NCERT Solution for Class 11 Accountancy Chapter 7 - Depreciation, Provisions and Reserves

NCERT Accountancy Solutions Class 11 Chapter 7 PDF Free Download

NCERT Solutions are said to be an extremely helpful study material while preparing for the CBSE Class 11 Accountancy examinations. This study material owns a deep knowledge and the Solutions collected by the subject matter wizards are no distinct.

NCERT Solution For Class 11 Commerce Accountancy Chapter 7 – Depreciation, Provisions And Reserves furnishes us with an all-inclusive data to all the concepts. As the students would have to learn the basic fundamentals about the subject of accountancy in class 11, this curriculum for class 11 is a comprehensive study material; which explains the concepts in a great way.

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Short Answers for NCERT Accountancy Solutions Class 11 Chapter 7

1. What is Depreciation?

Any fixed asset that is acquired by a business is subjected to wear and tear and obsolescence over a time. This decrease in monetary value is calculated by a measure in accounting termed as depreciation.

2. State briefly the need for providing depreciation.

The needs for providing depreciation are given below.

  1. Determining true net profit or net loss: Correct profit or loss can be determined only when all the expenses and losses incurred for earning revenues are being added to Profit and Loss Account. Assets are used by a business for earning revenues and its cost is charged in form of depreciation in Profit and Loss Account.
  2. To reflect true and fair view of the financial statements: If depreciation is not charged, assets are shown at higher value than their actual value in the Balance Sheet; as a result, the Balance Sheet will not reflect true and fair view of the financial statements.
  3. For determining the accurate cost of production: Depreciation on plant and machinery and other assets, which are utilized in production, gets included in the cost of production. If depreciation is not added, cost of production becomes underestimated, which leads to low sale price and therefore leads to low profit.
  4. Distribution of dividend from profit: If depreciation is not charged, it leads to overestimation of profit and consequently more profit is distributed as dividend, out of the capital instead of the profit. This leads to the movement of capital out of the business.
  5. For providing funds for replacement of assets: Depreciation is not a cash expense. So, the amount of depreciation charged will be retained in the business and the same will be used for replacement of fixed assets after its useful life.
  6. Consideration of tax: The Profit and Loss Account will disclose lesser profit in case depreciation is charged as compared to when the depreciation is not charged. This depicts reduced profit and thus the business needs to pay less tax.

3. What are the causes of depreciation?

The major causes of depreciation are listed below:

  1. Constant use: Fixed assets will be constantly used so there will be normal wear and tear that leads to fall in the value of fixed assets.
  2. Expiry with time: Assets whether used or not, will be showing a decline in their effective life with the passage of time. The natural forces like rain, weather, etc. also lead to deterioration of the fixed assets.
  3. Obsolescence: With advances in technology, the fast technological innovations and inventions, the assets will become outdated in future. This leads to the obsolescence of fixed assets.
  4. Expiry of legal rights: When an asset is acquired for a specific period of time, then, whether the asset is put to use or not, its value becomes zero at the end of its useful life. For example, if a land is acquired for Rs 2, 00,000 for 30 years on lease, then each year its value depreciates based on its gross value. At the end of the 30th year, the value of the lease will become zero.
  5. Accident: An asset is likely to lose its value as damage may happen to it due to mishaps such as a fire accident, theft or a natural calamity. The loss caused due to such accidents is permanent in nature.
  6. Permanent fall in value: Generally, fluctuations in the market price of the fixed assets are not recorded in the books. However, if the fall in market price is permanent, it is accounted, which leads to a fall in the value of fixed assets in the books.

4. Explain basic factors affecting the amount of depreciation

The basic factors affecting the amount of depreciation are as follows:

  1. Total cost of asset: While determining the amount of depreciation. The total cost of an asset is taken into consideration. The expenses incurred in acquiring, installing and constructing asset along with making the asset fit to its usable condition are also included in the total cost of asset.
  2. Estimated useful life: Each asset has its useful life apart from its physical life (in terms of number of years, units, etc.), that can be useful for a business. The useful life of an asset is considered to be the effective life of a fixed asset. For example, land has indefinite life; however, if business acquires a piece of land on lease for 30 years, then the useful life of the piece of land is considered to be of 30 years.
  3. Estimated scrap value: The value of an asset at the end of its effective life is known as the net realisable value or sale value of an asset. It gets deducted from the total cost of an asset. For example, furniture is acquired at Rs 40,000 and its effective life is 10 years.

5. Distinguish between straight line method and written down value method of calculating depreciation.

The points of difference between straight line method and written down value method is as follows:

Basis of Comparison

Straight Line Method

Written Down Value Method

Basis of calculation

Depreciation is calculated based on the original cost of an asset.

Depreciation is calculated on the reducing balance, i.e., the book value of an asset.

Amount of depreciation

Equal amount is charged each year over the effective life of the asset.

Diminishing amount of depreciation (based on the written down value of asset) is charged each year, over the effective life of the asset.

Book value of asset

Book value of the asset becomes zero at the end of its effective life.

Book value of the asset can never become zero.

Suitability

It is suitable for the assets like land and buildings which have low chances of being obsolete and hence lesser repair charges.

It is suitable for assets that require more repair as they get more used like, plant and machinery, car, etc.

Effect of depreciation and repair on Profit and Loss account

It has an unequal effect over the life of the asset, as depreciation remains same over the years but the repair cost increases in the later years due to wear and tear.

It provides an equal effect over the life of the asset, as depreciation cost is high and repairs are less in the initial years but in the later years the repair costs increase and accordingly depreciation cost decreases.

Recognition under Income Tax Act

It is not recognised under the income tax act.

It is recognised under the income tax act.

6. In case of a long term asset, repair and maintenance expenses are expected to rise in later years than in earlier year. Which method is suitable for charging depreciation if the management does not want to increase burden on profits and loss account on account of depreciation and repair.

In case of assets that require more repairs in the later part of their life such as car, machinery etc., the most preferred method that can be used by management for maintaining a balance on profit and loss account is the written down method.

In this method, in the initial years, depreciation costs are high and repairs are less, while at the later years the situation is reversed and the repair cost increases with lower depreciation costs. This creates a balances without putting burden on profit.

7. What are the effects of depreciation on profit and loss account and balance sheet?

The effects of depreciation on Profit and Loss Account are as follows:

  1. Depreciation leads to increase in the debit side of profit and loss account and thereby reduces net profit.
  2. Depreciation leads to increase in the total expenses that leads to an excess of debit over credit balance.

The effects of depreciation on Balance Sheet are as follows:

  1. Depreciation reduces the original cost or book value of the concerned asset.
  2. Depreciation reduces the overall balance of asset’s column in the balance sheet.

8. Distinguish between provision and reserve

Basis of Comparison

Provision

Reserve

Meaning

It is created to meet the known liability.

It is created to meet unknown liability that may occur in a business.

Nature

Provision is charged against profit.

Reserve is appropriation of the profit.

Purpose

It is created for a specific liability.

It is created for strengthening the financial position by investing in new projects.

Mode of creation

It is created by debiting the profit and loss account.

It is created by debiting the profit and loss appropriation account.

Dividend Payment

It cannot be used for payment of dividends.

It can be used for payment of dividends.

Need of Creation

Creation of provision is compulsory. It needs to be created even if there is no profit.

Creation of reserve depends on the sole discretion of the management. It can be created only when there is profit.

9. Give four examples each of provision and reserves.

Following are four examples of provision:

  1. Provision for bad and doubtful debts
  2. Provision for discount on debtors
  3. Provision for depreciation
  4. Provision for taxation

Following are four example of reserves:

  1. General reserve
  2. Capital reserve
  3. Dividend equalisation reserve
  4. Debenture redemption reserve

10. Distinguish between revenue reserve and capital reserve.

Basis of Comparison

Revenue Reserve

Capital Reserve

Source

It is created out of profit earned from revenue, i.e., revenue earned from normal activities of business operations

It is created out of profit earned from capital, i.e., gain from sale of capital assets, e.g. sale of fixed assets

For paying Dividend

It can be used in the form dividend

It cannot be used as a dividend

Purpose

It is created for strengthening the financial position of the business

It is created for financing long term project or writing off capital expenses.

11. Give four examples each of revenue reserve and capital reserves.

Four examples of revenue reserve are as follows:

  1. General Reserve
  2. Retained Earnings
  3. Dividend Equalisation Reserve
  4. Debenture Redemption Reserve

Four examples of capital reserve are as follows:

  1. Issues of shares at premium
  2. Profit or issue of shares
  3. Sale of fixed assets
  4. Profit on redemption of debentures

12. Distinguish between general reserve and specific reserve.

Basis of Difference

General Reserve

Specific Reserve

Meaning

It is the reserve is created without any specified purpose, the reserve is called general reserve.

It is the reserve created for some specific purpose, that reserve is called specific reserve.

Usage

It can be used for any purpose.

It cannot be used for any purpose other than the specified purpose for which it is created.

Examples

Retained earnings, reserve funds, etc.

Debenture redemption reserve, dividend equalisation reserve, etc.

 

13. Explain the concept of secret reserve.

Secret reserves are created by overstating liabilities or understating assets. They are not shown in the balance sheet. It reduces tax liabilities, as the liabilities are overstated. This reserve is created by management to avoid competition by reducing profit. Creation of secret reserve is not allowed under Companies Act, 1956 as it requires full disclosure of all material facts and accounting policies while preparing final statements.

Long Answers for NCERT Accountancy Solutions Class 11 Chapter 7

1. Explain the concept of depreciation. What is the need for charging depreciation and what are the causes of depreciation?

Any fixed asset that is acquired by a business is subjected to wear and tear and obsolescence over a time. This decrease in monetary value is calculated by a measure in accounting termed as depreciation.

A machinery that costs Rs 1, 00,000 and its useful life of 10 years, its depreciation will be calculated as:

Calculating depreciation

The needs for providing depreciation are given below.

  1. Determining true net profit or net loss: Correct profit or loss can be determined only when all the expenses and losses incurred for earning revenues are being added to Profit and Loss Account. Assets are used by a business for earning revenues and its cost is charged in form of depreciation in Profit and Loss Account.
  2. To reflect true and fair view of the financial statements: If depreciation is not charged, assets are shown at higher value than their actual value in the Balance Sheet; as a result, the Balance Sheet will not reflect true and fair view of the financial statements.
  3. For determining the accurate cost of production: Depreciation on plant and machinery and other assets, which are utilized in production, gets included in the cost of production. If depreciation is not added, cost of production becomes underestimated, which leads to low sale price and therefore leads to low profit.
  4. Distribution of dividend from profit: If depreciation is not charged, it leads to overestimation of profit and consequently more profit is distributed as dividend, out of the capital instead of the profit. This leads to the movement of capital out of the business.
  5. For providing funds for replacement of assets: Depreciation is not a cash expense. So, the amount of depreciation charged will be retained in the business and the same will be used for replacement of fixed assets after its useful life.
  6. Consideration of tax: The Profit and Loss Account will disclose lesser profit in case depreciation is charged as compared to when the depreciation is not charged. This depicts reduced profit and thus the business needs to pay less tax.

The major causes of depreciation are listed below:

1. Constant use: Fixed assets will be constantly used so there will be normal wear and tear that leads to fall in the value of fixed assets.

2. Expiry with time: Assets whether used or not, will be showing a decline in their effective life with the passage of time. The natural forces like rain, weather, etc. also lead to deterioration of the fixed assets.

3. Obsolescence: With advances in technology, the fast technological innovations and inventions, the assets will become outdated in future. This leads to the obsolescence of fixed assets.

4. Expiry of legal rights: When an asset is acquired for a specific period of time, then, whether the asset is put to use or not, its value becomes zero at the end of its useful life. For example, if a land is acquired for Rs 2, 00,000 for 30 years on lease, then each year its value depreciates based on its gross value. At the end of the 30th year, the value of the lease will become zero.

5. Accident: An asset is likely to lose its value as damage may happen to it due to mishaps such as a fire accident, theft or a natural calamity. The loss caused due to such accidents is permanent in nature.

6. Permanent fall in value: Generally, fluctuations in the market price of the fixed assets are not recorded in the books. However, if the fall in market price is permanent, it is accounted, which leads to a fall in the value of fixed assets in the books.

2. Discuss in detail the straight line method and written down value method of depreciation. Distinguish between the two and also give situations where they are useful.

Straight Line method

It is one of the simplest method of charging depreciation. In this method, depreciation is charged on the original cost of an asset, at a fixed rate. The amount of depreciation remains same, year after year and asset’s value becomes zero at the end of its useful life.

Amount of depreciation can be calculated as follows:

Amount of Depreciation

Advantages of Straight Line Method

  1. It is fairly simple to calculate.
  2. Asset can be completely written off, i.e., an asset can be depreciated till the net scrap value becomes zero.
  3. As same amount of depreciation is charged every year. Therefore, it helps in easy comparison of Profit and Loss Account for different years.
  4. It is used for calculating value of those assets that need less repairs and maintenance and are continuously used over a period of time.

Limitations of Straight Line Method

  1. As asset becomes older, the burden of deprecation is more on profit and loss account in the later years, as repair and maintenance costs increase correspondingly.
  2. Value of asset becomes zero in the books even if the asset is still in usable condition in business.

Uses of Straight Line Method

  1. This method is useful for assets where repairs and maintenance expenses are low.
  2. It is also useful when an asset is continuously utilized from one year to another.
  3. It is useful when the value of assets, such as patent, copyright, goodwill, etc., becomes zero

Written Down Value Method

In this method depreciation is charged on the diminishing balance, i.e., book value of the asset. Here when an asset’s value diminishes year after year, the amount of depreciation declines.

