NCERT Solutions | Class 11 Accountancy Chapter 7

NCERT Solutions | Class 11 Accountancy (Financial Accounting Part I) Chapter 7 | Depreciation, Provisions and Reserves 

NCERT Solutions for Class 11 Accountancy (Financial Accounting  Part I) Chapter 7 Depreciation, Provisions and Reserves

CBSE Solutions | Accountancy Class 11

Check the below NCERT Solutions for Class 11 Accountancy (Financial Accounting Part I) Chapter 7 Depreciation, Provisions and Reserves Pdf free download. NCERT Solutions Class 11 Accountancy  were prepared based on the latest exam pattern. We have Provided Depreciation, Provisions and Reserves Class 11 Accountancy NCERT Solutions to help students understand the concept very well.

NCERT | Class 11 Accountancy (Financial Accounting Part I)

NCERT Solutions Class 11 Accountancy
Book: National Council of Educational Research and Training (NCERT)
Board: Central Board of Secondary Education (CBSE)
Class: 11
Subject: Accountancy
Chapter: 7
Chapters Name: Depreciation, Provisions and Reserves
Medium: English

Depreciation, Provisions and Reserves | Class 11 Accountancy | NCERT Books Solutions

You can refer to MCQ Questions for Class 11 Accountancy (Financial Accounting Part I) Chapter 7 Depreciation, Provisions and Reserves to revise the concepts in the syllabus effectively and improve your chances of securing high marks in your board exams.

NCERT Solutions for Class 11 Commerce Accountancy Chapter 7 Depreciation, Provisions And Reserves

Question 1:

What is Depreciation?

Answer:

Every business acquires fixed assets for its use in the business over a period of time. As the benefits of these assets can be availed over a long period of time, thus, due to their regular use, there occurs continuous wear and tear and consequently fall in their value. This fall in the value of fixed assets, due to their regular use or expiry of time is termed as depreciation.

A machinery costing Rs 1,00,000 and its useful life is 10 years; so, depreciation is calculated as:

Question 2:

State briefly the need for providing depreciation.

Answer:

The needs for providing depreciation are given below.

  1. To ascertain true net profit or net loss− Correct profit or loss can be ascertained when all the expenses and losses incurred for earning revenues are charged to Profit and Loss Account. Assets are used for earning revenues and its cost is charged in form of depreciation from Profit and Loss Account.

  1. To show true and fair view of financial statements− If depreciation is not charged, assets are shown at higher value than their actual value in the Balance Sheet; consequently, the Balance Sheet  does not reflect true and fair view of financial statements.

  1. For ascertaining the accurate cost of production− Depreciation on plant and machinery and other assets, which are engaged in production, is included in the cost of production. If depreciation is not included, cost of production is underestimated, which will lead to low sale price and thus leads to low profit.

  1. Distribution of dividend out of profit− If depreciation is not charged, which leads to overestimating of profit and consequently more profit is distributed as dividend, out of capital instead of the profit. This leads to the flight of scarce capital out of the business.

  1. To provide funds for replacement of assets− Unlike other expenses, depreciation is not a cash expense. So, the amount of depreciation charged will be retained in the business and will be used for replacement of fixed assets after its useful life.

  1. Consideration of tax− If depreciation is charged, then Profit and Loss Account will disclose lesser profit as to when the depreciation is not charged. This depicts reduced profit and thus the business will be liable for lesser tax amount.

Question 3:

What are the causes of depreciation?

Answer:

  1. Constant use− Due to constant use of the fixed assets there exists normal wear and tear that leads to fall in the value of fixed assets.

  1. Expiry of time− With the passage of time, whether assets are used or not, its effective life decreases. The natural forces like rain, weather, etc. lead to deterioration of the fixed assets.

  1. Obsolescence− Due to the fast technological innovations and inventions today’s assets may be outdated by tomorrow’s sophisticated assets. This leads to the obsolescence of fixed assets.

  1. Expiry of legal rights− If 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 1,00,000 for 25 years on lease, then each year its value depreciates by of its gross value. At the end of the 25th year, the value of the lease will be zero.

