# Question for calculation for balance sheet

B

#### barrytas

Problem1:
I';m currently working at a project in which I have to make a
projection on effects on balance sheets. I simplified the problem
below:
Propose I invest in an asset with my own money (no loan)
Asset is worth 1000, depreciation 10 years (100 each)
After 10 years, balance sheet gives:
Assets:
Asset = 0, cashposition =1000

Liabilities:
Equity = 1000
Reserve fund = 1000 (10x depreciation)

So balance sheet is not in balance....which mistake am I making here?
Can somebody help me out on this?

Problem2:
Propose I'm a non-profit organisation and have to invest 1000. I have
no own capital and will borrow everything from a bank, repayment at 10
terms. For simplicity interest=0%.

My costprice will be 100 (= yearly depreciation) + 100 repayment of
loan = 200 in total. So far so good. But after 10 year a new cycle
starts:
At that time I have repaid my loan and also a reserve fund of 1000!
Therefore my cost price is 100 (=depreciation).

So since my costprice was set at 200 I will make a big profit (or not).
Therefore: what is the real cost-price in this example?

I hope that some of you can help me with these questions!

S

#### S.M. Serba

Where are you getting this "reserve fund" from? The credit side of the
depreciation journal entry is "Depreciation Expense".

The correct BS should be:

Assets = DR 0
Liabilities = CR 0
Equity = CR 1000
Net Income/Loss = DR 1000

You have the same problem with your second example. If you post
depreciation, the debit is Expense and the Credit is Accumulated
Depreciation.

Look at your problems again this way.

Stephanie

B

#### Brian

You would create an account for your asset. Debit it with the value of
the asset and then credit a capital account. You would then have to
make a debit for the expense of the depreciation and credit a contra
account each year. You would have a schedule for the asset and use the
conta account to highlight this is an estimate. If you did reduce the
value to zero there might be more entries to make. Selling or using as
a trade-in will cause you to have a gain on disposition of asset.

There are many forms of non profits and your question cannot be