Rate of depreciation is calculated as follows:

Rate of Depreciation

Where,

R represents rate of depreciation

n represents expected useful life of the asset

s represents the scrap value

c represents the cost of the asset

Advantages of Written Down Value Method

  1. It is based on the assumption that if an asset is used mostly in the earlier years, more cost is charged in form of depreciation.
  2. Suitable for the assets where repairs are more frequent in the later years, as depreciation is lesser and on a whole the combined burden of depreciation and repairs exerts equal pressure on the net profit over years.
  3. This method is accepted by the income tax authorities.
  4. As more depreciation is charged in the earlier years, so the loss due to obsolescence of the asset is reduced to a large extent.

Limitations of Written Down Value Method

  1. This process is difficult to calculate and is time consuming process.
  2. The value of an asset cannot be zero, thus the asset can never be completely written off.
  3. Shortage of funds arise for replacement of new asset. At the end of the useful life of an old asset, business will find it difficult to arrange funds for its replacement. This happens due to the fact that the amount of depreciation is retained and used in the business.

Uses of Written Down Value Method

  1. Useful for assets have long life.
  2. Useful for those assets that need more repair and maintenance costs in the later years.
  3. Provides easy calculation of depreciation for additional asset purchased during a year.

Difference between Straight Line Method and Written Down Value Method

Basis of Comparison

Straight Line Method

Written Down Method

Basis for calculation

Depreciation is calculated on the original cost of an asset.

Depreciation is calculated on the reducing balance, i.e., the book value of an asset.

Amount of depreciation

Equal amount is charged each year over the effective life of the asset.

Diminishing amount of depreciation (based on the written down value of asset) is charged each year over the effective life of the asset.

Book value of asset

Book value of the asset becomes zero at the end of its effective life.

Book value of the asset can never be zero during its lifetime.

Suitability

Suitable for the assets like, patents, land and buildings, etc., which have lesser possibility of obsolescence and lesser repair charges.

Suitable for assets that needs more repairs and maintenance costs in the later years like, plant and machinery, car, etc.

Effect of depreciation and repair on profit and loss account

Depreciation remains same over the years and results in unequal effect over the life of the asset. But repair cost increases in the later years.

Shows a Equal effect over the life of the asset, as depreciation is high and repairs are less in the initial years but in the latter years the repair cost increases and depreciation cost decreases.

Recognition under Income Tax Act

It is not recognised under the Income Tax Act.

It is recognised under the Income Tax Act.

3. Describe in detail two methods of recording depreciation. Also give the necessary journal entries.

The following are the two methods of recording depreciation:

  1. Charging depreciation to Asset Account− In this method, depreciation is directly credited to the asset account and no separate account is prepared with the provision of depreciation. From this method, the original cost of an asset and the total amount of depreciation cannot be determined from the Balance Sheet, as the Asset Account appears at its written down value.

Journal entries for depreciation are given below:

When depreciation is charged to Assets Account

Depreciation A/c

Dr.

 

To Assets A/c

 

(Depreciation charged to Assets Account)

 

Closing of Depreciation Account

Profit and Loss A/c

Dr.

 

To Depreciation A/c

 

(Depreciation transferred to Profit and Loss Account)

 

  1. Creating Provision for Depreciation Account− Under this method, depreciation is not credited to the Assets Account; it is credited to an account known as the provision for Depreciation Account. At the year end, asset is shown at the original cost in the Balance Sheet and total depreciation up to the date of Balance Sheet is shown as Provision for Depreciation Account.

Journal entries for charging depreciation are:

Charging Depreciation

Depreciation A/c

Dr.

 

To Provision for Depreciation A/c

 

(Depreciation charged)

 

Closing of Depreciation Account

Profit and Loss A/c

Dr.

 

To Depreciation A/c

 

(Depreciation account is transferred to Profit and Loss Account)

 

When the asset is sold, the accumulated depreciation on that asset is credited to the Asset Account by passing the following Journal entry:

Provision for Depreciation A/c

Dr.

 

To Asset A/c

 

(Accumulated depreciation transferred to Assets Account)

 

4. Explain determinants of the amount of depreciation.

Following are the factors that determine the amount of depreciation:

  1. Total cost of asset: While determining the amount of depreciation. The total cost of an asset is taken into consideration. The expenses incurred in acquiring, installing and constructing asset along with making the asset fit to its usable condition are also included in the total cost of asset.
  2. Estimated useful life: Each asset has its useful life apart from its physical life (in terms of number of years, units, etc.), that can be useful for a business. The useful life of an asset is considered to be the effective life of a fixed asset. For example, land has indefinite life; however, if business acquires a piece of land on lease for 30 years, then the useful life of the piece of land is considered to be of 30 years.
  3. Estimated scrap value: The value of an asset at the end of its effective life is known as the net realisable value or sale value of an asset. It gets deducted from the total cost of an asset. For example, furniture is acquired at Rs 40,000 and its effective life is 10 years.

After 10 years, furniture will be sold at Rs 5,000. So, depreciation is charged as:

Depreciation (p.a.)

=

(Original cost – Scrap Value )

 

 

Estimated Life of Asset (years)

 

 

 

=

(40,000 – 5,000)

10

=3,500/annum

5. Name and explain different types of reserves in details.

Reserves− Reserves are created with the purpose of strengthening the financial position and paving the way for future growth of the company. It is created out of profit earned by business.

The following are the types of reserve:

  1. Revenue Reserve− It is created out of revenue profit, i.e., revenue earned from normal activities of the business. It can be used for either general purpose or specific purpose. It is of two types:

a. General Reserve:  When the reserve is created without any specified purpose to serve, that reserve is called general reserve. It is a free reserve and can be used for any purpose. It can also be used for future growth and expansion of the organisation. For example, reserve funds, retained earnings, contingencies reserves, etc.

b. Specific Reserve: This type of reserve is created for some specific purpose, and is known as specific reserve.

Examples of specific reserve are given below.

i. Debenture Redemption Reserve

ii. Dividend Equalisation Reserve

iii. Investment Fluctuation Reserve

iv. Workmen Compensation Fund

  1. Capital Reserve: Capital reserve created out of capital profit, i.e., gain from activities other than normal business operations, such as sale of fixed asset, etc. It is created to meet the capital loss. Capital reserve cannot be distributed as dividend. Following are some examples of capital reserves:

i. Premium on issue of shares

ii. Premium on issue of debentures

iii. Profit on redemption of debentures

iv. Profit on sale of fixed assets

v. Profit prior to incorporation

3. Secret Reserves− Secret reserves are created by overstating liabilities or understating assets. They are not shown in the balance sheet. It reduces tax liabilities, as the liabilities are overstated. This reserve is created by management to avoid competition by reducing profit. Creation of secret reserve is not allowed under Companies Act, 1956 as it requires full disclosure of all material facts and accounting policies while preparing final statements.

6. What are provisions? How are they created? Give accounting treatment in case of provision for doubtful Debts.

Provisions are some amount that is set aside from profit to meet the known liability; however, the amount of liability is uncertain. It is created for specific liability. The creation of provision is compulsory even when there is no profit. The underlying principle behind creation of provision is conservatism, i.e. to prepare for future loss. The purpose is to provide cushion to the future business performance against the uncertain and unforeseen losses that may arise from the past transactions. A few examples of provisions are mentioned below:

  1. Provision for depreciation
  2. Provision for bad and doubtful debts
  3. Provision for discount on debtors
  4. Provision for taxation

Provisions are created by debiting the Profit and Loss Account on estimate basis. It is created on the basis of past experiences. A business may experience common losses, such as depreciation of fixed assets, taxation, etc. every year, which although are known; but, their exact amount in future period is unknown.

Therefore, a business always creates a provision based on certain percentage every year, which is purely based on the intuition and past experiences. These undetermined liabilities in form of provisions are kept aside, which will help future business activities, undisturbed from the future losses.

Accounting treatment for provision for doubtful debts is:

Profit and Loss A/c

Dr.

 

To Provision for Doubtful Debts

 

(Provision for doubtful debt made)

 

Numerical Answers for NCERT Accountancy Solutions Class 11 Chapter 7

1. On April 01, 2010, Bajrang Marbles purchased a Machine for Rs 1, 80,000 and spent Rs 10,000 on its carriage and Rs 10,000 on its installation. It is estimated that its working life is 10 years and after 10 years its scrap value will be Rs 20,000.

(a) Prepare Machine account and Depreciation account for the first four years by providing depreciation on straight line method. Accounts are closed on March 31st every year.

(b) Prepare Machine account, Depreciation account and Provision for depreciation account (or accumulated depreciation account) for the first four years by providing depreciation using straight line method accounts are closed on March 31 every year.

Machine account and Depreciation account using depreciation on straight line method is as follows:

Books of Bajrang Marbles

(a)

 

Machinery Account

Dr.

 

 

 

 

 

 

Cr.

Date

Particulars

J.F.

Amount

Rs

Date

Particulars

J.F.

Amount

Rs

2010

 

 

 

2011

 

 

 

Apr.01

Bank

 

2,00,000

Mar.31

Depreciation

 

18,000

 

 

 

 

 

Balance c/d

 

1,82,000

 

 

 

2,00,000

 

 

 

2,00,000

 

 

 

 

 

 

 

 

2011

 

 

 

2012

 

 

 

Apr.01

Balance b/d

 

1,82,000

Mar.31

Depreciation

 

18,000

 

 

 

 

Mar.31

Balance c/d

 

1,64,000

 

 

 

1,82,000

 

 

 

1,82,000

 

 

 

 

 

 

 

 

2012

 

 

 

2013

 

 

 

Apr.01

Balance b/d

 

1,64,000

Mar.31

Depreciation

 

18,000

 

 

 

 

Mar.31

Balance c/d

 

1,46,000

 

 

 

1,64,000

 

 

 

1,64,000

 

 

 

 

 

 

 

 

2013

 

 

 

2014

 

 

 

Apr.01

Balance b/d

 

1,46,000

Mar.31

Depreciation

 

18,000

 

 

 

 

Mar.31

Balance c/d

 

1,28,000

 

 

 

1,46,000

 

 

 

1,46,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Hence, the closing balance of machinery account after 4 years is Rs. 1, 28,000.

Working notes: Calculation of annual depreciation

Cost of Asset= 1, 80,000 + 10,000 +10,000= 2, 00,000

 

Depreciation (p.a.)

=

(Original cost – Scrap Value )

 

 

Estimated Life of Asset (years)

 

 

 

=

(1,80,000 + 10,000 + 10,000 – 20,000)

 

10

 

=

Rs 18,000/annum

The depreciation account is calculated as:

Depreciation Account

Dr.

 

 

 

 

 

 

Cr.

Date

Particulars

J.F.

Amount

Rs

Date

Particulars

J.F.

Amount

Rs

2011

 

 

 

2011

 

 

 

Mar.31

Machinery

 

18,000

Mar.31

Profit and Loss

 

18,000

 

 

 

 

 

 

 

 

 

 

 

18,000

 

 

 

18,000

 

 

 

 

 

 

 

 

2012

 

 

 

2012

 

 

 

Mar.31

Machinery

 

18,000

Mar.31

Profit and Loss

 

18,000

 

 

 

 

 

 

 

 

 

 

 

18,000

 

 

 

18,000

 

 

 

 

 

 

 

 

2013

 

 

 

2013

 

 

 

Mar.31

Machinery

 

18,000

Mar.31

Profit and Loss

 

18,000

 

 

 

 

 

 

 

 

 

 

 

18,000

 

 

 

18,000

 

 

 

 

 

 

 

 

2014

 

 

 

2014

 

 

 

Mar.31

Machinery

 

18,000

Mar.31

Profit and Loss

 

18,000

 

 

 

 

 

 

 

 

 

 

 

18,000

 

 

 

18,000

 

 

 

 

 

 

 

 

(b)

Machinery Account

Dr.

 

 

 

 

 

 

Cr.

Date

Particulars

J.F.

Amount 

Rs

Date

Particulars

J.F.

Amount

Rs

2010

 

 

 

2011

 

 

 

Apr.01

Bank

 

2,00,000

Mar.31

Balance c/d

 

2,00,000

 

 

 

 

 

 

 

 

 

 

 

2,00,000

 

 

 

2,00,000

 

 

 

 

 

 

 

 

2011

 

 

 

2012

 

 

 

Apr.01

Balance b/d

 

2,00,000

Mar.31

Balance c/d

 

2,00,000

 

 

 

 

 

 

 

 

 

 

 

2,00,000

 

 

 

2,00,000

 

 

 

 

 

 

 

 

2012

 

 

 

2013

 

 

 

Apr.01

Balance b/d

 

2,00,000

Mar.31

Balance c/d

 

2,00,000

 

 

 

 

 

 

 

 

 

 

 

2,00,000

 

 

 

2,00,000

 

 

 

 

 

 

 

 

2013

 

 

 

2014

 

 

 

Apr.01

Balance b/d

 

2,00,000

Mar.31

Balance c/d

 

2,00,000

 

 

 

 

 

 

 

 

 

 

 

2,00,000

 

 

 

2,00,000

 

 

 

 

 

 

 

 


Provision for Depreciation Account

 

Dr.

 

 

 

 

 

 

Cr.

 

Date

Particulars

J.F.

Amount

Rs

Date

Particulars

J.F.