  1. Accident− An asset may lose its value and damage may happen to it due to mishaps such as a fire accident, theft or a natural calamity. The loss due to accident is permanent in nature.

  1. Permanent fall in value− Generally, we do not record fluctuations in the market price of the fixed assets 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.

Question 4:

Explain basic factors affecting the amount of depreciation.

Answer:

  1. Total cost of asset− The total cost of an asset is taken into consideration for ascertaining the amount of depreciation. The expenses incurred in acquiring, installing and constructing asset and bringing the asset to its usable condition are included in the total cost of asset.

  1. Estimated useful life− Every asset has its useful life other than its physical life (in terms of number of years, units, etc.), used by a business. The useful life of an asset is considered to estimate the effective life of a fixed asset. For example, land has indefinite life; however, if business acquiress a piece of land on lease for 25 years, then the useful life of the piece of land is considered to be 25 years.

  1. Estimated scrap value− It is estimated as the net realisable value or sale value of an asset at the end of its effective life. It is deducted from the total cost of an asset. For example, furniture is acquired at Rs 50,000 and its effective life is 10 years.

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

Question 5:

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

Answer:

Basis of Difference

Straight Line Method

Written Down Value 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 (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.

Suitability

It is suitable for the assets like patents, copyright, land and buildings, etc., which have lesser possibility of obsolescence and lesser repair charges.

It is suitable for assets that needs more repair in the later years like, plant and machinery, car, etc.

Effect of depreciation and repair on profit and loss account

Unequal effect over the life of the asset, as depreciation remains same over the years but repair cost increases in the later years.

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

 

 

Question 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.

Answer:

If the management does not want to exert undue burden on the profits due to high depreciation and repair costs in the latter years of the assets, then ‘written down method’ should be a preferred method to provide depreciation. This is because the cost of depreciation reduces; whereas, repair and maintenance expenses increase in the latter years. However, on the whole, it does not exert increasing burden on profits.

Question 7:

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

Answer:

The effects of depreciation on Profit and Loss Account are given below.

  1. Depreciation increases the debit side of profit and loss account and hence reduces net profit.

  2. Depreciation increases the total expenses, leading to an excess of debit over credit balance.

The effects of depreciation on Balance Sheet are given below.

  1. It reduces the original cost or book value of the concerned asset.

  2. It reduces the overall balance of asset’s column in the balance sheet.

Question 8:

Distinguish between provision and reserve.

Answer:

Basis of Difference

Provision

Reserve

Meaning

It is created to meet the known liability.

It is created to meet unknown liability.

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.

Mode of creation

It is created by debiting the profit and loss account.

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

Use for payment of dividend

It cannot be used for payment of dividends.

It can be used for payment of dividends.

Creation

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

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

 

 

Question 9:

Give four examples each of provision and reserves.

Answer:

Four examples of provision are given below.

  1. Provision for bad and doubtful debts

  2. Provision for discount on debtors

  3. Provision for depreciation

  4. Provision for taxation

Four examples of reserve are given below.

  1. General reserve

  2. Capital reserve

  3. Dividend equalisation reserve

  4. Debenture redemption reserve

Question 10:

Distinguish between revenue reserve and capital reserve.

Answer:

Basis of Difference

Revenue Reserve

Capital Reserve

Source

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

It is created out of capital profit, i.e., gain from other than normal activities of business operations, such as sale of fixed assets, etc.

Dividend

It can be used for dividend.

It cannot be used for dividend.

Purpose

It is created for strengthening the financial position of the business.

It is created for the purpose laid down in the Companies Act.

 

 

Question 11:

Give four examples each of revenue reserve and capital reserves.

Answer:

  1. Four examples of revenue reserve are given below.

  1. General Reserve

  2. Retained Earnings

  3. Dividend Equalisation Reserve

  4. Debenture Redemption Reserve

  1. Four examples of capital reserve are given below.

  1. Issues of shares at premium

  2. Profit or issue of shares

  3. Sale of fixed assets

  4. Profit on redemption of debentures

Question 12:

Distinguish between general reserve and specific reserve.

