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 10years The Registration charges of the Motor Car is ₹5,000 | Show Motor car Account for the first years, assuming that the books of accounts are closed on 31st march every year.

1. 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 10years The Registration charges of the Motor Car is ₹5,000.

Show Motor car Account for the first years, assuming that the books of accounts are closed on 31st march every year.

Solution:

Under Straight Line Method depreciation is charged at a specific percentage on the original cost of the asset every year. 

Depreciation= Original Cost (-) Scrap value / Estimated life of the asset (in years) 

Original Cost= Purchasing price of an asset (+) Registration Charges (other expenses of asset)

Using original cost formula to take out the original cost of Motor car.

ஃ Original cost= 55,000 (+) 5,000 = 60,000

Afterward, find the depreciation of the motor car

ஃ  Depreciation= 55,000 (-) 10,000 /10 = 5,000 p.a.

Motor Car Account  

Date	Particulars	JF	Amount	Date	Particulars	JF	Amount
April 2015				March 2015
1	To Cash/Bank		60,000	31	By Depreciation		5,000
				31	By Balance c/d		55,000
			60,000				60,000
April 2016				March
				2016
1	To Balance b/d		55,000	31	By Depreciation		5,000
				31	By Balance c/d		50,000
			55,000				55,000
April 2017				March 2018
1	To Balance b/d		50,000	31	By depreciation		5,000
				31	By Balance c/d		45,000
			50,000				50,000
April 2018				March 2019
1	To Balance b/d		45,000	31	By depreciation		5,000
				31	By balance c/d		40,000
			45,000				45,000

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