Amount

Rs

2011

 

 

 

2011

 

 

 

Mar.31

Balance c/d

 

18,000

Mar.31

Depreciation

 

18,000

 

 

 

 

 

 

 

 

 

 

 

18,000

 

 

 

18,000

 

 

 

 

 

 

 

 

 

 

 

 

2011

 

 

 

 

 

 

 

Apr.01

Balance b/d

 

18,000

 2012

 

 

 

2012

 

 

 

 Mar.31

Balance c/d

 

 18,000

Mar.31

Depreciation

 

18,000

 

 

 

36,000

 

 

 

36,000

 

 

 

 

 

 

 

 

 

 

 

 

2012

 

 

 

 

 

 

 

Apr.01

Balance b/d

 

36,000

 2013

 

 

 

2013

 

 

 

 Mar.31

Balance c/d 

 

 54,000

Mar.31

Depreciation

 

18,000

 

 

 

54,000

 

 

 

54,000

 

 

 

 

 

 

 

 

 

 

 

 

2003

 

 

 

 

 

 

 

Apr.01

Balance b/d

 

54,000

 2014

 

 

 

2014

 

 

 

 Mar.31

Balance c/d

 

 72,000

Mar.31

Depreciation

 

18,000

 

 

 

72,000

 

 

 

72,000

 

 

 

 

 

 

 

 

 

Hence, the provision for Depreciation account at the end of 4th Year is Rs.72, 000

Depreciation Account

Dr.

 

 

 

 

 

 

Cr.

Date

Particulars

J.F.

Amount

Rs

Date

Particulars

J.F.

Amount

Rs

2011

 

 

 

2011

 

 

 

Mar.31

Provision for Depreciation

 

18,000

Mar.31

Profit and Loss

 

18,000

 

 

 

 

 

 

 

 

 

 

 

18,000

 

 

 

18,000

 

 

 

 

 

 

 

 

2012

 

 

 

2012

 

 

 

Mar.31

Provision for Depreciation

 

18,000

Mar.31

Profit and Loss

 

18,000

 

 

 

 

 

 

 

 

 

 

 

18,000

 

 

 

18,000

 

 

 

 

 

 

 

 

2013

 

 

 

2013

 

 

 

Mar.31

Provision for Depreciation

 

18,000

Mar.31

Profit and Loss

 

18,000

 

 

 

 

 

 

 

 

 

 

 

18,000

 

 

 

18,000

 

 

 

 

 

 

 

 

2014

 

 

 

2014

 

 

 

Mar.31

Provision for Depreciation

 

18,000

Mar.31

Profit and Loss

 

18,000

 

 

 

 

 

 

 

 

 

 

 

18,000

 

 

 

18,000

 

 

 

 

 

 

 

 

 

2. On July 01, 2010, Ashok Ltd. Purchased a Machine for Rs 1, 08,000 and spent Rs 12,000 on its installation. At the time of purchase it was estimated that the effective commercial life of the machine will be 12 years and after 12 years its salvage value will be Rs 12,000.

Prepare machine account and depreciation Account in the books of Ashok Ltd. For first three years, if depreciation is written off according to straight line method. The account are closed on December 31st, every year.

The machine account and depreciation account are as follows:

Cost of Machine = Rs. (1, 08,000 + 12,000)

= Rs 1, 20,000

Books of Ashok Ltd.

Machinery Account

Dr.

Cr.

Date

Particulars

J.F.

Amount

Rs

Date

Particulars

J.F.

Amount

Rs

2010

2010

Jul.01

Bank

1,20,000

Dec.31

Depreciation

4,500

Dec.31

Balance c/d

1,15,500

1,20,000

1,20,000

2011

2011

Jan.01

Balance b/d

1,15,500

Dec.31

Depreciation

9,000

Dec.31

Balance c/d

1,06,500

1,15,000

1,15,500

2012

2012

Jan.01

Balance b/d

1,06,500

Dec.31

Depreciation

9,000

Dec.31

Balance c/d

97,500

1,06,500

1,06,500

2013

Jan.01

Balance b/d

97,500

Hence, the closing balance after three years is Rs 97,500.

Working notes: Calculation of annual depreciation

Depreciation (p.a.)

=

(Original cost – Scrap Value )

Estimated Life of Asset (years)

Depreciation

=

(1,08,000 + 12,000 – 12,000)

12

=

Rs 9,000

Depreciation Account

Dr.

Cr.

Date

Particulars

J.F.

Amount

Rs

Date

Particulars

J.F.

Amount

Rs

2010

2010

Dec.31

Machinery

4,500

Dec.31

Profit and Loss

4,500

4,500

4,500

2011

2011

Dec.31

Machinery

9,000

Dec.31

Profit and Loss

9,000

9,000

9,000

2012

2012

Dec.31

Machinery

9,000

Dec.31

Profit and Loss

9,000

9,000

9,000

3. Reliance Ltd. purchased a second hand machine for Rs 56,000 on October 01, 2011 and spent Rs 28,000 on its overhaul and installation before putting it to operation. It is expected that the machine can be sold for Rs 6,000 at the end of its useful life of 15 years. Moreover an estimated cost of Rs 1,000 is expected to be incurred to recover the salvage value of Rs 6,000. Prepare machine account and Provision for depreciation account for the first three years charging depreciation by fixed Instalment Method. Accounts are closed on March 31, every year.

Machine account and provision for depreciation account are as follows:

 

Books of Reliance Ltd.

Machinery Account

Dr.

 

 

 

 

 

 

Cr.

Date

Particulars

J.F.

Amount

Rs

Date

Particulars

J.F.

Amount

Rs

2011

 

 

 

2011

 

 

 

Oct.01

Bank

 

84,000

 

 

 

 

 

 

 

 

Dec.31

Balance c/d

 

84,000

 

 

 

84,000

 

 

 

84,000

 

 

 

 

 

 

 

 

2012

 

 

 

2012

 

 

 

Jan.01

Balance b/d

 

84,000

 

 

 

 

 

 

 

 

Dec.31

Balance c/d

 

84,000

 

 

 

84,000

 

 

 

84,000

 

 

 

 

 

 

 

 

2013

 

 

 

2013

 

 

 

Jan.01

Balance b/d

 

84,000

 

 

 

 

 

 

 

 

Dec.31

Balance c/d

 

84,000

 

 

 

84,000

 

 

 

84,000

 

 

 

 

 

 

 

 

 

Provision for Depreciation  Account

Dr.

 

 

 

 

 

 

Cr.

Date

Particulars

J.F.

Amount

Rs

Date

Particulars

J.F.

Amount

Rs

 

 

 

 

2011

 

 

 

 

 

 

 

Dec.31

Depreciation

 

1,316

2011

 

 

 

 

 

 

 

Dec.31

Balance c/d

 

1,316

 

 

 

 

 

 

 

1,316

 

 

 

1,316

 

 

 

 

 

 

 

 

 

 

 

 

2012

 

 

 

 

 

 

 

Jan.01

Balance b/d

 

1,316

2012

 

 

 

Dec.31

Depreciation

 

5,267

Dec.31

Balance c/d

 

6,583

 

 

 

 

 

 

 

6,583

 

 

 

6,583

 

 

 

 

 

 

 

 

 

 

 

 

2013

 

 

 

 

 

 

 

Jan.01

Balance b/d

 

6,583

2013

 

 

 

Dec.31

Depreciation

 

5,267

Dec.31

Balance c/d

 

11,850

 

 

 

 

 

 

 

11,850

 

 

 

11,850

 

 

 

 

2014

 

 

 

 

 

 

 

Jan.01

Balance b/d

 

11,850

 

 

 

 

 

 

 

 

 

As per the solution the balance of provision for depreciation account is Rs. 11,850

Working Note:

 

Calculation of annual depreciation

Depreciation (p.a.)

=

(Original cost – Scrap Value )

Estimated Life of Asset (years)

 

Depreciation (p.a.)

=

(56,000 + 28,000 – 6,000 + 1,000)

15 years

 

=

Rs 5,267

4. Berlia Ltd. Purchased a second hand machine for Rs 56,000 on July 01, 2015 and spent Rs 24,000 on its repair and installation and Rs 5,000 for its carriage. On September 01, 2016, it purchased another machine for Rs 2, 50,000 and spent Rs 10,000 on its installation.

(a) Depreciation is provided on machinery @10% p.a on original cost method annually on December 31. Prepare machinery account and depreciation account from the year 2015 to 2018.

(b) Prepare machinery account and depreciation account from the year 2015 to 2018, if depreciation is provided on machinery @10% p.a. on written down value method annually on December 31.

The machinery account and depreciation account are as follows:

Books of Berlia Ltd.

(a)

Machinery Account (Using Original Cost Method)

Dr.

 

 

 

 

 

 

Cr.

Date

Particulars

J.F.

Amount

Rs

Date

Particulars

J.F.

Amount

Rs

2015

 

 

 

2015

 

 

 

Jul.01

Bank (i)

 

85,000

Dec.31

Depreciation

 

4,250

 

(5,600 + 24,000 + 5,000)

 

 

Dec.31

Balance c/d

 

80,750

 

 

 

85,000

 

 

 

85,000

 

 

 

 

 

 

 

 

2016

 

 

 

2016

 

 

 

Jan.01

Balance b/d (i)

 

80,750

Dec.31

Depreciation

 

 

Sep.01

Bank (ii)

 

2,60,000

 

(i) 8,500, (ii) 8,667

 

17,167

 

(2,50,000 + 10,000)

 

 

Dec.31

Balance c/d

 

3,23,583

 

 

 

 

 

(i) 72,250, (ii) 2,51,333

 

 

 

 

 

3,40,750

 

 

 

3,40,750

 

 

 

 

 

 

 

 

2017

 

 

 

2017

 

 

 

Jan.01

Balance b/d

 

3,23,583

Dec.31

Depreciation

 

 

 

(i) 72,250, (ii) 2,51,333

 

 

 

(i) 8,500, (ii) 26,000

 

34,500

 

 

 

 

Dec.31

Balance c/d

 

 

 

 

 

 

 

(i) 63,750, (ii) 2,25,333

 

2,89,083

 

 

 

3,23,583

 

 

 

3,23,583

 

 

 

 

 

 

 

 

2018

Balance b/d

 

 

2018

 

 

 

Jan.01

(i) 63,750, (ii) 2,25,333

 

2,89,083

Dec.31

Depreciation

 

 

 

 

 

 

 

(i) 8,500, (ii) 26,000

 

34,500

 

 

 

 

Dec.31

Balance c/d

 

 

 

 

 

 

 

(i) 55,250, (ii) 1,99,333

 

2,54,583

 

 

 

2,89,083

 

 

 

2,89,083

 

 

 

 

 

 

 

 

Hence, balance on machine account as on 1st Jan 2019 is Rs. 2, 54,583

Depreciation Account

Dr.

 

 

 

 

 

 

Cr.

Date

Particulars

J.F.

Amount

Rs

Date

Particulars

J.F.

Amount

Rs

2015

 

 

 

2015

 

 

 

Dec.31

Machinery

 

4,250

Dec.31

Profit and Loss

 

4,250

 

 

 

4,250

 

 

 

4,250

 

 

 

 

 

 

 

 

2016

 

 

 

2016

 

 

 

Dec.31

Machinery

 

 

Dec.31

Profit and Loss

 

17,167

 

(i) 8,500 (ii) 8,667

 

17,167

 

 

 

 

 

 

 

17,167

 

 

 

17,167

 

 

 

 

 

 

 

 

2017

 

 

 

2017

 

 

 

Dec.31

Machinery

 

 

Dec.31

Profit and Loss

 

34,500

 

(i) 8,500 (ii) 26,000

 

34,500

 

 

 

 

 

 

 

34,500

 

 

 

34,500

 

 

 

 

 

 

 

 

2018

 

 

 

2018

 

 

 

Dec.31

Machinery

 

34,500

Dec.31

Profit and Loss

 

34,500

 

(i) 8,500 (ii) 26,000

 

34,500

 

 

 

34,500

 

 

 

 

 

 

 

 

 

Working notes: Calculation of depreciation per annum

 

(i) Depreciation on Machinery Purchased on July 01, 2015

 

 

= (56,000 + 24,000 + 5,000) ×

10

100

 

= Rs 8,500 pa

 

 

(ii) Depreciation on Machinery purchased on September 01, 2016.

 

= (2,50,000 + 10,000)  ×

10

100

 

= Rs 26,000 pa

 

(b)

Machinery Account (Written Down Value method)

Dr.

 

 

 

 

 

 

Cr.

Date

Particulars

J.F.

Amount 

Rs

Date

Particulars

J.F.

Amount 

Rs

2015

 

 

 

2015

 

 

 

Jul.01

Bank (i)

 

85,000

Dec.31

Depreciation

 

4,250

 

(5,600 + 24,000 + 5,000)

 

 

Dec.31

Balance c/d

 

80,750

 

 

 

85,000

 

 

 

85,000

 

 

 

 

 

 

 

 

2016

 

 

 

2016

 

 

 

Jan.01

Balance b/d (i)

 

80,750

Dec.31

Depreciation

 

 

Sep.01

Bank (ii)

 

2,60,000

 

(i) 8,075, (ii) 8,667

 

16,742

 

(2,50,000 + 10,000)

 

 

Dec.31

Balance c/d

 

 

 

 

 

 

 

(i) 72,675, (ii) 2,51,333

 

 3,24,008

 

 

 

3,40,750

 

 

 

3,40,750

 

 

 

 

 

 

 

 

2017

 

 

 

2017

 

 

 

Jan.01

Balance b/d

 

3,24,008

Dec.31

Depreciation

 

 

 

(i) 72,675, (ii) 2,51,333

 

 

 

(i) 7,268, (ii) 25,133

 

32,401

 

 

 

 

Dec.31

Balance c/d

 

 

 

 

 

 

 

(i) 65,407, (ii) 2,26,200

 

2,91,607

 

 

 

3,24,008

 

 

 

3,24,008

 

 

 

 

 

 

 

 

2018

Balance b/d

 

 

2018

 

 

 

Jan.01

(i) 65,407, (ii) 2,26,200

 

2,91,607

Dec.31

Depreciation

 

 

 

 

 

 

 

(i) 6,540, (ii) 22,620

 

29,160

 

 

 

 

Dec.31

Balance c/d

 

 

 

 

 

 

 

(i) 58,867, (ii) 2,03,580

 

2,62,447

 

 

 

2,91,607

 

 

 

2,91,607

 

 

 

 

 

 

 

 

Hence, balance on machine account as on 1st Jan 2019 is Rs 2, 62,447

Depreciation Account

Dr.

