 45.89
f) Depreciation and Amortization
Depreciation 40.64
g) Other expenses
Rent Expenses 54.78
Total Expenses 327.78
III. Profit before tax (I –II) 179.71
IV. Tax expense 32.69
V. Profit after taxes (IV-V) 147.02

38. How will you deal with the following items in
Statement of Profit and Loss for year 2016-17
• Material purchased during the year ₹ 64,50,000
• Stock in trade purchased during the year ₹ 17,80,000
Inventory 1st April 2016 (₹) 31st March 2017 (₹)
Raw material 24,55,000 18,37,000
Work in progress 4,34,000 6.25,000
Stock in trade 2,20,000 4,45,000
Finished goods 13,78,000 6,64,200

39. Statement of Profit and Loss of Y Ltd for the year ended 2016-17
Particulars ₹
a) Cost of material consumed
(Opening stock of Raw material + Purchase of Raw
material – Closing Stock of Raw material)
24,55,000 + 64,50,000 – 18,37,000
70,68,000
b) Purchase of stock in trade 17,80,000
c) Changes in inventories of Work in progress, Stock
in trade and Finished goods
(Opening stock of work in progress + opening stock of
stock in trade + opening stock of finished goods)-
(Closing stock of work in progress + Closing stock of
stock in trade + Closing stock of finished goods)
= (434000+220000+1378000)-
(625000+445000+664200)= 20,32000-17,34200
2,97,800

40. Various measures of profit
• Gross profit = Sales – cost of goods sold or Profit before interest,
taxes and Depreciation and Amortization (EBITDA) + Other operating
expenses
• Cash operating profit = EBITDA = Profit before interest and taxes
(EBIT) + Depreciation and Amortization
• Operating Profit = Profit before interest and taxes (EBIT)= Profit
before tax (EBT) + Interest and Finance cost
• Pre- tax profit = Profit before tax (EBT)= Profit after tax (PAT) + Tax
expense
• Net profit = Profit after tax (PAT)= Profit before tax (EBT)-Tax expense

41. From following calculate (a) EBIT (b)EBITDA
(c) Gross profit
Particulars ₹ Crores
Total revenue 363.54
Cost of goods sold 120.47
Other operating expenses 60.26
Depreciation and amortization 53.25
Finance and interest cost 42.20
Tax on income 19.84
Profit after taxes 68.52

42. Solution
Particulars ₹
Profit after taxes 68.52
Add tax expenses 19.84
Profit before tax (EBT) 88.36
Add interest and finance charges 42.20
Profit before interest and taxes (EBIT) 130.56
Add Depreciation and Amortization 53.25
Profit before interest, taxes and Depreciation and
Amortization (EBITDA)
183.81
Add other operating expenses 60.26
Gross Profit (Sales – cost of goods sold) 244.07

43. Concept of Deferred Tax
Sl.No Entity Profit
Status
Entity –
Current
Entity –
Future
Effect
1 Book profit
higher than
the Taxable
profit
Pay less tax
now
Pay more tax
in future
Creates
Deferred Tax
Liability (DTL)
2 Book profit is
less than the
Taxable profit
Pay more tax
now
Pay less tax
in future
Creates
Deferred Tax
Asset (DTA)
The tax effect on the timing differences is termed as deferred tax which literally means taxes which
are deferred. Deferred tax is recognized on all timing difference – Temporary and Permanent.
These deferred taxes are given effect to in the financial statements through Deferred Tax Asset and
Liability as under:

44. Treatment of Tax
• Tax expense = Current tax + Deferred Tax. It is shown as an Expense in
Statement of Profit and Loss. It is tax as per books of accounts
maintained as per company law.
• Current Tax is the tax on current income as per income tax law
• Deferred tax is the difference of Tax expense and current tax. It shows
difference between tax computed as per company law and income
tax law.
• If deferred tax is negative in statement of Profit and Loss, then it is
Deferred tax assets and is shown as non-current Assets
• If deferred tax is positive, then it is Deferred Tax Liability and is
shown as non-current Liability

