Question
Give difference between : Equal instalment method and Reducing balance method.
| Points of Difference | Equal Instalment Method | Reducing Balance Method |
| $(1)$ Computation of depreciation amount | Under this method depreciation is calculated by deducting scrap value from cost price and dividing arrival amount by no. of years of estimated life of asset. | Under this method depreciating amount is calculated on the basis of predetermined rate of depreciation. |
| $(2)$ Amount of depreciation | Under this method every year amount of depreciation remain identical | Under this method every year amount of depreciation reduces. |
| $(3)$ Every time counting | Amount of depreciation remain indenticalthats why there is no need to calculate depreciation every time. | Amount of depreciation changes every year thats why there is need to calculate depreciation every time. |
| $(4)$ Value of an asset | Under this method, amount of depreciation is calculate on the basis of cost price. | Under this method, amount of depreciation is calculate on the basis of opening balance of the asset at the predetermined rate. |
| $(5)$ Value of asset at the end of estimate life in book value | Under this method value of asset becomes zero at the end of its estimated life. | Under this method value of asset does not become zero at the end of its estimated life. |
| $(6)$ Amount of depreciation & repair expense | Under this method, no balance is maintained between depreciation & maintenance expense. | Under this method, balance is maintained between depreciation and maintenance expense. |
| $(7)$ Simple to Calculate | Under this method, to calculate amount of depreciation is simple. | Under this method, to calculate amount of depreciation is difficult. |
| $(8)$ Appropriate | This method is useful for that asset in which using life of asset decide easily. | This method is useful for that asset in which its life is long and its amount is taking place in book value. |
| $(9)$ Important | This method is very important in $U.S.A.$, Britan and Canada. | This method is very important in India. |
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| $1$ | Cash purchase $Rs.15,000$ and cash sales $Rs.14,000.$ |
| $2$ | A personal goods of $Rs.10,000$, brought to business. |
| $3$ | Goods of Rs.$12,000$ purchased from Harsh. |
| $1$ | Mita returned goods of $Rs.1,000.$ |
| $2$ | Goods of $Rs.20,000$ sold to Kalpana at $10%$ trade discount and $5%$ cash discount. |
| $3$ | Goods of $Rs.2,000$ destroyed by fire and insurance company admitted claim $Rs.1,000.$ |
| Pass necessary rectification entries to rectify the following journal entries written by Ramlal: | |||||
| Date | Particulars | L.F. | Debit(Rs.) | Credit (Rs.) | |
| $1$ | Brokerage A/c. | Dr. | $16,000$ | ||
| To Cash A/c | $16,000$ | ||||
| (Being the brokerage $Rs.16,000$ paid for the purchase of machinery for business.) | |||||
| $2$ | Cash A/c. | Dr. | $4,500$ | ||
| To Karina's A/c. | $4,500$ | ||||
| (Being the amount $Rs. 4,500$ written off as bad debts in last year, received in current year from Karina) | |||||
| $3$ | Chaitali's A/c. | Dr. | $6,900$ | ||
| To Cash A/c. | $6,900$ | ||||
| (Being the amount $Rs.6,900$ paid to Chaitali for cash purchase) | |||||
| Total | $27,400$ | $27,400$ | |||