 

 

 

 

 

 

Cr.

Date

Particulars

J.F.

Amount

Rs

Date

Particulars

J.F.

Amount Rs

2015

 

 

 

2015

 

 

 

Dec.31

Machinery

 

4,250

Dec.31

Profit and Loss

 

4,250

 

 

 

4,250

 

 

 

4,250

 

 

 

 

 

 

 

 

2016

 

 

 

2016

 

 

 

Dec.31

Machinery

 

 

Dec.31

Profit and Loss

 

16,742

 

(i) 8,075, (ii) 8,667

 

16,742

 

 

 

 

 

 

 

16,742

 

 

 

16,742

 

 

 

 

 

 

 

 

2017

 

 

 

2017

 

 

 

Dec.31

Machinery

 

 

Dec.31

Profit and Loss

 

32,401

 

(i) 7,268, (ii) 25,133

 

32,401

 

 

 

 

 

 

 

32,401

 

 

 

32,401

 

 

 

 

 

 

 

 

2018

 

 

 

2018

 

 

 

Dec.31

Machinery

 

 

Dec.31

Profit and Loss

 

29,160

 

(i) 6,540, (ii) 22,620

 

29,160

 

 

 

 

 

 

 

29,160

 

 

 

29,160

 

 

 

 

 

 

 

 

 

5. Ganga Ltd. purchased a machinery on January 01, 2014 for Rs 5, 50,000 and spent Rs 50,000 on its installation. On September 01, 2014 it purchased another machine for Rs 3, 70,000. On May 01, 2016 it purchased another machine for Rs 8, 40,000 (including installation expenses).

Depreciation was provided on machinery @10% p.a. on original cost method annually on December 31. Prepare:

(a) Machinery account and depreciation account for the years 2014, 2015, 2016 and 2017.

(b) If depreciation is accumulated in provision for Depreciation account then prepare machine account and provision for depreciation account for the years 2014, 2015, 2016 and 2017.

The machinery account and depreciation account are as follows:

(a)

Books of Ganga Ltd.

Machinery Account

Dr.

 

 

 

 

 

 

Cr.

Date

Particulars

J.F.

Amount

Rs

Date

Particulars

J.F.

Amount

Rs

2014

 

 

 

2014

 

 

 

Jan.01

Bank (i)

 

6,00,000

Dec.31

Depreciation

(i) 60,000 (ii) 12,333 

 

72,333

 

(5,50,000 + 50,000)

 

 

Dec.31

Balance c/d

 

 

Sep.01

Bank (ii)

 

3,70,000

 

(i) 5,40,000, (ii) 3,57,667 

 

8,97,667

 

 

 

9,70,000

 

 

 

9,70,000

 

 

 

 

 

 

 

 

2015

 

 

 

2015

 

 

 

Jan.01

Balance b/d

 

 

Dec.31

Depreciation

 

 

 

(i) 5,40,000, (ii) 3,57,667

 

8,97,667

 

(i) 60,000, (ii) 37,000,

 

 

May.01

Bank (iii)

 

8,40,000

 

(iii) 56,000

 

1,53,000

 

 

 

 

Dec.31

Balance c/d

 

 

 

 

 

 

 

(i) 4,80,000 (ii) 3,20,667,

 

 

 

 

 

 

 

(iii) 7,84,000

 

15,84,667

 

 

 

17,37,667

 

 

 

17,37,667

 

 

 

 

 

 

 

 

2016

 

 

 

2016

 

 

 

Jan.01

Balance b/d

 

 

Dec.31

Depreciation

 

 

 

(i) 4,80,000, (ii) 3,20,667

 

 

 

(i) 60,000, (ii) 37,000,

 

 

 

(iii) 7,84,000

 

15,84,667

Dec.31

(iii) 84,000

 

1,81,000

 

 

 

 

 

Balance c/d

 

 

 

 

 

 

 

(i) 4,20,000, (ii) 2,83,667,

 

 

 

 

 

 

 

(iii) 7,00,000

 

14,03,667

 

 

 

15,84,667

 

 

 

15,84,667

 

 

 

 

 

 

 

 

2017

 

 

 

2017

 

 

 

Jan.01

Balance b/d

 

 

Dec.31

Depreciation

 

 

 

(i) 4,20,000, (ii) 2,83,667,

 

 

 

(i) 60,000, (ii) 37,000,

 

 

 

(iii) 7,00,000

 

14,03,667

 

(iii) 84,000

 

1,81,000

 

 

 

 

Dec.31

Balance c/d

 

 

 

 

 

 

 

(i) 3,60,000, (ii) 2,46,667,

 

 

 

 

 

 

 

(iii) 6,16,000

 

12,22,667

 

 

 

14,03,667

 

 

 

14,03,667

 

 

 

 

 

 

 

 

 

The balance of machine account is Rs.12, 22,667.

Depreciation Account

Dr.

 

 

 

 

 

 

Cr.

Date

Particulars

J.F.

Amount Rs

Date

Particulars

J.F.

Amount Rs

2014

 

 

 

2014

 

 

 

Dec.31

Machinery

 

72,333

Dec.31

Profit and Loss

 

72,333

 

 

 

72,333

 

 

 

72,333

 

 

 

 

 

 

 

 

2015

 

 

 

2015

 

 

 

Dec.31

Machinery

 

1,53,000

Dec.31

Profit and Loss

 

1,53,000

 

 

 

1,53,000

 

 

 

1,53,000

 

 

 

 

 

 

 

 

2016

 

 

 

2016

 

 

 

Dec.31

Machinery

 

1,81,000

Dec.31

Profit and Loss

 

1,81,000

 

 

 

1,81,000

 

 

 

1,81,000

 

 

 

 

 

 

 

 

2017

 

 

 

2017

 

 

 

Dec.31

Machinery

 

1,81,000

Dec.31

Profit and Loss

 

1,81,000

 

 

 

1,81,000

 

 

 

1,81,000

 

 

 

 

 

 

 

 

 

(b)

Machinery Account 

Dr.

 

 

 

 

 

 

Cr.

Date

Particulars

J.F.

Amount

Rs

Date

Particulars

J.F.

Amount

Rs

2014

 

 

 

2014

 

 

 

Jan.01

Bank (i)

 

6,00,000

 

 

 

 

 

(5,50,000 + 50,000)

 

 

Dec.31

Balance c/d

 

 

Sep.01

Bank (ii)

 

3,70,000

 

 

 

9,70,000

 

 

 

9,70,000

 

 

 

9,70,000

 

 

 

 

 

 

 

 

2015

 

 

 

2015

 

 

 

Jan.01

Balance b/d

 

 

 

 

 

 

 

(i) 6,00,000 (ii) 3,70,000

 

9,70,000

 

 

 

 

May.01

Bank (iii)

 

8,40,000

Dec.31

Balance c/d

 

18,10,000

 

 

 

18,10,000

 

 

 

18,10,000

 

 

 

 

 

 

 

 

2016

 

 

 

2016

 

 

 

Jan.01

Balance b/d

 

 

Dec.31

Balance c/d

 

18,10,000

 

(i) 6,00,000 (ii) 3,70,000

 

 

 

 

 

 

 

(iii) 8,40,000

 

18,10,000

 

 

 

 

 

 

 

18,10,000

 

 

 

18,10,000

 

 

 

 

 

 

 

 

2017

 

 

 

2017

 

 

 

Jan.01

Balance b/d

 

 

Dec.31

Balance c/d

 

18,10,000

 

(i) 6,00,000 (ii) 3,70,000

 

 

 

 

 

 

 

(iii) 8,40,000

 

18,10,000

 

 

 

 

 

 

 

18,10,000

 

 

 

18,10,000

 

 

 

 

 

 

 

 

 

Provision for Depreciation  Account

Dr.

 

 

 

 

 

 

Cr.

Date

Particulars

J.F.

Amount

 Rs

Date

Particulars

J.F.

Amount 

Rs

2014

 

 

 

2014

 

 

 

Dec.31

Balance c/d

 

72,333

Dec.31

Depreciation

 

72,333

 

 

 

 

 

 

 

 

 

 

 

72,333

 

 

 

72,333

 

 

 

 

 

 

 

 

 

 

 

 

2015

 

 

 

2015

 

 

 

Jan.01

Balance b/d

 

72,333

Dec.31

Balance c/d

 

2,25,333

Dec.31

Depreciation

 

1,53,000

 

 

 

2,25,333

 

 

 

2,25,333

 

 

 

 

 

 

 

 

 

 

 

 

2016

 

 

 

2016

 

 

 

Jan.01

Balance b/d

 

2,25,333

Dec.31

Balance c/d

 

4,06,333

Dec.31

Depreciation

 

1,81,000

 

 

 

4,06,333

 

 

 

4,06,333

 

 

 

 

 

 

 

 

 

 

 

 

2017

 

 

 

2017

 

 

 

Jan.01

Balance b/d

 

4,06,333

Dec.31

Balance c/d

 

5,87,333

Dec.31

Depreciation

 

1,81,000

 

 

 

5,87,333

 

 

 

5,87,333

 

 

 

 

 

 

 

 

 

The provision for depreciation account has a balance of Rs. 5, 87,333

6. Azad Ltd. purchased furniture on October 01, 2014 for Rs 4, 50,000. On March 01, 2015 it purchased another furniture for Rs 3, 00,000. On July 01, 2016 it sold off the first furniture purchased in 2014 for Rs 2, 25,000. Depreciation is provided at 15% p.a. on written down value method each year. Accounts are closed each year on March 31. Prepare furniture account, and accumulated depreciation account for the years ended on March 31, 2015, March 31, 2016 and March 31, 2017. Also give the above two accounts if furniture disposal account is opened.

The furniture account and accumulated depreciation account are as follows:

Books of Azad Ltd.

Furniture Account

Dr.

 

 

 

 

 

 

Cr.

Date

Particulars

J.F.

Amount Rs

Date

Particulars

J.F.

Amount 

Rs

2014

 

 

 

2015

 

 

 

Oct.01

Bank (i)

 

4,50,000

 

 

 

 

2015

 

 

 

Mar.31

Balance c/d

 

7,50,000

Mar.01

Bank (ii)

 

3,00,000

 

 

 

 

 

 

 

7,50,000

 

 

 

7,50,000

 

 

 

 

 

 

 

 

2015

 

 

 

2016

 

 

 

Apr.01

Balance b/d

 

 

 

 

 

 

 

(i) 4,50,000, (ii) 3,00,000

 

7,50,000

Mar.31

Balance c/d

 

7,50,000

 

 

 

7,50,000

 

 

 

7,50,000

 

 

 

 

 

 

 

 

2016

 

 

 

2016

 

 

 

Apr.01

Balance b/d

 

7,50,000

July 01

Furniture Disposal

 

4,50,000

 

(i) 4,50,000, (ii) 3,50,000

 

 

2005

 

 

 

 

 

 

 

Mar.31

Balance c/d

 

3,00,000

 

 

 

7,50,000

 

 

 

7,50,000

 

 

 

 

 

 

 

 

 

Accumulated Depreciation Account

Dr.

 

 

 

 

 

 

Cr.

Date

Particulars

J.F.

Amount 

Rs

Date

Particulars

J.F.

Amount

 Rs

2015

 

 

 

2015

 

 

 

Mar.31

Balance c/d

 

37,500

Mar.31

Depreciation

 

 

 

 

 

 

 

(i) 33,750, (ii) 3,750

 

37,500

 

 

 

37,500

 

 

 

37,500

 

 

 

 

 

 

 

 

2016

 

 

 

2015

 

 

 

Mar.31

Balance c/d

 

1,44,376

Apr.01

Balance b/d

 

37,500

 

 

 

 

2016

 

 

 

 

 

 

 

Mar.31

Depreciation

 

 

 

 

 

 

 

(i) 62,438, (ii) 44,378

 

1,06,876

 

 

 

1,44,376

 

 

 

1,44,376

 

 

 

 

 

 

 

 

2016

 

 

 

2016

 

 

 

July.01

Furniture Disposal

 

1,09,456

Apr.01

Balance b/d

 

1,44,376

2017

 

 

 

July.01

Depreciation (i)

 

13,268

Mar.31

Balance c/d

 

85,960

2017

 

 

 

 

 

 

 

Mar.31

Depreciation (ii)

 

37,772

 

 

 

 

 

 

 

 

 

 

 

1,95,416

 

 

 

1,95,416

 

 

 

 

 

 

 

 

 

Hence, the balance of provision of depreciation account is Rs. 85,960.

Furniture Disposal Account

Dr.

 

 

 

 

 

 

Cr.

Date

Particulars

J.F.

Amount Rs

Date

Particulars

J.F.

Amount 

Rs

2016

 

 

 

2016

 

 

 

Jul.01

Furniture

 

4,50,000

Jul.01

Accumulated Dep.

