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NCERT · Class 11 · Accountancy

Chapter 7: Depreciation, Provisions and Reserves

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Numerical Answers for NCERT Accountancy Solutions Class 11 Chapter 7

22 questions
Q1Written answer

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

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Worked solution

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

₹

 Date Particulars J.F. Amount

₹
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 ₹. 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
= ₹ 18,000/annum

The depreciation account is calculated as:

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  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 ₹.72, 000

Depreciation Account
Dr. Cr.
Date Particulars J.F. Amount

₹

 Date Particulars J.F. Amount

₹
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
Q2Written answer

On July 01, 2010, Ashok Ltd. Purchased a Machine for ₹ 1, 08,000 and spent ₹ 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 ₹ 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.

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Worked solution

The machine account and depreciation account are as follows:

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

= ₹ 1, 20,000

Books of Ashok Ltd.
Machinery Account
Dr. Cr.
Date Particulars J.F. Amount

₹

 Date Particulars J.F. Amount

₹
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 ₹ 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
= ₹ 9,000
Depreciation Account
Dr. Cr.
Date Particulars J.F. Amount

₹

 Date Particulars J.F. Amount

₹
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
Q3Written answer

Reliance Ltd. purchased a second hand machine for ₹ 56,000 on October 01, 2011 and spent ₹ 28,000 on its overhaul and installation before putting it to operation. It is expected that the machine can be sold for ₹ 6,000 at the end of its useful life of 15 years. Moreover an estimated cost of ₹ 1,000 is expected to be incurred to recover the salvage value of ₹ 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.

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Worked solution

Machine account and provision for depreciation account are as follows:

Books of Reliance Ltd.
Machinery Account
Dr. Cr.
Date Particulars J.F. Amount

₹

 Date Particulars J.F. Amount

₹
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

₹

 Date Particulars J.F. Amount

₹
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 ₹. 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
= ₹ 5,267
Q4Written answer

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

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Worked solution

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

₹

 Date Particulars J.F. Amount

₹
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 ₹. 2, 54,583

Depreciation Account
Dr. Cr.
Date Particulars J.F. Amount

₹

 Date Particulars J.F. Amount

₹
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
= ₹ 8,500 pa

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

= (2,50,000 + 10,000)  × 10
100
= ₹ 26,000 pa

(b)

Machinery Account (Written Down Value method)
Dr. Cr.
Date Particulars J.F. Amount 

₹

 Date Particulars J.F. Amount 

₹
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 ₹ 2, 62,447

Depreciation Account
Dr. Cr.
Date Particulars J.F. Amount

₹

 Date Particulars J.F. Amount ₹
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
Q5Written answer

Ganga Ltd. purchased a machinery on January 01, 2014 for ₹ 5, 50,000 and spent ₹ 50,000 on its installation. On September 01, 2014 it purchased another machine for ₹ 3, 70,000. On May 01, 2016 it purchased another machine for ₹ 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.

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Worked solution

The machinery account and depreciation account are as follows:

(a)

Books of Ganga Ltd.
Machinery Account
Dr. Cr.
Date Particulars J.F. Amount

₹

 Date Particulars J.F. Amount

₹
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 ₹.12, 22,667.

Depreciation Account
Dr. Cr.
Date Particulars J.F. Amount ₹ Date Particulars J.F. Amount ₹
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

₹

 Date Particulars J.F. Amount

₹
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

 ₹

 Date Particulars J.F. Amount 

₹
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 ₹. 5, 87,333

Q6Written answer

Azad Ltd. purchased furniture on October 01, 2014 for ₹ 4, 50,000. On March 01, 2015 it purchased another furniture for ₹ 3, 00,000. On July 01, 2016 it sold off the first furniture purchased in 2014 for ₹ 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.

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Worked solution

The furniture account and accumulated depreciation account are as follows:

Books of Azad Ltd.
Furniture Account
Dr. Cr.
Date Particulars J.F. Amount ₹ Date Particulars J.F. Amount 

₹
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 

₹

 Date Particulars J.F. Amount

 ₹
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 ₹. 85,960.

Furniture Disposal Account
Dr. Cr.
Date Particulars J.F. Amount ₹ Date Particulars J.F. Amount 

₹
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 ₹ 1, 15,544.

Q7Written answer

M/s Lokesh Fabrics purchased a Textile Machine on April 01, 2011 for ₹ 1, 00,000. On July 01, 2012 another machine costing ₹ 2, 50,000 was purchased. The machine purchased on April 01, 2011 was sold for ₹ 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.

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Worked solution

 Machinery account and Machinery disposal account are prepared below:

Books of M/s. Lokesh Fabrics
Machinery Account
Dr. Cr.
Date Particulars J.F. Amount

₹

 Date Particulars J.F. Amount

₹
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 ₹.1, 09,375

Machinery Disposal Account
Dr. Cr.
Date Particulars J.F. Amount

₹

 Date Particulars J.F. Amount

 ₹
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 ₹. 7,500.

Q8Written answer

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

₹

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 ₹ 2, 00,000 was sold for ₹ 75,000. A new machine was purchased on July 01, 2015 for ₹ 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.

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Worked solution

Machinery account and provision for depreciation account are created below:

Machinery Account
Dr. Cr.
Date Particulars J.F. Amount

₹

 Date Particulars J.F. Amount

₹
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 ₹, 19, 00,000.

Provision for Depreciation Account
Dr. Cr.
Date Particulars J.F. Amount

 ₹

 Date Particulars J.F. Amount

 ₹
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 ₹.5000.

Machinery Disposal Account
Dr. Cr.
Date Particulars J.F. Amount 

₹

 Date Particulars J.F. Amount ₹
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
Q9Written answer

M/s. Excel Computers has a debit balance of ₹ 50,000 (original cost ₹ 1, 20,000) in computers account on April 01, 2010. On July 01, 2010 it purchased another computer costing ₹ 2, 50,000. One more computer was purchased on January 01, 2011 for ₹ 30,000. On April 01, 2014 the computer which has purchased on July 01, 2010 became obsolete and was sold for ₹ 20,000. A new version of the IBM computer was purchased on August 01, 2014 for ₹ 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.

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Worked solution

The computer account is created below:

Books of M/s Excel Computers
Computer Account
Dr. Cr.
Date Particulars J.F. Amount

₹

 Date Particulars J.F. Amount 

₹
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 ₹. 91,917

Q10Written answer

Carriage Transport Company purchased 5 trucks at the cost of ₹ 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 ₹ 70,000 in full settlement of the claim. On the same date the company purchased a second hand truck for ₹ 1, 00,000 and spent ₹ 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.

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Worked solution

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

₹

 Date Particulars J.F. Amount

₹
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 ₹. 9, 20,000.

Provision for Depreciation Account
Dr. Cr.
Date Particulars J.F. Amount

₹

 Date Particulars J.F. Amount

₹
2011 2011
Dec.31 Balance c/d 1,50,000 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 ₹.30, 000 due to the accident is observed and the balance of provision for depreciation account is ₹. 4, 46,000.

Truck Disposal Account
Dr. Cr.
Date Particulars J.F. Amount 

₹

 Date Particulars J.F. Amount 

₹
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