45. Example: Deferred Tax
A Company discloses following extracts of Tax. You are required to
compute (a) Current tax (b) Tax expense and (c) Deferred Tax Assuming
Applicable tax rate for Company is 30%.
Cases Book Profit (₹ Crores) Taxable Profit (₹ Crores)
1. 100 90
2. 120 150

46. Solution
Cases Book
Profit
Taxable
profit
Current
tax
Deferred
tax
Tax
expense
DTA/DTL
1 100 90 27 3 30 DTL
2 120 150 45 (15) 36 DTA

47. Balance sheet
From following information prepare Balance sheet of B Ltd as on 31st
March, 2019
Particulars ₹ (Crores) Particulars ₹ (Crores)
Property, plant and equipment 1200 Equity share capital 1000
Long term investment 700 Other equity 200
Trade receivables 800 Inventories 200
Trade payables 600 Deferred tax liability 40
Long term borrowings 160 Long term provisions 100
Short term borrowings 500 Short term provisions 700
Cash and cash equivalent 100 Capital work in progress 500

48. Balance sheet of B Ltd. as on 31st March, 2019
Assets ₹ (Crores) ₹ (Crores)
I. Non-Current Assets
Property, plant and equipment 1200
Capital work in progress 500
Long term investments 700
Total Non-Current Assets 2400
II. Current Assets
Inventories 200
Trade receivables 800
Cash and cash equivalent 100
Total Current Assets 1100
Total Assets 3300

49. Equity and Laibilities ₹ (Crores) ₹ (Crores)
I. Equity
Equity Share Capital 1000
Other equity 200 1200
II. Non-Current Liabilities
Long term borrowing 160
Long term provisions 100
Deferred tax liability 40 300
II. Current Liabilities
Trade payables 600
Short term Borrowings 500
Short term provisions 700 1800
Total Current Liabilities
Total Equity and Liabilities 3300

50. Adjustments (Additional information)
1. Prepaid expenses: Deduct from expenses in Statement of Profit and
Loss and show as Current Assets in Balance sheet
2. Outstanding Expenses: Add to expenses in Statement of Profit and
Loss and show as Current Liabilities in Balance sheet
3. Accrued Revenue: Add to income in Statement of Profit and Loss
and show as Current Assets in Balance sheet
4. Revenue received in advance: Less from income in Statement of
Profit and Loss and show as Current Liabilities in Balance sheet
5. Closing inventories: Less from opening inventory in Statement of
Profit and Loss and show as Current Assets in Balance sheet

51. Adjustments continued
6. Depreciation: Show this as expenses in Statement of Profit and Loss
and add this to accumulated depreciation of respective asset and
deduct this total accumulated depreciation from respective asset in
Balance sheet
7. Provision for tax: Compute this as % on Profit before tax. Deduct this
from profit before tax from statement of profit and loss. Show this as
current liability in Balance sheet
8. Provision for doubtful debts: This is new provision. Compute this on
debtors (Trade receivables) x %. Show this as expenses in Statement of
Profit and loss and deduct from this existing provision given in trial
balance. Deduct new provision from Debtors (Trade receivables) in
Balance sheet

52. Hidden adjustment
Normally adjustments are given as addition information below trial
balance. However, if interest rate given in loan, this is called hidden
adjustment.
• Loan x interest rate = interest expense =A
• Compare this with interest already given in trial balance=B
• If A is more than B, difference is outstanding interest
• If A is less than B, Difference is prepaid expenses

53. From following trial balance, prepare statement of Profit and Loss and Balance sheet for year
2018-19
Particulars Dr. Amount Cr. Amount
Stock 31st March, 2018 75000
Sales 350000
Purchases 245000
Wages 50000
Discount 5000
Furniture and fitting 17000
Salaries 7500
Rent 4950
Sundry expenses 7050
Surplus account 31st March, 2018 15030

54. From following trial balance, prepare statement of Profit and Loss and Balance sheet for year
2018-19-Continued
Particulars Dr. Amount Cr. Amount
Dividend paid 9000
Share capital 100000
Debtors and Creditors 37500 17500
Plant and Machinery 29000
Cash and Bank 16200
Reserve 15500
Patents and trade
marks
4830
Total 503030 503030