 

1,09,456

 

 

 

 

Jul.01

Bank

 

2,25,000

 

 

 

 

Jul.01

Profit and Loss (Loss)

 

1,15,544

 

 

 

 

 

 

 

 

 

 

 

4,50,000

 

 

 

4,50,000

 

 

 

 

 

 

 

 

 

Working Note:

Furniture (i)

Years

Opening Balance

 

Depreciation

 

Closing Balance

2014 – 2015

4,50,000

33,750

 

=

4,16,250

2015 – 2016

4,16,250

62,438

 

=

3,53,812

2016

3,53,812

13,268

(3 months)

=

3,40,544

 

 

 

1,09,456

 

 

 

Balance on July 01, 2016

3,40,544

 

 

 

 

 

Less: Sale on July 01, 2016

(2,25,000)

 

 

 

 

 

Loss on sale of furniture

1,15,544

 

So, we see that Loss on sale of furniture is Rs 1, 15,544.

7. M/s Lokesh Fabrics purchased a Textile Machine on April 01, 2011 for Rs 1, 00,000. On July 01, 2012 another machine costing Rs 2, 50,000 was purchased. The machine purchased on April 01, 2011 was sold for Rs 25,000 on October 01, 2015. The company charges depreciation @15% p.a. on straight line method. Prepare machinery account and machinery disposal account for the year ended March 31, 2016.

 Machinery account and Machinery disposal account are prepared below:

Books of M/s. Lokesh Fabrics

Machinery Account

Dr.

 

 

 

 

 

 

Cr.

Date

Particulars

J.F.

Amount

Rs

Date

Particulars

J.F.

Amount

Rs

2011

 

 

 

2012

 

 

 

Apr.01

Bank (i)

 

1,00,000

Mar.31

Depreciation

 

15,000

 

 

 

 

Mar.31

Balance c/d

 

85,000

 

 

 

 

 

 

 

 

 

 

 

1,00,000

 

 

 

1,00,000

 

 

 

 

 

 

 

 

2012

 

 

 

2013

 

 

 

Apr.01

Balance b/d

 

85,000 

Mar.31

Depreciation

 

 

July.01 

Bank (ii)

 

2,50,000

 

(i) 15,000 + 28,125

 

43,125

 

 

 

 

Mar.31

Balance c/d

 

 

 

 

 

 

 

(i) 70,000, (ii) 2,21,875

 

2,91,875

 

 

 

3,35,000

 

 

 

3,35,000

 

 

 

 

 

 

 

 

2013

 

 

 

2014

 

 

 

Apr.01

Balance b/d

 

 

Mar.31

Depreciation

 

 

 

 (i) 70,000, (ii) 2,21,875

 

2,91,875 

 

(i) 15,000, (ii) 37,500

 

52,500

 

 

 

 

Mar.31

Balance c/d

 

 

 

 

 

 

 

(i) 55,000, (ii) 1,84,375

 

2,39,375

 

 

 

2,91,875

 

 

 

2,91,875

 

 

 

 

 

 

 

 

2014

 

 

 

2015

 

 

 

Apr.01

Balance b/d

 

 

Mar.31

Depreciation

 

 

 

(i) 5,500, (ii) 1,84,375 

 

2,39,375

 

(i) 15,000, (ii) 37,500

 

52,500

 

 

 

 

Mar.31

Balance c/d

 

 

 

 

 

 

 

(i) 40,000, (ii) 1,46,875

 

1,86,875

 

 

 

 

 

 

 

 

 

 

 

2,39,375

 

 

 

2,39,375

 

 

 

 

 

 

 

 

2015

 

 

 

2015

 

 

 

Apr.01

Balance b/d

 

 

Oct.01

Depreciation

 

7,500

 

(i) 40,000, (ii) 1,46,875

 

1,86,875

Oct.01

Machinery Disposal

 

32,500

 

 

 

 

2016

 

 

 

 

 

 

 

Mar.31

Depreciation (ii)

 

37,500

 

 

 

 

Mar.31

Balance c/d

 

1,09,375

 

 

 

 

 

 

 

 

 

 

 

1,86,875

 

 

 

1,86,875

 

 

 

 

 

 

 

 

 

Hence, the balance of machine account is Rs.1, 09,375

Machinery Disposal Account

Dr.

 

 

 

 

 

 

Cr.

Date

Particulars

J.F.

Amount

Rs

Date

Particulars

J.F.

Amount

 Rs

2015

 

 

 

2015

 

 

 

Oct.01

Machinery

 

32,500

Oct.01

Bank

 

25,000

 

 

 

 

Oct.01

Profit and Loss

 

7,500

 

 

 

32,500

 

 

 

32,500

 

 

 

 

 

 

 

 

 

Here we see that Loss on sale of machine account is Rs. 7,500.

8. The following balances appear in the books of Crystal Ltd, on Jan 01, 2015

Rs

Machinery account on 15, 00,000

Provision for depreciation account 5, 50,000

On April 01, 2015 a machinery which was purchased on January 01, 2012 for Rs 2, 00,000 was sold for Rs 75,000. A new machine was purchased on July 01, 2015 for Rs 6, 00,000. Depreciation is provided on machinery at 20% p.a. on Straight line method and books are closed on December 31 every year. Prepare the machinery account and provision for depreciation account for the year ending December 31, 2015.

Machinery account and provision for depreciation account is created below:

Machinery Account

Dr.

 

 

 

 

 

 

Cr.

Date

Particulars

J.F.

Amount

Rs

Date

Particulars

J.F.

Amount

Rs

2015

 

 

 

2015

 

 

 

Jan.01

Balance b/d

 

15,00,000

Apr.01

Machinery Disposal

 

2,00,000

 

(13,00,000 + 2,00,000)

 

 

 

 

 

 

Jul.01

Bank

 

6,00,000

Dec.31

Balance c/d

 

19,00,000

 

 

 

21,00,000

 

 

 

21,00,000

 

 

 

 

 

 

 

 

 

Hence, balance of machinery account is Rs, 19, 00,000.

Provision for Depreciation Account

Dr.

 

 

 

 

 

 

Cr.

Date

Particulars

J.F.

Amount

 Rs

Date

Particulars

J.F.

Amount

 Rs

2015

 

 

 

2015

 

 

 

Apr.01

Machinery Disposal

 

1,30,000

Jan.01

Balance b/d

 

5,50,000

Apr.01

Balance c/d

 

7,50,000

Apr.01

Depreciation

 

10,000

 

 

 

 

Dec.31

Depreciation

 

 

 

 

 

 

 

(i) 2,60,000, (ii) 60,000

 

3,20,000

 

 

 

8,80,000

 

 

 

8,80,000

 

 

 

 

 

 

 

 

 

Working Note for the solution:

Machine Sold on July 01, 2015

  

(i)

Years

Opening Balance

 

Depreciation

 

Closing Balance

 

2012

2,00,000

40,000

=

1,60,000

 

2013

1,60,000

40,000

=

1,20,000

 

2014

1,20,000

40,000

=

80,000

 

2015

80,000

10,000

=

70,000

 

 

Accumulated Depreciation

=

1,30,000

 

 

 

 

 

 

 

 

 

Value on April 01, 2015

=

 

(70,000)

 

 

 

 

Less: Sale

=

 

75,000

 

 

 

 

Profit on sale of Machinery

 

 

5,000

From the above we see that profit on sale of machinery is Rs.5000.

Machinery Disposal Account

Dr.

 

 

 

 

 

 

Cr.

Date

Particulars

J.F.

Amount 

Rs

Date

Particulars

J.F.

Amount Rs

2015

 

 

 

2015

 

 

 

Apr.01

Machinery

 

2,00,000

Apr.01

Provision for Depreciation

 

1,30,000

 Apr.01 

Profit and Loss (Profit)

 

5,000 

Apr.01 

Bank

 

75,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,05,000

 

 

 

2,05,000

 

 

 

 

 

 

 

 

9. M/s. Excel Computers has a debit balance of Rs 50,000 (original cost Rs 1, 20,000) in computers account on April 01, 2010. On July 01, 2010 it purchased another computer costing Rs 2, 50,000. One more computer was purchased on January 01, 2011 for Rs 30,000. On April 01, 2014 the computer which has purchased on July 01, 2010 became obsolete and was sold for Rs 20,000. A new version of the IBM computer was purchased on August 01, 2014 for Rs 80,000. Show Computers account in the books of Excel Computers for the years ended on March 31 2011, 2012, 2013, 2014 and 2015. The computer is depreciated @10 p.a. on straight line method basis.

The computer account is created below:

Books of M/s Excel Computers

Computer Account

Dr.

 

 

 

 

 

 

Cr.

Date

Particulars

J.F.

Amount

Rs

Date

Particulars

J.F.

Amount 

Rs

2010

 

 

 

2011

 

 

 

Apr.01

Balance b/d (i)

 

50,000

Mar.31

Depreciation

 

 

Jul.01

Bank (ii)

 

2,50,000

 

(i) 12,000, (ii) 18,750,

 

 

2011

 

 

 

 

(iii) 750

 

31,500

Jan.01

Bank (iii)

 

30,000

Mar.31

Balance c/d

 

 

 

 

 

 

 

(i) 38,000, (ii) 2,31,250,

 

 

 

 

 

 

 

(iii) 29,250

 

2,98,500

 

 

 

3,30,000

 

 

 

3,30,000

 

 

 

 

 

 

 

 

2011

 

 

 

2012

 

 

 

Apr.01

Balance b/d

 

 

Mar.31

Depreciation

 

 

 

(i) 38,000, (ii) 2,31,250,

 

 

 

(i) 12,000 (ii) 25,000,

 

 

 

(iii) 29,250

 

2,98,500

 

(iii) 3,000

 

40,000

 

 

 

 

Mar.31

Balance c/d

 

 

 

 

 

 

 

(i) 26,000 (ii) 2,06,250,

 

 

 

 

 

 

 

(iii) 26,250

 

2,58,500

 

 

 

2,98,500

 

 

 

2,98,500

 

 

 

 

 

 

 

 

2012

 

 

 

2013

 

 

 

Apr.01

Balance b/d

 

 

Mar.31

Depreciation

 

 

 

(i) 26,000 (ii) 2,06,250,

 

 

 

(i) 12,000, (ii) 25,000,

 

40,000

 

(iii) 26,250

 

2,58,500

Mar.31

(iii) 3,000

 

 

 

 

 

 

 

Balance c/d

 

 

 

 

 

 

 

(i) 14,000, (ii) 1,81,250,

 

 

 

 

 

 

 

(iii) 23,250

 

2,18,500

 

 

 

2,58,500

 

 

 

2,58,500

 

 

 

 

 

 

 

 

2013

 

 

 

2014

 

 

 

Apr.01

Balance b/d

 

 

Mar.31

Depreciation

 

 

 

(i) 14,000, (ii) 1,81,250,

 

 

 

(i) 12,000, (ii) 25,000,

 

40,000

 

(iii) 23,250

 

2,18,500

 

(iii) 3,000

 

 

 

 

 

 

Mar.31

Balance c/d

 

 

 

 

 

 

 

(i) 2,000, (ii) 1,56,250,

 

 

 

 

 

 

 

(iii) 20,250

 

1,78,500

 

 

 

2,18,500

 

 

 

2,18,500

 

 

 

 

 

 

 

 

2014

 

 

 

2014

 

 

 

Apr.01

Balance c/d

 

 

Apr.01

Bank (ii)

 

20,000

 

(i) 2,000, (ii) 1,56,250,

 

 

Apr.01

Profit and Loss (Loss)

 

1,36,250

 

(iii) 20,250

 

1,78,500

2015

 

 

 

Aug.01

Bank (iv)

 

80,000

Mar.31

Depreciation

 

10,333 

 

 

 

 

 

(i) 2,000, (iii) 3,000, (iv) 5,333

 

 

 

 

 

 

Mar.31 

Balance c/d

 

 

 

 

 

 

 

(iii) 17,250, (iv) 74,667

 

91,917

 

 

 

2,58,500

 

 

 

2,58,500

 

 

 

 

 

 

 

 

 

Here the closing balance is Rs. 91,917

10. Carriage Transport Company purchased 5 trucks at the cost of Rs 2, 00,000 each on April 01, 2011. The company writes off depreciation @ 20% p.a. on original cost and closes its books on December 31, every year. On October 01, 2013, one of the trucks is involved in an accident and is completely destroyed. Insurance company has agreed to pay Rs 70,000 in full settlement of the claim. On the same date the company purchased a second hand truck for Rs 1, 00,000 and spent Rs 20,000 on its overhauling. Prepare truck account and provision for depreciation account for the three years ended on December 31, 2013. Also give truck account if truck disposal account is prepared.

Truck account and provision for depreciation account is prepared as follows:

Books of Carriage Transport Company

Truck Account

Dr.

 

 

 

 

 

 

Cr.

Date

Particulars

J.F.

Amount

Rs

Date

Particulars

J.F.

Amount

Rs

2011

 

 

 

2011

 

 

 

Apr.01

Bank

 

10,00,000

Dec.31

Balance c/d

 

10,00,000

 

 

 

10,00,000

 

 

 

10,00,000

 

 

 

 

 

 

 

 

2012

 

 

 

2012

 

 

 

Jan.01

Balance b/d

 

10,00,000

Dec.31

Balance c/d

 

10,00,000

 

 

 

10,00,000

 

 

 

10,00,000

 

 

 

 

 

 

 

 

2013

 

 

 

2013

 

 

 

Jan.01

Balance b/d

 

10,00,000

Oct.01

Truck Disposal

 

2,00,000

Oct.01

Bank

 

1,20,000

Dec.31

Balance c/d

 

9,20,000

 

 

 

11,20,000

 

 

 

11,20,000

 

 

 

 

 

 

 

 

Hence, the balance of truck account is Rs. 9, 20,000.