Answer:

Basis of Difference

General Reserve

Specific Reserve

Meaning

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

When reserve is created for some specific purpose, the 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.

 

 

Question 13:

Explain the concept of secret reserve.

Answer:

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

Question 1:

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

Answer:

Every business acquires fixed assets for its use in the business over a period of time. As the benefits of these assets can be availed over a long period of time (due to their regular use), there exists continuous wear and tear and consequently fall in their value. This fall in the value of fixed assets (due to regular use or expiry of time) is termed as depreciation.

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

  1. To ascertain true net profit or net loss− Correct profit or loss can be ascertained when all the expenses and losses incurred for earning revenues are charged to profit and loss account. Assets are used for earning revenues and its cost is charged in form of depreciation from profit and loss account.

  1. To show true and fair view of financial statements− If depreciation is not charged, assets are shown at higher value than their actual value in the balance sheet; consequently, the balance sheet does not reflect true and fair view of financial statements.

  1. For ascertaining the accurate cost of production− Depreciation on plant and machinery and other assets, which are engaged in production, is included in the cost of production. If depreciation is not included, cost of production is underestimated, which will lead to low sale price and thus leads to low profit.

  1. Distribution of dividend out of profit− If depreciation is not charged, which leads to overestimating of profit and consequently more profit is distributed as dividend, out of capital instead of the profit. This leads to the flight of scarce capital out of the business.

  1. To provide funds for replacement of assets− Unlike other expenses, depreciation is not a cash expense. So, the amount of depreciation charged will be retained in the business and will be used for replacement of fixed assets after its useful life.

  1. Consideration of tax− If depreciation is charged, then profit and loss account will disclose lesser profit as to when the depreciation is not charged. This depicts reduced profit and thus the business will be liable for lesser tax amount.

Below are given the causes for depreciation.

  1. Constant use− Due to constant use of the fixed assets there exists normal wear and tear that leads to fall in the value of fixed assets.

  1. Expiry of time− With the passage of time, whether assets are used or not, its effective life decreases. The natural forces like rain, weather, etc. lead to deterioration of the fixed assets.

  1. Obsolescence− Due to the fast technological innovations and inventions today’s assets may be outdated by tomorrow’s sophisticated assets. This leads to the obsolescence of fixed assets.

  1. Expiry of legal rights− If 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 1,00,000 for 25 years on lease, then each year its value depreciates by of its gross value. At the end of the 25th year, the value of the lease will be zero.

  1. Accident− An asset may lose its value and damage may happen to it due to mishaps such as a fire accident, theft or a natural calamity. The loss due to accident is permanent in nature.

  1. Permanent fall in value− Generally, we do not record fluctuations in the market price of the fixed assets 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.

Question 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.

Answer:

Straight Line method

It is a simple method of charging depreciation. Under this method, depreciation is charged on the original cost of an asset, at a fixed rate of percentage. In this method, amount of depreciation remains same from year to year and asset’s value becomes zero at the end of its useful life.

Amount of depreciation is calculated as under:

Advantages of Straight Line Method

  1. It is simple to calculate.

  2. Asset can be completely written off, i.e., asset can be depreciated until the net scrap value is zero.

  3. 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 assets that have low repairs and maintenance expenses and are continuously used over a period of time.

Limitations of Straight Line Method

  1. Burden of deprecation is more on profit and loss account in the later years, when repair and maintenance costs increase, as asset becomes older.

  2. Value of asset becomes zero in the books even if asset is still in usable condition in business.

Uses of Straight Line Method

  1. This method is useful where repairs and maintenance expenses on asset are low.

  2. It is also useful when an asset is continuously used 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

This method is applicable where depreciation is charged on the diminishing balance, i.e., book value of the asset. In this method, asset’s value goes on diminishing year after year and the amount of depreciation declines.

Rate of depreciation is calculated as follows:

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 logical assumption that asset is used more in the earlier years, so more cost is charged in form of depreciation.

