1
A company maintains its fixed assets at cost. Depreciation provision accounts, one for each
type of asset, are in use. Machinery is to be depreciated at the rate of 15% per annum, and fixtures
at the rate of 5% per annum, using the reducing balance method. Depreciation is to be calculated
on assets in existence at the end of each year, giving a full year’s depreciation even though the asset
was bought part of the way through the year. The following transactions in assets have taken place:
2005 1 January Bought machinery £2,800, fixtures £290
1 July Bought fixtures £620
2006 1 October Bought machinery £3,500
1 December Bought fixtures £130
The financial year end of the business is 31 December.
You are to show:
(a) The machinery account.
(b) The fixtures account.
(c) The two separate provision for depreciation accounts.
(d) The fixed assets section of the balance sheet at the end of each year, for the years ended
31 December 2005 and 2006.