Provision for Depreciation Account

Dr.

 

 

 

 

 

 

Cr.

Date

Particulars

J.F.

Amount

Rs

Date

Particulars

J.F.

Amount

Rs

2011

 

 

 

2011

 

 

 

Dec.31

Balance c/d

 

1,50,000

Dec.31

Depreciation

 

1,50,000

 

 

 

1,50,000

 

 

 

1,50,000

 

 

 

 

 

 

 

 

2012

 

 

 

2012

 

 

 

Dec.31

Balance c/d

 

3,50,000

Jan.01

Balance c/d

 

1,50,000

 

 

 

 

Dec.31

Depreciation

 

2,00,000

 

 

 

3,50,000

 

 

 

3,50,000

 

 

 

 

 

 

 

 

2013

 

 

 

2013

 

 

 

Oct.01

Truck Disposal

 

1,00,000

Jan.01

Balance b/d

 

3,50,000

Oct.01

Balance c/d

 

4,46,000

Oct.01

Depreciation (9 Months)

 

30,000

 

 

 

 

Dec.31

Depreciation

 

 

 

 

 

 

 

(1,60,000 + 6,000)

 

1,66,000

 

 

 

 

 

 

 

 

 

 

 

5,46,000

 

 

 

5,46,000

 

 

 

 

 

 

 

 

 

Working Note for the solution:

 

 

Opening Balance

 

Depreciation

 

Closing Balance

 

Apr.01, 2011

2,00,000

30,000

=

1,70,000

 

Jan.01, 2012

1,70,000

40,000

=

1,30,000

 

Jan.01, 2013

1,30,000

30,000

=

1,00,000

 

 

Accumulated Depreciation

=

1,00,000

 

 

 

 

Value on Oct.01, 2013

=

1,00,000

 

Less: Insurance Claim

=

70,000

 

Loss on Accident

 

30,000

Hence, a total loss of Rs.30, 000 due to the accident is observed and the balance of provision for depreciation account is Rs. 4, 46,000.

Truck Disposal Account

Dr.

 

 

 

 

 

 

Cr.

Date

Particulars

J.F.

Amount 

Rs

Date

Particulars

J.F.

Amount 

Rs

2013

 

 

 

2013

 

 

 

Oct.01

Truck

 

2,00,000

Oct.01

Provision for Depreciation

 

1,00,000

 

 

 

 

Oct.01

Insurance Co. (Insurance Claim)

 

70,000

 

 

 

 

Oct.01

Profit and Loss (Loss)

 

30,000

 

 

 

 

 

 

 

 

 

 

 

2,00,000

 

 

 

2,00,000

 

 

 

 

 

 

 

 

 

11. Saraswati Ltd. purchased a machinery costing Rs 10, 00,000 on January 01, 2011. A new machinery was purchased on 01 May, 2012 for Rs 15, 00,000 and another on July 01, 2014 for Rs 12, 00,000. A part of the machinery which originally cost Rs 2, 00,000 in 2011 was sold for Rs 75,000 on October 31, 2014. Show the machinery account, provision for depreciation account and machinery disposal account from 2011 to 2015 if depreciation is provided at 10% p.a. on original cost and account are closed on December 31, every year.

Machinery account, provision for depreciation account and machinery disposal account is displayed below:

Books of Saraswati Ltd.

Machinery Account

Dr.

 

 

 

 

 

 

Cr.

Date

Particulars

J.F.

Amount

Rs

Date

Particulars

J.F.

Amount

Rs

2011

 

 

 

2011

 

 

 

Jan.01

Bank (i)

 

10,00,000

 

 

 

 

 

(8,00,000 + 2,00,000)

 

 

Dec.31

Balance c/d

 

10,00,000

 

 

 

10,00,000

 

 

 

10,00,000

 

 

 

 

 

 

 

 

2012

 

 

 

2012

 

 

 

Jan.01

Balance b/d

 

10,00,000

Dec.31

Balance c/d

 

25,00,000

May.01

Bank (ii)

 

15,00,000

 

 

 

 

 

 

 

 

25,00,000

 

 

 

25,00,000

 

 

 

 

 

 

 

 

2013

 

 

 

2013

 

 

 

Jan.01

Balance b/d

 

25,00,000

Dec.31

Balance c/d

 

25,00,000

 

 

 

25,00,000

 

 

 

25,00,000

 

 

 

 

 

 

 

 

2014

 

 

 

2014

 

 

 

Jan.01

Balance b/d

 

25,00,000

Oct.31

Machinery Disposal

 

2,00,000

Jul.01

Bank (ii)

 

12,00,000

Dec.31

Balance c/d

 

 

 

 

 

 

 

(i) 8,00,000 (ii) 15,00,000

 

 

 

 

 

 

 

(iii) 12,00,000

 

35,00,000

 

 

 

37,00,000

 

 

 

37,00,000

 

 

 

 

 

 

 

 

2015

 

 

 

2015

 

 

 

Jan.01

Balance c/d

 

35,00,000

Dec.31

Balance c/d

 

35,00,000

 

 

 

35,00,000

 

 

 

35,00,000

 

 

 

 

 

 

 

 

 

Provision for Depreciation Account

Dr.

 

 

 

 

 

 

Cr.

Date

Particulars

J.F.

Amount Rs

Date

Particulars

J.F.

Amount 

Rs

2011

 

 

 

2011

 

 

 

Dec.31

Balance c/d

 

1,00,000

 

 

 

 

 

 

 

 

Dec.31

Depreciation (i)

 

1,00,000

 

 

 

1,00,000

 

 

 

1,00,000

 

 

 

 

 

 

 

 

2012

 

 

 

2012

 

 

 

Dec.31

Balance c/d

 

3,00,000

Jan.01

Balance c/d

 

1,00,000

 

 

 

 

Dec.31

Depreciation

 

 

 

 

 

 

 

(i) 1,00,000 (ii) 1,00,000

 

2,00,000

 

 

 

 

 

(8 months)

 

 

 

 

 

3,00,000

 

 

 

3,00,000

 

 

 

 

 

 

 

 

2013

 

 

 

2013

 

 

 

Dec.31

Balance b/d

 

5,50,000

Jan.01

Balance c/d

 

3,00,000

 

 

 

 

Dec.31

Depreciation

 

2,50,000

 

 

 

5,50,000

 

(i) 1,00,000 (ii) 1,50,000,

 

5,50,000

 

 

 

 

 

 

 

 

2014

 

 

 

2014

 

 

 

Oct.31

Machinery Disposal

 

76,667

Jan.01

Balance b/d

 

5,50,000

Dec.31

Balance c/d

 

7,80,000

Oct.31

Depreciation

 

16,667

 

 

 

 

Dec.31

Depreciation

 

 

 

 

 

 

 

(i) 80,000, (ii) 1,50,000,

 

 

 

 

 

 

 

(iii) 60,000

 

2,90,000

 

 

 

8,56,667

 

 

 

8,56,667

 

 

 

 

 

 

 

 

2015

 

 

 

2015

 

 

 

Dec.31

Balance c/d

 

11,30,000

Jan.01

Balance c/d

 

7,80,000

 

 

 

 

Dec.31

Depreciation

 

 

 

 

 

 

 

(i) 80,000, (ii) 1,50,000,

 

 

 

 

 

 

 

(iii) 1,20,000

 

3,50,000

 

 

 

11,30,000

 

 

 

11,30,000

 

 

 

 

 

 

 

 

 

Machinery Disposal Account

Dr.

 

 

 

 

 

 

Cr.

Date

Particulars

J.F.

Amount

Rs

Date

Particulars

J.F.

Amount

Rs

2014

 

 

 

2014

 

 

 

Oct.31

Machinery

 

2,00,000

Oct.31

Depreciation

 

76,667

 

 

 

 

Oct.31

Bank

 

75,000

 

 

 

 

Oct.31

Profit and Loss (Loss)

 

48,333

 

 

 

 

 

 

 

 

 

 

 

2,00,000

 

 

 

2,00,000

 

 

 

 

 

 

 

 

 

Working Note for solution:

 

Opening Balance

 

Depreciation

 

Closing Balance

2011

2,00,000

20,000

=

1,80,000

2012

1,80,000

20,000

=

1,60,000

2013

1,60,000

20,000

=

1,40,000

2014

1,40,000

16,667

=

1,23,333

 

Accumulated Depreciation

 

76,667

 

 

 

Value on Oct. 01, 2014

1,23,333

Sale on Oct. 01, 2014

– 75,000

Loss on sale

Rs 48,333

Hence, we see that a loss of Rs. 48,333 is observed in sale of machine.

12. On July 01, 2011 Ashwani purchased a machine for Rs 2, 00,000 on credit. Installation expenses Rs 25,000 are paid by cheque. The estimated life is 5 years and its scrap value after 5 years will be Rs 20,000. Depreciation is to be charged on straight line basis. Show the journal entry for the year 2011 and prepare necessary ledger accounts for first three years. 

The journal entry is prepared as follows:

Books of Ashwani

Journal

Date

 

Particulars

 

L.F.

Debit Amount Rs

Credit Amount Rs

2011

 

 

 

 

 

 

Jul.01

Machinery A/c

Dr.

 

2,25,000

 

 

 

To Creditors for Machinery A/c

 

 

 

2,00,000

 

 

To Bank A/c

 

 

 

25,000

 

(Machinery bought on credit and Rs 25,000 paid

 for installation through cheque)

 

 

 

 

 

 

 

 

 

2011

 

 

 

 

 

 

Dec.31

Depreciation A/c

Dr.

 

20,500

 

 

 

To Machinery A/c

 

 

 

20,500

 

(Depreciation charged on Machinery)

 

 

 

 

 

 

 

 

 

 

2011

 

 

 

 

 

 

Dec.31

Profit and Loss A/c

Dr.

 

20,500

 

 

 

To Depreciation A/c

 

 

 

20,500

 

(Depreciation transferred to Profit and Loss Account)

 

 

 

 

 

 

 

 

 

 

 

2012

 

 

 

 

 

 

Dec.31

Depreciation A/c

Dr.

 

41,000

 

 

 

To Machinery A/c

 

 

 

41,000

 

(Depreciation charged on Machinery)

 

 

 

 

 

 

 

 

 

 

 

2012

 

 

 

 

 

 

Dec.31

Profit and Loss A/c

Dr.

 

41,000

 

 

 

To Depreciation A/c

 

 

 

41,000

 

(Depreciation transferred to Profit and Loss Account)

 

 

 

 

 

 

 

 

 

 

 

2013

 

 

 

 

 

 

Dec.31

Depreciation A/c

Dr.

 

41,000

 

 

 

To Machinery A/c

 

 

 

41,000

 

(Depreciation charged on Machinery)

 

 

 

 

2013

 

 

 

 

 

 

Dec.31 

Profit and Loss A/c

Dr.

 

41,000

 

 

 

To Depreciation A/c

 

 

 

41,000

 

(Depreciation transferred to Profit and Loss Account)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ledger

Machinery Account

Dr.

 

 

 

 

 

 

Cr.

Date

Particulars

J.F.

Amount 

Rs

Date

Particulars

J.F.

Amount 

Rs

2011

 

 

 

2011

 

 

 

Jul.01

Creditors for Machinery

 

2,00,000

Dec.31

Depreciation

 

20,500

Jul.01

Bank

 

25,000

Dec.31

Balance c/d

 

2,04,500

 

 

 

2,25,000

 

 

 

2,25,000

 

 

 

 

 

 

 

 

2012

 

 

 

2012

 

 

 

Jan.01

Balance b/d

 

2,04,500

Dec.31

Depreciation

 

41,000

 

 

 

 

Dec.31

Balance c/d

 

1,63,500

 

 

 

2,04,500

 

 

 

2,04,500

 

 

 

 

 

 

 

 

2013

 

 

 

2013

 

 

 

Jan.01

Balance c/d

 

1,63,500

Dec.31

Depreciation

 

41,000

 

 

 

 

Dec.31

Balance c/d

 

1,22,500

 

 

 

1,63,500

 

 

 

1,63,500

 

 

 

 

 

 

 

 

Hence, balance of machine account is Rs. 1, 22,500.

Working Note for solution:

 

Calculation of annual depreciation is done below

 

Depreciation (p.a.)

=

(2,00,000 + 25,000 – 20,000)

5

 

=

Rs 41,000/annum

13. On October 01, 2010, a Truck was purchased for Rs 8, 00,000 by Laxmi Transport Ltd. Depreciation was provided at 15% p.a. on the diminishing balance basis on this truck. On December 31, 2013 this Truck was sold for Rs 5, 00,000. Accounts are closed on 31st March every year. Prepare a Truck Account for the four years.

The truck account is prepared below:

Books of Laxmi Transport Ltd.

Truck Account

Dr.

 

 

 

 

 

 

Cr.

Date

Particulars

J.F.

Amount

Rs

Date

Particulars

J.F.

