Illustration :
A firm purchases a lease for 3 for years for Rs.60,000 on 1.4.2010. It decides to provide for its replacement by means of an insurance policy for Rs.60,000. The annual premium is Rs. 19,000. On 1.4.2013, the lease is renewed for a further period of 3 years for Rs.60,000. You are required to show necessary ledger accounts. Books are closed on 31st March every year.
Solution:
Dr. Lease Account Cr.
| Date | Particulars ` | Rs. | Date | Particulars ` | Rs. |
| 2010
Apr. 1 |
To Bank | 60,000 | 2011
Mar.31 |
By Balance c/d | 60,000 |
| 2011
Apr. 1 |
To Balance b/d | 60,000 | 2012
Mar.31 |
By Balance c/d | 60,000 |
| 2012
Apr. 1 |
To Balance b/d | 60,000 | 2013
Mar.31 |
By Depreciation Reserve A/c | 60,000 |
Dr. Depreciation Insurance Policy Account Cr.
| Date | Particulars ` | Rs. | Date | Particulars ` | Rs. |
|
2010 Apr.1 |
To Bank (premium) | 19,000 | 2011 Mar.31 |
By Balance c/d | 19,000 |
|
2011 Apr.1 |
To Balance b/d | 19,000 | 2012 Mar.31 |
By Balance c/d | 38,000 |
| To Bank | 19,000 | _______ | |||
| 38,000 | 38,000 | ||||
| 2012 Apr. 1 |
To Balance b/d | 38,000 | 2013 Mar.31 |
By Bank | 60,000 |
| To Bank | 19,000 | ||||
| To Depreciation Reserve A/c (profit transferred) | 3,000 | ||||
| 60,000 | 60,000 |
Dr. Depreciation Reserve Account Cr.
| Date | Particulars ` | Rs. | Date | Particulars ` | Rs. |
| 2011
Mar.31 |
To Balance c/d | 19,000 | 2011 Mar.31 |
By Profit & Loss A/c | 19,000 |
| 2011
Mar.31 |
To Balance c/d | 38,000 | 2011 Apr. 1 |
By Balance b/d | 19,000 |
| 2012 Mar.31 |
By Profit & Loss A/c | 19,000 | |||
| 38,000 | 38,000 | ||||
| 2013 Mar.31 |
To Lease A/c | 60,000 | 2012 Apr. 1 |
By Balance b/d | 38,000 |
| By Profit & Loss A/c | 19,000 | ||||
| 2013 Mar.31 |
By Depreciation Insurance Policy A/c` | 3,000 | |||
| 60,000 | 60,000 |