  2. It is suitable for the assets where repairs are more 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.

Limitations of Written Down Value Method

  1. It is difficult to calculate and is a time consuming process.

  2. The value of an asset cannot be zero, thus the asset cannot be completely written off.

  3. There arises shortage of funds for replacement of new asset. This happens due to the fact that the amount of depreciation is retained and used in the business. Consequently, at the end of the useful life of an old asset, business finds it difficult to arrange funds for its replacement.

Uses of Written Down Value Method

  1. It is useful when assets have long life.

  2. It is useful for those assets that require more repair and maintenance costs in the later years.

  3. It provides easy calculation to provide depreciation of additional asset purchased during a year.

Difference between Straight Line Method and Written Down Value Method

Basis of Difference

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 (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.

Suitability

It is suitable for the assets like, patents, copyrights, land and buildings, etc., which have lesser possibility of obsolescence and lesser repair charges.

It is 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

Unequal effect over the life of the asset, as depreciation remains same over the years but repair cost increases in the later years.

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.

 

 

Question 3:

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

Answer:

The two methods of recording depreciation are diagrammatically presented below.

  1. Charging depreciation to Asset Account− Under this method, depreciation is directly credited to the asset account and no separate account is prepared for provision of depreciation. Under 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; in fact, it is credited to 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 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)

 



Question 4:

Explain determinants of the amount of depreciation.

Answer:

  1. Total cost of asset− The total cost of an asset is taken into consideration for ascertaining the amount of depreciation. The expenses incurred in acquiring, installing and constructing of assets and bringing the assets to their usable condition are included in the total cost of asset.

  1. Estimated useful life− Every asset having it’s useful life other than it’s physical life, in terms of number of years, units, etc. are considered to estimate the effective life of a fixed asset. For example, land has indefinite life; however, if business acquires a piece of land on lease for 25 years, it’s useful life is considered to be 25 years.

  1. Estimated scrap value− It is estimated as the net realisable value or sale value of an asset at the end of it’s effective life. It is deducted from the total cost of an asset. For example, furniture is acquired at Rs 50,000 with it’s effective life of 10 years.

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

Question 5:

Name and explain different types of reserves in details.

Answer:

Reserves− Reserves are created for strengthening the financial positions and future growth. It is created out of profit earned by business.

The broad classification of reserve is diagrammatically presented below.

  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, then the reserve is called general reserve. It is a free reserve and so can be used for any purpose. It can also be used for future growth and expansion. For example, reserve funds, retained earnings, contingencies reserves, etc.

b. Specific Reserve− When reserve is created for some specific purpose, then the reserve is called specific reserve.

Examples of specific reserve are given below.

i. Debenture Redemption Reserve

ii. Investment Fluctuation Reserve

iii. Dividend Equalisation Reserve

iv. Workmen Compensation Fund

  1. Capital Reserve− It is created out of capital profit, i.e., gain from other than normal activities of business operations, such as sale of fixed asset, etc. It is created to meet the capital loss. It cannot be distributed as dividend. The example of capital reserves are given below.

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 on reissue of forfeited shares

vi. Profit prior to incorporation

  1. Secret Reserves− Reserves that are created by overstating liabilities or understating assets are known as secret reserves. They are not shown in the Balance Sheet. These reduce tax liabilities, as the liabilities are overstated. It is created by management to avoid competition by reducing profit. Creation of secret reserve is not allowed by Companies Act, 1956, which requires full disclosure of all materials facts and accounting policies, while preparing final statements.

Question 6:

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

Answer:

Provisions are the amount that is created against profit to meet the known liability; however, the amount of liability is uncertain. It is created for specific liability. Creation of provision is compulsory even if, there is no profit. The underlying principle behind creation of provision is conservatism, viz., to prepare for future loss. The main rationale for making provisions 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 given below.

