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Why depreciation is charged in P&L Account?
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Answer Posted / ranadheer
Depreciation is reduction in the value of asset (or)
decrease in the value of asset due to wear and tear.
Depreciation is loss for the company. According to nominal
rule Debit all expenses and losses so Depreciation is
debited to profit&loss account
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Raj & Raj Ltd purchased a machinery on 01.01.1996 for Rs.88,000.The life of the machine estimated to be 5 Yrs.It was calculated that the old machinery would fetch Rs.8000 at the end of its useful life.it was decided to replace the machinery at the end of the 5th year by setting up depreciation fund and invest the annual depreciation (along with interest earned each year) in gilt edged securities carrying interest at 5% p.a. At the end of the 5th Year the securities were sold for Rs.9000.As per the sinking fund table Rs.14,478 is to be invested every year.A new machine was purchased on 01.01.2001 for Rs.1,00,000.pass the journal entries and show the ledger accounts
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