Amount

Rs

2010

 

 

 

2011

 

 

 

Oct.01

Bank

 

8,00,000

Mar.31

Depreciation (6 months)

 

60,000

 

 

 

 

Mar.31

Balance c/d

 

7,40,000

 

 

 

8,00,000

 

 

 

8,00,000

 

 

 

 

 

 

 

 

2011

 

 

 

2012

 

 

 

Apr.01

Balance b/d

 

7,40,000

Mar.31

Depreciation

 

1,11,000

 

 

 

 

Mar.31

Balance c/d

 

6,29,000

 

 

 

7,40,000

 

 

 

7,40,000

 

 

 

 

 

 

 

 

2012

 

 

 

2013

 

 

 

Apr.01

Balance b/d

 

6,29,000

Mar.31

Depreciation

 

94,350

 

 

 

 

 Mar.31

Balance c/d

 

5,34,650

 

 

 

6,29,000

 

 

 

6,29,000

 

 

 

 

 

 

 

 

2013

 

 

 

2013

 

 

 

Apr.01

Balance b/d

 

5,34,650

Dec.31

Depreciation (9 months)

 

60,148

Dec.31

Profit and Loss (Profit)

 

25,498

Dec.31

Bank

 

5,00,000

 

 

 

5,60,148

 

 

 

5,60,148

 

 

 

 

 

 

 

 

 

 

Working Note for solution:

For 2010-2011

8, 00,000 x x = 60,000

For 2011- 2012

8, 00,000 – 60,000= 7, 40,000

7, 40,000 x = 1, 11,000

For 2012-2013

7, 40,000- 1, 11,000 = 6, 29,000

6, 29,000 x = 94,350

For 2013- 2014

6, 29,000 – 94,350 = 5, 34,650

5, 34,650 x x = 60,148

Book Value = 5, 34,650 – 60,148

= 4, 74,502

Profit on sale of truck = Sale Price – Book Value

= 5, 00,000 – 4, 74,502 = 25,498

14. Kapil Ltd. purchased a machinery on July 01, 2011 for Rs 3, 50,000. It purchased two additional machines, on April 01, 2012 costing Rs 1, 50,000 and on October 01, 2012 costing Rs 1, 00,000. Depreciation is provided @10% p.a. on straight line basis. On January 01, 2013, first machinery become useless due to technical changes. This machinery was sold for Rs 1, 00,000, prepare machinery account for 4 years on the basis of calendar year.

The machinery account is created below:

Books of Kapil Ltd. 

Machinery Account

Dr.

 

 

 

 

 

 

Cr.

Date

Particulars

J.F.

Amount

Rs

Date

Particulars

J.F.

Amount

Rs

2011

 

 

 

2011

 

 

 

Jul.01

Bank (i)

 

3,50,000

Dec.31

Depreciation (6 months)

 

17,500

 

 

 

 

Dec.31

Balance c/d

 

3,32,500

 

 

 

3,50,000

 

 

 

3,50,000

 

 

 

 

 

 

 

 

2012

 

 

 

2012

 

 

 

Jan.01

Balance c/d

 

3,32,500

Dec.31

Depreciation

 

 

Apr.01

Bank (ii)

 

1,50,000

 

(i) 35,000 (ii) 11,250 (9 months),

 

 

Oct.01

Bank (iii)

 

1,00,000

 

(iii) 2,500 (3 months)

 

48,750

 

 

 

 

Dec.31

Balance c/d

 

 

 

 

 

 

 

(i) 2,97,500, (ii) 1,38,750,

 

 

 

 

 

 

 

(iii) 97,500

 

5,33,750

 

 

 

 

 

 

 

 

 

 

 

5,82,500

 

 

 

5,82,500

 

 

 

 

 

 

 

 

2013

 

 

 

2013

 

 

 

Jan.01

(i) 2,97,500, (ii) 1,38,750,

 

 

Jan.01

Bank (i)

 

1,00,000

 

(iii) 97,500

 

5,33,750

Jan.01

Profit and Loss (Loss)

 

1,97,500

 

 

 

 

Dec.31

Depreciation

 

 

 

 

 

 

 

(ii) 15,000 (iii) 10,000

 

25,000

 

 

 

 

Dec.31

Balance c/d

 

 

 

 

 

 

 

(ii) 1,23,750, (iii) 87,500

 

2,11,250

 

 

 

 

 

 

 

 

 

 

 

5,33,750

 

 

 

4,33,750

 

 

 

 

 

 

 

 

2014

 

 

 

2014

 

 

 

Jan.01

Balance c/d

 

2,11,250

Dec.31

Depreciation

 

 

 

(ii) 1,23,750, (iii) 87,500

 

 

Dec.31

(ii) 15,000, (iii) 10,000

 

25,000

 

 

 

 

 

Balance c/d

 

 

 

 

 

 

 

(ii) 1,08,750, (iii) 77,500

 

1,86,250

 

 

 

2,11,250

 

 

 

2,11,250

2015

 

 

 

 

 

 

 

Jan.01

Balance b/d

 

1,86,250

 

 

 

 

 

 

 

 

 

 

 

 

 

Hence, balance of machine account is Rs. 1, 86,250 and loss on sale of machine is Rs. 1, 97,500

15. On January 01, 2011, Satkar Transport Ltd, purchased 3 buses for Rs 10, 00,000 each. On July 01, 2013, one bus was involved in an accident and was completely destroyed and Rs 7, 00,000 were received from the Insurance Company in full settlement. Depreciation is written off @15% p.a. on diminishing balance method. Prepare bus account from 2011 to 2014. Books are closed on December 31 every year.

The bus account is prepared below:

Books of Satkar Transport Ltd.

Bus Account

Dr.

 

 

 

 

 

 

Cr.

Date

Particulars

J.F.

Amount 

Rs

Date

Particulars

J.F.

Amount 

Rs

2011

 

 

 

2011

 

 

 

Jan.01

Bank

 

30,00,000

Dec.31

Depreciation

 

4,50,000

 

 

 

 

Dec.31

Balance c/d

 

25,50,000

 

 

 

 

 

 

 

 

 

 

 

30,00,000

 

 

 

30,00,000

 

 

 

 

 

 

 

 

2012

 

 

 

2012

 

 

 

Jan.01

Balance b/d

 

25,50,000

Dec.31

Depreciation

 

3,82,500

 

 

 

 

Dec.31

Balance c/d

 

21,67,500

 

 

 

25,50,000

 

 

 

25,50,000

 

 

 

 

 

 

 

 

2013

 

 

 

2013

 

 

 

Jan.01

Balance b/d

 

21,67,500

July.01

Depreciation (6 months)

 

54,187

July.01

Profit and Loss (Profit)

 

31,687

July.01

Insurance Co. (Insurance claim)

 

7,00,000

 

 

 

 

Dec.31

Depreciation

 

2,16,750

 

 

 

 

Dec.31

Balance c/d

 

12,28,250

 

 

 

21,99,187

 

 

 

21,99,187

 

 

 

 

 

 

 

 

2014

 

 

 

2014

 

 

 

Jan.01

Balance c/d

 

12,28,250

Dec.31

Depreciation

 

1,84,237

 

 

 

 

Dec.31

Balance c/d

 

10,44,013

 

 

 

12,28,250

 

 

 

12,28,250

 

 

 

 

 

 

 

 

 

Hence, the bus account balance is Rs. 10, 44,013.

16. On October 01, 2011 Juneja Transport Company purchased 2 Trucks for Rs 10, 00,000 each. On July 01, 2013, One Truck was involved in an accident and was completely destroyed and Rs 6, 00,000 were received from the insurance company in full settlement. On December 31, 2013 another truck was involved in an accident and destroyed partially, which was not insured. It was sold off for Rs 1, 50,000. On January 31, 2014 Company purchased a fresh truck for Rs 12, 00,000. Depreciation is to be provided at 10% p.a. on the written down value every year. The books are closed every year on March 31. Give the truck account from 2011 to 2014.

The truck account is prepared below:

Books of Juneja Transport Company

 Truck Account

Dr.

 

 

 

 

 

 

Cr.

Date

Particulars

J.F.

Amount

 Rs

Date

Particulars

J.F.

Amount 

Rs

2011

 

 

 

2012

 

 

 

Oct.01

Bank

 

20,00,000

Mar.31

Depreciation

 

1,00,000

 

 

 

 

Mar.31

Balance c/d

 

19,00,000

 

 

 

 

 

 

 

 

 

 

 

20,00,000

 

 

 

20,00,000

 

 

 

 

 

 

 

 

2012

 

 

 

2013

 

 

 

Apr.01

Balance b/d

 

19,00,000

Mar.31

Depreciation

 

1,90,000

 

 

 

 

Mar.31

Balance c/d

 

17,10,000

 

 

 

19,00,000

 

 

 

19,00,000

 

 

 

 

 

 

 

 

2013

 

 

 

2013

 

 

 

Apr.01

Balance b/d

 

17,10,000

Jul.01

Depreciation (3 Month on one Truck)

 

21,375

 

 

 

 

Jul.01

Bank (Insurance Claim)

 

6,00,000

2014

 

 

 

Jul.01 

Profit and Loss (loss)

 

2,33,625

Jan.31

Bank

 

12,00,000

 

 

 

 

 

 

 

 

Dec.31

Depreciation (9 Month on II Truck)

 

64,125

 

 

 

 

Dec.31

Bank

 

1,50,000

 

 

 

 

Dec.31

Profit and Loss (Loss)

 

6,40,875

 

 

 

 

2014

 

 

 

 

 

 

 

Mar.31

Depreciation (2 Months)

 

20,000

 

 

 

 

Mar.31

Balance c/d

 

11,80,000

 

 

 

 

 

 

 

 

 

 

 

29,10,000

 

 

 

29,10,000

 

 

 

 

 

 

 

 

 

Working Note:

For 1st Truck

 

 

Opening Balance

Depreciation

=

Closing Balance

Oct.01, 2011

10,00,000

50,000 (6 Months)

=

9,50,000

Apr.01, 2012

9,50,000

95,000

=

8,55,000

Apr.01, 2013

8,55,000

21,375 (3 Months)

=

8,33,625

  

Value on July 01, 2013

=

8,33,625

Insurance Claim

=

–  6,00,000

Loss on 1st Truck

=

Rs 2,33,625

 

 For 2nd Truck

 

 

Opening Balance

Depreciation

=

Closing Balance

Oct.01, 2012

10,00,000

50,000 (6 Months)

=

9,50,000

Apr.01, 2012

9,50,000

95,000

=

8,55,000

Apr.01, 2013

8,55,000

64,125 (9 Months)

=

7,90,875

  

Value on Dec.31, 2013

=

7,90,875

Sale of Truck

=

–  1,50,000

Loss on 2nd Truck

=

Rs 6,40,875

Hence, the loss on truck 1 and truck 2 are Rs 2, 33,625 and Rs 6, 40,875 respectively.

17. A Noida based Construction Company owns 5 cranes and the value of this asset in its books on April 01, 2017 is Rs 40,00,000. On October 01, 2017 it sold one of its cranes whose value was Rs 5, 00,000 on April 01, 2017 at a 10% profit. On the same day it purchased 2 cranes for Rs 4, 50,000 each. Prepare cranes account. It closes the books on December 31 and provides for depreciation on 10% written down value.

The cranes account is created below:

Cranes Account

Dr.

 

 

 

 

 

 

Cr.

Date

Particulars

J.F.

Amount

Rs

Date

Particulars

J.F.

Amount

Rs

2017

 

 

 

2017

 

 

 

Apr.01

Machinery (35,00,000 + 5,00,000)

 

40,00,000

Oct.01

Depreciation

 

25,000

Oct.01

Profit and Loss (Profit)

 

47,500

Oct.01

Bank

 

5,22,500

Oct.01

Bank

 

9,00,000

Dec.31

Depreciation

 

 

 

 

 

 

 

35,00,000 ×

10

×

9

 = 2,62,500

 

 

100

12

 

 

 

 

 

9,00,000 ×

10

×

6

 = 22,500

 

2,85,000

100

12

 

 

 

 

Dec.31

Balance c/d

 

 

 

 

 

 

 

 

41,15,000

 

 

 

 

 

 

 

 

 

 

 

49,47,500

 

 

 

49,47,500

 

 

 

 

 

 

 

 

 

Working Note:

Original cost of Crane 1 = 5, 00,000

Accumulated Depreciation = Depreciation in 2011 – 2012

= 25,000

Book Value as on Oct 01, 2011

= Original Cost – Depreciation till Oct 01, 2011

= 5, 00,000 – 25,000

= 4, 75,000

Selling Price

= Book Value + 10% of Book Value

= 4, 75,000 + 10% of 4, 75,000

= 4, 75,000 + 47,500

= 5, 22,500

Profit on crane 1

= Sale Price – Book Value

= 5, 22,500 – 4, 75,000

= 47,500

18. Shri Krishnan Manufacturing Company purchased 10 machines for Rs 75,000 each on July 01, 2014. On October 01, 2016, one of the machines got destroyed by fire and an insurance claim of Rs 45,000 was admitted by the company. On the same date another machine is purchased by the company for Rs 1, 25,000. The company writes off 15% p.a. depreciation on written down value basis. The company maintains the calendar year as its financial year. Prepare the machinery account from 2014 to 2017.

The machinery account is prepared below:

Books of Shri Krishna Manufacturing Company

Machinery Account

Dr.

 

 

 

 

 

 

Cr.

Date

Particulars

J.F.

Amount

Rs

Date

Particulars

J.F.

Amount

Rs

2014

 

 

 

2014

 

 

 

Jul.01

Bank

 

7,50,000

Dec.31

Depreciation

 

56,250

 

 

 

 

Dec.31

Balance c/d

 

6,93,750

 

 

 

 

 

 

 

 

 

 

 

7,50,000

 

 

 

7,50,000

 

 

 

 

 

 

 

 

2015

 

 

 

2015

 

 

 

Jan.01

Balance b/d

 

6,93,750

Dec.31

Depreciation

 

1,04,063

 

 

 

 

Dec.31

Balance c/d

 

5,89,687

 

 

 

6,93,750

 

 

 

6,93,750

 

 

 

 

 

 

 

 

2016

 

 

 

2016

 

 

 

Jan.01

Balance b/d

 

5,89,687

Oct.01

Depreciation (9 months

 

6,634

 

 

 

 

 

for one machine)

 

 

Oct.01

Bank

 

1,25,000

Oct.01

Insurance Co.

