Question: Carriage Transport Company purchased 5 trucks at the cost of Rs $2, 00, 000$ each on April 1, 2001. The company writes off depreciation @ $20 %$ per annum on original cost and closes its books on December 31st, every year. On October 1, 2003, one of the trucks is involved in an accident and is completely destroyed. The 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, 2003. Also, give Truck account if truck disposal account is prepared.

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Solution

Answer :
Dr Truck Account Cr
Date Particulars JF Amt.(Rs) Date Particulars JF Amt.(Rs)
2001 Apr 1 To Bank A/c $10, 00, 000$ 2001 Dec 31 By Balance c/d $10, 00, 000$
$10, 00, 000$ $10, 00, 000$
2002 Jan 1 To Balance b/d $10, 00, 000$ 2002 Dec 31 By Balance c/d $10, 00, 000$
$10, 00, 000$ $10, 00, 000$
2003 Jan 1 To Balance b/d (T1) $10, 00, 000$ 2003 Oct 1 By Truck Disposal A/c $20, 00, 000$
Oct 1 To Bank A/c (T2) $1, 20, 000$ Dec 31 By Balance c/d $9, 20, 000$
$11, 20, 000$ $11, 20, 000$

Dr Provision for Depreciation Account Cr
Date Particulars JF Amt.(Rs) Date Particulars JF Amt.(Rs)
2001 Dec 31 To Balance c/d $1, 50, 000$ 2001 Dec 31 By Depreciation A/c $1, 50, 000$
$1, 50, 000$ $1, 50, 000$
2002 Dec 31 To Balance c/d $3, 50, 000$ 2002 Jan 1 By Balance b/d $1, 50, 000$
Dec 31 By Depreciation A/c $2, 00, 000$
$3, 50, 000$ $3, 50, 000$
2003 Oct 1 To Trunk Disposal A/c $1, 00, 000$ 2003 Jan 1 By Balance b/d $3, 50, 000$
Dec 31 To Balance c/d $4, 46, 000$ Oct 31 By Depreciation A/c (Dep till Oct 9 months) $30, 000$
Dec 31 By Depreciation A/c (Old)(T1) $1, 60, 000$
(New)(T2) = $6, 000$
$1, 66, 000$
$5, 46, 000$ $5, 46, 000$
Dr Truck Disposal Account Cr
Date Particulars JF Amt.(Rs) Date Particulars JF Amt.(Rs)
2003 Oct 1 To Truck A/c $2, 00, 000$ 2003 Oct 1 By Provision for Depreciation A/c $1, 00, 000$
Oct 1 By Insurance Co (Claim Amount) $70, 000$
Oct 1 By Profit & Loss A/c (Loss on Sale) $30, 000$
$2, 00, 000$ $2, 00, 000$
Working Note
Total Depreciation Charged on Truck @ $20 %$
Dec 2001 = $30, 000$
Dec 2002 = $40, 000$
Oct 2003 = $30, 000$
Rs. $1, 00, 000$
Cost of truck at disposal = $2, 00, 000 - 1, 00, 000 = R s .1, 00, 000$
Profit or Loss on sales of truck
= $1, 00, 000 - 70, 000 = R s .30, 000$ (Loss)

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Date	Particulars	JF	Amt.(Rs)	Date	Particulars	JF	Amt.(Rs)
2001 Apr 1	To Bank A/c		$10, 00, 000$	2001 Dec 31	By Balance c/d		$10, 00, 000$
			$10, 00, 000$				$10, 00, 000$
2002 Jan 1	To Balance b/d		$10, 00, 000$	2002 Dec 31	By Balance c/d		$10, 00, 000$
			$10, 00, 000$				$10, 00, 000$
2003 Jan 1	To Balance b/d (T1)		$10, 00, 000$	2003 Oct 1	By Truck Disposal A/c		$20, 00, 000$
Oct 1	To Bank A/c (T2)		$1, 20, 000$	Dec 31	By Balance c/d		$9, 20, 000$
			$11, 20, 000$				$11, 20, 000$