55. Additional information
• Stock in trade on 31st March 2019 was valued at Rs. 82000
• Depreciation on fixed assets @ 10%
• Make a provision for income tax @ 50%
• Ignore corporate dividend tax

56. Statement of Profit and Loss for the year ended 31st March, 2019
Note No Year ending 31st March, 19 Year ending 31st March, 18
I. Revenue from operation (Sales) 350000
II. Other income (Discount) 5000
III. Total Revenue 355000
IV. Expenses
Purchases of stock in trade 245000
Changes in inventory
(Opening-closing stock) 75000-82000
(7000)
Employee benefit expenses 1 57500
Finance cost Nil
Depreciation and Amortization 2 5083
Other expenses 3 12000
Total expenses 312583
V Profit before tax 42417
VI Tax expenses (42417 x 50%) 21209
VII Profit after taxes 21208

57. Accompanying notes to Statement of Profit and Loss for the year ended 31st
March, 2019
Year ending 31st March, 19 Year ending 31st March, 18
1 Employee Benefit Expenses
Wages 50000
Salaries 7500
57500
2. Depreciation and Amortization
Depreciation on plant and Machinery 2900
Depreciation on Patents and Trade marks 483
Depreciation on Furniture and Fittings 1700
5083
3 Other expenses
Rent 4950
Sundry expenses 7050
12000

58. Balance sheet as on 31st March
Assets Note No Year ending 31st
March, 19
Year ending 31st March,
18
I. Non Current Assets
Tangible Assets 4 41400
Intangible Assets 5 4347
Total Non-Current Assets 45747
II. Current Assets
Inventories 82000
Trade receivables 37500
Cash and cash equivalent 16200
Total Current Assets 135700
Total Assets 181447

59. Balance sheet as on 31st March
Equity and Liabilities Note No Year ending 31st
March, 19
Year ending 31st March,
18
I. Equity
Equity Share Capital 100000
Other equity 6 42738
Total Equity 142738
II. Non-Current Liabilities Nil
III. Current Liabilities
Trade payable (Creditors) 17500
Short term provisions 21209
Total Current Liabilities 38709
Total Equity and Liabilities 181447

60. Notes accompanying Balance sheet Year ending 31st March, 19 Year ending 31st March, 18
4 Tangible Assets
Plant and Machinery 29000
Less Depreciation (2900) 26100
Furniture and fitting 17000
Less Depreciation (1700) 15300
Total 41400
5 Intangible Assets
Patents and trade marks 4830
Less Depreciation (483)
4347
6. Other Equity
Reserves 15500
Opening Surplus 15030
Profit for the year 21208
Less Dividend paid (9000)
42738

61. From following trial Balance prepare Statement of P&L and Balance sheet for the year ended 31-3-19
₹'000s
Trade Payables 75
Receivables 100
Overdraft 30
Loan note interest 2
Administrative expenses 47
Selling & distribution expenses 10
5% Loan notes 60
Freehold land & buildings at cost 200
Fixtures & fittings at cost 150
Motor vehicles at cost 200

62. Trial Balance contd……
₹'000s
Accumulated Depreciation at 1.4.18
Fixtures & fittings 30
Motor vehicles 60
Opening Inventory at 1.4.18 125
Purchases 185
Sales 375
Share capital 160
Revaluation reserve 35
Provision for doubtful debts at 1.4.18 7
Retained Earnings at 1.4.18 187

63. Additional information
• Closing Inventory at 31 March 2019: ₹175,000.
• Included in the figure for administrative expenses is ₹18,000, being
advance payment for twelve months' rent from 30.11.2018
• Depreciation is to be charged as follows:
Fixtures and fittings: 20% straight line.
Motor vehicles: 30% reducing balance.
• Provision for doubtful debts should be increased and made equal to
10% of outstanding Receivables.
• During the year the company have engaged computer consultants at
a cost of ₹15,000. Their bill has not yet been paid but must be
provided for.
• It is expected that audit and accountancy fees for 2018-19 will
amount to ₹12,000.