 

45,000

 

 

 

 

Oct.01

Profit and Loss (Loss)

 

7,335

 

 

 

 

Dec.31

Depreciation

 

 

 

 

 

 

 

(i) 79,608, (ii) 4,688

 

84,296

 

 

 

 

Dec.31

Balance c/d

 

 

 

 

 

 

 

(i) 4,51,110, (ii) 1,20,312

 

5,71,422

 

 

 

7,14,687

 

 

 

7,14,687

 

 

 

 

 

 

 

 

2017

 

 

 

2017

 

 

 

Jan.01

Balance b/d

 

 

Dec.31

Depreciation

 

 

 

(i) 4,51,110, (ii) 1,20,312

 

5,71,422

 

(i) 67,667, (ii) 18,047

 

85,714

 

 

 

 

Dec.31

Balance c/d

 

 

 

 

 

 

 

(i) 3,83,443, (ii) 1,02,265

 

4,85,708

 

 

 

 

 

 

 

 

 

 

 

5,71,422

 

 

 

5,71,422

 

 

 

 

 

 

 

 

 

Working Note:

 

Machine Costing Rs 75,000 sold on Oct.01, 2016

 

Opening Balance

Depreciation

=

Closing Balance

Jul.01, 2014

75,000

5,625

(6 months)

=

69,375

Jan.01, 2015

69,375

10,406

=

58,969

Jan.01, 2016

58,969

6,634

(9 months)

=

52,335

 

Value on Oct.01, 2016

 

52,335

Insurance Claim

 

– 45,000

Loss

 

Rs 7,335

Hence we see that loss on vehicle claim was Rs. 7,335 and the balance is Rs, 4, 85,708

19. On January 01, 2014, a Limited Company purchased machinery for Rs 20, 00,000. Depreciation is provided @15% p.a. on diminishing balance method. On March 01, 2016, one fourth of machinery was damaged by fire and Rs 40,000 were received from the insurance company in full settlement. On September 01, 2016 another machinery was purchased by the company for Rs 15, 00,000.

Write up the machinery account from 2016 to 2017. Books are closed on December 31, every year.

The machinery account is prepared as follows:

Machinery Account

Dr.

 

 

 

 

 

 

Cr.

Date

Particulars

J.F.

Amount

Rs

Date

Particulars

J.F.

Amount

Rs

2016

 

 

 

2016

 

 

 

Jan.01

Balance b/d (i)

(10,83,750 + 3,61,250)

 

14,45,000

Mar.01

Depreciation (1/4 Machine

for 2 Months)

 

9,031

Sep.01

Bank (ii)

 

15,00,000

Mar.01

Bank

 

40,000

 

 

 

 

Mar.01

Profit and Loss

 

3,12,219

 

 

 

 

Dec.31

Depreciation (i)

 

 

 

 

 

 

 

(i) 1,62,563 (3/4th of  machine),

(ii) 75,000

 

2,37,563

 

 

 

 

Dec.31

Balance c/d

 

 

 

 

 

 

 

(i) 9,21,187, (ii) 14,25,000

 

23,46,187

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

29,45,000

 

 

 

29,45,000

 

 

 

 

 

 

 

 

2017

 

 

 

2017

 

 

 

Jan.01

Balance b/d

 

 

Dec.31

Depreciation

 

 

 

(i) 9,21,187, (ii) 14,25,000

 

23,46,187

Dec.31

(i) 1,38,177, (ii) 2,13,750

 

3,51,927

 

 

 

 

 

Balance c/d

 

 

 

 

 

 

 

(i) 7,83,009, (ii) 12,11,250

 

19,94,260

 

 

 

23,46,187

 

 

 

23,46,187

 

 

 

 

 

 

 

 

 

 

Working Note:

 

Machine (i)

 

 

 

 

 

 

Years

January 01

 

Depreciation

(15% p.a.)

=

Closing Balance

2014

20,00,000

3,00,000

=

17,00,000

2015

17,00,000

2,55,000

=

14,45,000

2016

14,45,000

 

 

 

 

 

1/4th of Machine that was damaged (i)

 

 

 

 

 

 

Years

Opening Balance

 

Depreciation

 (15% p.a.)

=

Closing Balance

2014

5,00,000

75,000

=

4,25,000

2015

4,25,000

63,750

=

3,61,250

2016

3,61,250

9,031 (2 months)

=

3,52,219

 

Value on 1 Mar. 2016

=

3,52,219

Insurance Claim

=

40,000

Loss

 

Rs 3,12,219

Hence, the loss on one-fourth of 1st machine is Rs, 3, 12,219 and the balance for machine account is Rs.19, 94,260.

20. A Plant was purchased on 1st July, 2015 at a cost of Rs 3, 00,000 and Rs 50,000 were spent on its installation. The depreciation is written off at 15% p.a. on the straight line method. The plant was sold for Rs 1, 50,000 on October 01, 2017 and on the same date a new Plant was installed at the cost of Rs 4, 00,000 including purchasing value. The accounts are closed on December 31 every year.

Show the machinery account and provision for depreciation account for 3 years

Machinery account and provision for depreciation account is shown below:

Plant Account

Dr.

 

 

 

 

 

 

Cr.

Date

Particulars

J.F.

Amount

Rs

Date

Particulars

J.F.

Amount

Rs

2015

 

 

 

2015

 

 

 

July.01

Bank

 

3,50,000

Dec.31

Balance c/d

 

3,50,000

 

 

 

3,50,000

 

 

 

3,50,000

 

 

 

 

 

 

 

 

2016

 

 

 

2016

 

 

 

Jan.01

Balance b/d

 

3,50,000

 

 

 

 

 

 

 

 

Dec.31

Balance c/d

 

3,50,000

 

 

 

3,50,000

 

 

 

3,50,000

 

 

 

 

 

 

 

 

2017

 

 

 

2017

 

 

 

Jan.01

Balance b/d

 

3,50,000

Oct.01

Provision for Depreciation

 

1,18,125

Oct.01

Bank

 

4,00,000

Oct.01

Bank

 

1,50,000

 

 

 

 

Oct.01

Profit and Loss

 

81,875

 

 

 

 

Dec.31

Balance c/d

 

4,00,000

 

 

 

7,50,000

 

 

 

7,50,000

 

 

 

 

 

 

 

 

 

Provision for Depreciation Account

Dr.

 

 

 

 

 

 

Cr.

Date

Particulars

J.F.

Amount

Rs

Date

Particulars

J.F.

Amount

Rs

2015

 

 

 

2015

 

 

 

Dec.31

Balance c/d

 

26,250

Dec.31

Depreciation

 

26,250

 

 

 

26,250

 

 

 

26,250

 

 

 

 

 

 

 

 

2016

 

 

 

2016

 

 

 

Dec.31

Balance b/d

 

78,750

Jan.01

Balance c/d

 

26,250

 

 

 

 

Dec.31

Depreciation

 

52,500

 

 

 

78,750

 

 

 

78,750

 

 

 

 

 

 

 

 

2017

 

 

 

2017

 

 

 

Oct.01

Plant

 

1,18,125

Jan.01

Balance b/d

 

78,750

 Dec.31

Balance c/d

 

15,000

Oct.01

Depreciation (i) (9 months)

 

39,375

 

 

 

 

Dec.31

Depreciation (ii) (3 months)

 

15,000

 

 

 

1,33,125

 

 

 

1,33,125

 

 

 

 

 

 

 

 

 

 Hence, the loss on sale of plant is Rs 81,875 and the balance of machine account is Rs. 4, 00,000.

21. An extract of Trial balance from the books of Tahiliani and Sons Enterprises on March 31, 2017 is given below:

Name of the Account

Debit Amount

Rs

Credit Amount

Rs

 

 

 

Sundry debtors

50,000

 

Bad debts

6,000

 

Provision for doubtful debts

 

4,000

 

Additional Information:

  •          Bad Debts proved bad; however, not recorded amounted to Rs 2,000.
  •          Provision is to be maintained at 8% of debtors

Give necessary accounting entries for writing off the bad debts and creating the provision for doubtful debts account. Also, show the necessary accounts.

The solution is given below:

Date

 

Particulars

 

L.F.

Debit Amount Rs

Credit Amount Rs

 

 

 

 

 

 

 

 

Bad Debt A/c

Dr.

 

2,000

 

 

 

To Debtors A/c

 

 

 

2,000

 

(Further bad debt charged from Debtors Account)

 

 

 

 

 

 

 

 

 

 

 

Provision for Doubtful Debt A/c

Dr.

 

8,000

 

 

 

To Bad Debt A/c

 

 

 

8,000

 

(Amount of bad debt transferred to

Provision for Doubtful Debt Account)

 

 

 

 

 

 

 

 

 

 

Profit and Loss A/c

Dr.

 

7,840

 

 

 

To Provision for Doubtful Debt A/c

 

 

 

7,840

 

(Amount of Provision for Doubtful Debt transferred

 to Profit and Loss Account)

 

 

 

 

 

 

 

 

 

  

Bad Debt Account

Dr.

 

 

 

 

 

 

Cr.

Date

Particulars

J.F.

Amount 

Rs

Date

Particulars

J.F.

Amount

 Rs

2017

 

 

 

2017

 

 

 

Mar.31

Balance b/d

 

6,000

Mar.31

Provision for Doubtful

 

 

Mar.31

Debtors

 

2,000

 

Debt

 

 8,000

 

 

 

8,000

 

 

 

8,000

 

 

 

 

 

 

 

 

Debtors Account

Dr.

 

 

 

 

 

 

Cr.

Date

Particulars

J.F.

Amount 

Rs

Date

Particulars

J.F.

Amount

 Rs

2017

 

 

 

2017

 

 

 

Mar.31

Balance b/d

 

50,000

Mar.31

Bad Debt

 

2,000

 

 

 

 

Mar.31

Balance c/d

 

48,000

 

 

 

50,000

 

 

 

50,000

 

 

 

 

 

 

 

 

Provision for Doubtful Debts Account

Dr.

 

 

 

 

 

 

Cr.

Date

Particulars

J.F.

Amount 

Rs

Date

Particulars

J.F.

Amount

 Rs

2017 

 

 

 

2017

 

 

 

31 Mar.

Bad Debt (6,000 + 2,000)

 

8,000

Apr.01

Balance b/d

 

4,000

31 Mar.

Balance c/d (8% of 50,000-2,000)

 

3,840

Mar.31

Profit and Loss

 

7,840

 

 

 

11,840

 

 

 

11,840

 

 

 

 

 

 

 

 

 

Hence, the new provision for bad debts is Rs, 3,840 and profit and loss account balance is Rs.7840.

22. The following information is extracted from the Trial Balance of M/s Nisha Traders on 31 March 2017.

Sundry Debtors

80,500

Bad Debts

1,000

Provision for Bad Debts

5,000

 

Additional Information

Bad Debts Rs 500

Provision is to be maintained at 2% of Debtors

Prepare bad debts account, Provision for bad debts account and profit and loss account.

The bad debts account, Provision for bad debts account and profit and loss account are shown below:

Bad Debt Account

Dr.

 

 

 

 

 

 

Cr.

Date

Particulars

J.F.

Amount

Rs

Date

Particulars

J.F.

Amount

Rs

2017

 

 

 

2017 

 

 

 

Mar.31

Balance b/d

 

1,000

Mar.31

Provision for Bad Debts

 

1,500

Mar.31

Debtors

 

500

 

 

 

 

 

 

 

1,500

 

 

 

1,500

 

 

 

 

 

 

 

 

Provision for Bad debt Account

Dr.

 

 

 

 

 

 

Cr.

Date

Particulars

J.F.

Amount

Rs

Date

Particulars

J.F.

Amount

Rs

2017

 

 

 

2017

 

 

 

Mar.31

Bad Debt

 

1,500

Mar.31

Balance b/d

 

5,000

Mar.31

Profit and Loss

 

1,900

 

 

 

 

Mar.31

Balance c/d (2% of 80,500-500)

 

1,600

 

 

 

 

 

 

 

5,000

 

 

 

5,000

 

 

 

 

 

 

 

 

 

Profit and Loss Account

Dr.

 

 

 

 

 

 

Cr.

Date

Particulars

J.F.

Amount

Rs

Date

Particulars

J.F.

Amount 

Rs

 

 

 

 

2017 

 

 

 

 

 

 

 

 Mar.31

Provision for Bad Debts

 

1,900

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Hence, the new provision is Rs. 1600 and the profit and loss account shows as a credit of Rs.1900.


Concepts covered in this chapter –

  • Depreciation
  • Meaning of Depreciation
  • Features of Depreciation
  • Depreciation and other Similar Terms
  • Depletion
  • Amortisation
  • Causes of depreciation
  • Obsolescence
  • Matching of Costs and Revenue
  • Cost of asset
  • Depreciable cost
  • Estimated useful life
  • Methods of calculating depreciation amount
  • Straight Line Method
  • Written Down Value Method
  • Annual Charge of Depreciation

Conclusion

NCERT solutions for class 11 Accountancy chapter 7 provides a wide degree of illustrative examples; which assists the students to comprehend and learn quickly. The above mentioned are the illustrations for class 11 CBSE syllabus. For more solutions and study materials of NCERT solutions for class 11 Accountancy visit BYJU’S or download the app for more information.

 

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