  1. Provision for bad and doubtful debts

  2. Provision for depreciation

  3. Provision for taxation

  4. Provision for discount on debtors

Provisions are made by debiting the Profit and Loss Account on estimate basis. The provisions are created on the basis of past experiences. Every year, a business may experience common losses, such as depreciation of fixed assets, taxation, etc., which are although known; however, their exact amount of future period is unknown. Thus, business creates provision of certain percentage every year, which is truly based on the intuitions and past experiences. These unascertained liabilities in form of provisions are kept aside, which 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)

 

Question 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.

Answer:

(a)

Books of Bajrang Marbles
 
Machinery Account
Dr.
 
 
 
 
 
 
Cr.
Date
Particulars
J.F.
Amount
(₹)
Date
Particulars
J.F.
Amount
(₹)
2010
 
 
 
2011
 
 
 
Apr.01
Bank
 
2,00,000
Mar.31
Depreciation
 
18,000
 
(1,80,0000 + 20,000)
 
 
 
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
 
 
 
 
 
 
 
 
                 
 
Working notes: Calculation of annual depreciation
 
Depreciation (p.a.)
=
(Original cost – Scrap Value )
 
 
Estimated Life of Asset (years)
 
 
 
=
(1,80,000 + 10,000 + 10,000 – 20,000)
 
10
 
=
₹ 18,000 per annum
 
 
Depreciation Account
Dr.
 
 
 
 
 
 
Cr.
Date
Particulars
J.F.
Amount
(₹)
Date
Particulars
J.F.
Amount
(₹)
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 
(₹)
Date
Particulars
J.F.
Amount
(₹)
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
(₹)
Date
Particulars
J.F.
Amount
(₹)
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
 
 36,000
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
 
 
 
 
 
 
 
 
 
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
 
 
 
 
 
 
 
 
 
 
 

Question 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.

 

 

Answer:

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

 

 

 

 

 

 

 

 

 

 

 

 

  

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

 

 

 

 

 

 

 

 

 

Working Note:

 

Calculation of annual depreciation

 

Depreciation (p.a.)

=

(1,08,000 + 12,000 – 12,000)

12 years

 

=

Rs 9,000 per annum

 

Question 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.

 

 

Answer:

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

               

 

Working Note:

 

Calculation of annual depreciation

 

Depreciation (p.a.)

=

(56,000 + 28,000 – 6,000 + 1,000)

15 years

 

=

Rs 5,267 per annum

 

Note: As per the solution, the balance of provision for depreciation account, as on March.31, 2015 is Rs 11,850; whereas, as per the book, it is Rs 18,200.

However, if we ignore the scrap value and prepare provision for depreciation for 4 years, the answer would match to that of the book.

 

Question 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 20018, if depreciation is provided on machinery @10% p.a. on written down value method annually on December 31.

Answer:

Books of Berlia Ltd.

(a)

Machinery Account (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

 

 

 

 

 

 

 

 

 

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 annual depreciation

 

(i) Depreciation (p.a.) on Machinery Purchased on July 01, 2015

 

 

= (56,000 + 24,000 + 5,000) ×

10

100

 

= Rs 8,500 per annum

 

 

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

 

 

= (2,50,000 + 10,000)  ×

10

100

 

= Rs 26,000 per annum

 

 

(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

 

 

 

 

 

 

 

 

  

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

 

 

 

 

 

 

 

 

 



Question 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, 2015 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.

Answer:

(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
 
 
 
 
 
 
 
 
 
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
 
 
 
 
 
 
 
 
 

Question 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.

Answer:

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

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

Question 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.

 

Answer:

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

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

Question 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.

Answer:

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

 

 

 

 

 

 

 

 

 

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:

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

 

 

 

 

                   

 

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

 

 

 

 

 

 

 

 

 

Question 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.

Answer:

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

 

 

 

 

 

 

 

 

 

Note: As per the solution, the closing balance, as on 31st March, 2005 is Rs 91,917; however, as per the book it is Rs 83,917.

 

 

Question 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 April 30, 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.

Answer:

Books of Saraswati Ltd.
Machinery Account
Dr.
 