64. Statement of Profit and Loss for the year ended 31st March, 2019
Note No Year ended 31-3-19 Year ended 31-3-18
I. Revenue from operation (Sales) 375000
II. Other income Nil
III. Total Revenue 375000
IV. Expenses
Purchases of stock in trade 185000
Changes in inventory
(Opening-closing stock) 125000-175000
(50000)
Employee benefit expenses Nil
Finance cost 1 3000
Depreciation and Amortization 2 72000
Other expenses (Administrative :35000, Selling:10000,
Provision for DD:3000, Consultancy:15000, Audit:12000)
3 75000
Total expenses 285000
V Profit before tax 90000
VI Tax expenses Nil
VII Profit after taxes 90000

65. Notes accompanying Statement of Profit and Loss
1. Finance cost
The Trial Balance shows 5% Loan notes of ₹60,000
Therefore there is still an amount owing but not yet paid = ₹1,000 (₹3,000 - ₹2,000)
Loan note interest should be : 60,000 x 5% = ₹3,000
But in the Trial Balance loan note interest is = ₹2,000
P&L: Expense
Loan note interest ₹3,000
B/S: Current Liabilities
Accrued loan note interest ₹1,000
B/S: Non Current Liabilities
5% Loan notes ₹60,000

66. Notes accompanying Statement of Profit and Loss
2. Depreciation and Amortization
• Dep'n charge for the year
• Straight Line: Original cost x %
• Reducing Balance: NBV x %
F+F: ₹150,000 x 20% = ₹30,000 (Straight Line)
MV: (₹200,000 - 60,000) x 30% = ₹42,000 (Reducing Balance)
F+F: ₹150,000 - (30,000 + 30,000) = ₹90,000
MV: ₹200,000 - (60,000 + 42,000 = ₹98,000
Note : Cost - Accumulated dep'n = NBV
Accumulated Depreciation = Accumulated Dep'n at 1.4.18 (TB) + Dep'n
charge for year

67. Notes accompanying Statement of Profit and Loss
2. Other expenses: Provision for Doubtful Debts
10% of Receivables = 10% x ₹100,000 = ₹10,000
2019 prov'n - 2018 prov'n
₹10,000 - ₹ 7,000 = ₹ 3,000
Receivables 100,000
Less: Prov'n for DD (10,000)
Figure for Balance sheet 90000

68. Notes accompanying Statement of Profit and Loss
Other Expenses: Administrative Expenses
Of the ₹47,000 admin expense, ₹18,000 is paid in advance for rent
How much is the prepayment? Match up the dates!
Financial Year 1.4.18 - 31.3.19
Payment for rent 30.11.18 - 30.11.19
30.11.18 - 30.11.19 - 4 months Matches – Expense in the Profit and
Loss
1.1.18to 30.8.18 - 8 months Doesn’t Match – Prepayment = ₹ 12000
(Admin Exp) = ₹47,000
Less: Prepayment = (₹12,000)
= ₹35,000
₹ 12000 will be shown as Current Assets

69. Balance sheet as on 31-3-2019
I. Assets
Non current Assets
Cost
(TB)
Accumulated
Dep'n (W3)
NBV
(W3)
Land & Building 200,000 - 200,000
Fixtures & Fittings 150,000 60,000 90,000
Motor Vehicles 200,000 102,000 98,000
388,000
Current Assets
Inventory (W1) 175,000
Receivables (100 -10) 100,000
Provision for DD (W4) (10,000)
Prepayment 12,000
277000
Total Assets 665000

70. Balance sheet as on 31st March
II. Equity and Liabilities Year ending 31st March, 19
I. Equity
Equity Share Capital 160000
Other equity 312000
Total Equity 472000
II. Non-Current Liabilities (Notes payable) 60,000
III. Current Liabilities
Overdraft 30000
Payables 75000
Accruals 28000
Total Current Liabilities 133000
Total Equity and Liabilities 665000