 
 
 
 
 
Cr.
Date
Particulars
J.F.
Amount
(₹)
Date
Particulars
J.F.
Amount
(₹)
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
Apr. 30
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 (₹)
Date
Particulars
J.F.
Amount 
(₹)
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
 
 
 
Apr. 30
Machinery Disposal
 
66,667
Jan.01
Balance b/d
 
5,50,000
Dec.31
Balance c/d
 
7,80,000
Apr. 30
Depreciation
 
6,667
 
 
 
 
Dec.31
Depreciation
 
 
 
 
 
 
 
(i) 80,000, (ii) 1,50,000,
 
 
 
 
 
 
 
(iii) 60,000
 
2,90,000
 
 
 
8,46,667
 
 
 
8,46,667
 
 
 
 
 
 
 
 
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
(₹)
Date
Particulars
J.F.
Amount
(₹)
2014
 
 
 
2014
 
 
 
Apr. 30
Machinery
 
2,00,000
Apr. 30
Provision for Depreciation
 
66,667
 
 
 
 
Apr. 30
Bank
 
75,000
 
 
 
 
Apr. 30
Profit and Loss (Loss)
 
58,333
 
 
 
 
 
 
 
 
 
 
 
2,00,000
 
 
 
2,00,000
 
 
 
 
 
 
 
 
 
Working Note:
 
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
6,667
=
1,33,333
 
Accumulated Depreciation
 
66,667
 
 
 
Value on Apr. 30, 2014
1,33,333
Sale on   Apr. 30, 2014
75,000
Loss on sale
₹ 58,333
  
 



Question 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.

Answer:

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

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

Working Note:

Truck involved in accident

 

 

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

 

                   

 

 

Question 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.

 

 

Answer:

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

 

 

 

 

 

 

 

 

 

Working Note:

 

Calculation of annual depreciation

 

Depreciation (p.a.)

=

(2,00,000 + 25,000 – 20,000)

5

 

=

Rs 41,000 per annum

 

Question 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

 

 

Answer:

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

 

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

 

 

 

 

 

 

 

 

 

Note: As per the solution, the profit on the sale of truck, as on December 31, 2013 is Rs 25,498; however, the answer given in the book is Rs 58,237.

 

 

Question 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.

 

Answer:

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

 

 

 

 

               

 



Question 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 writen off @15% p.a. on diminishing balance method. Prepare bus account from 2011 to 2014. Books are closed on December 31 every year.

 

Answer:

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

 

 

 

 

 

 

 

 

 

Question 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.

Answer:

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

 

 

 

 

 

 

 

 

 

Note: As per solution, loss on truck one is as Rs 2,33,625; however, as per NCERT book, loss is of Rs 3,26,250.

 

Truck – 1

 

 

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 Truck – 1

=

Rs 2,33,625

 

 Truck – 2

 

 

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 Truck – 2

=

Rs 6,40,875

 

 

 

Question 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.

Answer:

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

 

 

 

 

 

 

 

32,37,500 + 8,77,500

 

41,15,000

 

 

 

 

 

 

 

 

 

 

 

49,47,500

 

 

 

49,47,500

 

 

 

 

 

 

 

 

 

Question 18:

Shri Krishan 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.

 

 

Answer:

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, 2002

 

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

 

 

Question 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.

 

 

Answer:

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 (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

 

 



Question 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

 

 

Answer:

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

 

 

 

 

 

 

 

 

 

Question 21:

An extract of Trial balance from the books of Tahiliani and Sons Enterprises on Marc 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.

 

 

Answer:

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

 

3,840

Mar.31

Profit and Loss

 

7,840

 

 

 

11,840

 

 

 

11,840

 

 

 

 

 

 

 

 

 

Question 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.

 

 

Answer:

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

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



NCERT Class 11 Accountancy (Financial Accounting Part I)

Class 11 Accountancy Chapters | Accountancy Class 11 Chapter 7

NCERT Solutions For Class 11 Accountancy

Class 11 Accountancy NCERT Solutions: Financial Accounting Part I

NCERT Solutions For Class 11 Accountancy

Class 11 Accountancy NCERT Solutions: Financial Accounting Part II

NCERT SOLUTIONS

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