eae ws ee: eee ee ee ee ee ee ee WF studiestodoy Goma T.S. Grewal's Double Entry Book Keeping (Financial Accounting) Accounts Textbook for CBSE Class 11 Chapter 14 Depreciation Q.1What is Depreciation? What is the need for need for providing Depreciation? Describe the two methods of providing Depreciation. Answerl, Meaning of Depreciation: Depreciation is the fall in the value of tangible fixed asset because of its Usage or with efflux of time or due to obsolescence or accident. Need or Objectives for providing Depreciation:- The following are the need or objectives for providing depreciation: (i) To find out the correct profit or loss: the profit for any year can be determined only when all cost of earning revenues have been accounted for. Decrease in the value of fixed assets or depreciation shows the cost of earning revenue by use of fixed assets in the accountting year. Depreciation is not optional but compulsory to determine correct profit or loss. (li) To show true and fair view of the financial position: Depreciation, if not charged, would result in assets being stated at a higher value. As a result of this, the Position Statement or Balance Sheet ‘would not present a true and fair view of the financial position, (iii) Provision for funds out of profits for replacement: Funds should be retained, out of Profits, for replacement of assets at the end of life of the asset. The amount of depreciation is debited to Profit and Loss Account, on account of depreciation are retained in the business as no payment is made like other expenses. (iv) To ascertain the correct cost Of production: Depreciation should be taken into consideration for calculating the cost of production. ‘Two Methods of Depreciation: ‘The amount of depreciation to be charged for the year is calculated by using various methods, But the two main methods for calculating depreciation 1. Fixed Percentage on Original Cost or Fixed Installment or Straight Line Method, 2. Fixed Percentage on Diminishing Balance or Reducing Installment Method or Written Down Value Method. Q.2 What are the two methods for providing Depreciation? Give the merits and demerits of each method. Answer 2. ‘Two Methods of Depraciation:- ‘The amount of depreciation to be charged for the year is calculated by using various methods. But the two main methods for calculating depreciation are: 1 Fixed Percentage on Original Cost or Fixed Installment or Straight Line Method. Copyright © https://www.studiestoday.com All rights reserved. No part of this publication may be reproduced, distributed, or transmitted in any form or by any means, including photocopying, recording, oF other electronic or mechanical methods, without the prior written permission Downloaded from https:// www.studiestoday.comVownloaded trom nttps:// www.studiestoday.com Gomcal 2. Fixed Percentage on Diminishing Balance or Reducing Installment Method or Written Down Value Method. ‘Advantages of the Straight Line Method are:- 1 Itis a simple method of calculating the depreciation. 2. In this method, assets can be depreciated up to the estimated scrap value or zero value. 3. Ibis easy to calculate the amount of depreciation under this method. 4. The Profit and Loss Account is debited or charged with same amount of depreciation every year ‘and uniformity is maintained on the expenditure. PF stustestodey Disadvantages of the Straight Line Method are: 1. There is no arrangement of interest on capital invested in assets in this method. 2. With the passage of time, work efficiency of assets decreases and repair expenses increases. As a result, in later years, there is more load on the Profit and Loss Account due to Increased repair expenses. 3. Sometimes in this method, the book value of assets becomes nil, still the assets are used in the business. Advantages of the Written Down Value Method: The following are the advantages of the Written Down Value Method: 1. There is same weightage on Profit and Loss Account of depreciation and repair expenses. 2. This method is easier than Straight Line Method. 3. In case of expansion and increase in assets, the depreciation can be computed easily by this method. 4. This method is acceptable by the Government under the Income Tax Act. Disadvantages of the Written Down Value Method: The following are the disadvantages of the Written Down Value Method: 1. In this method the value of the asset can never be zero. 2. It is a difficult task to ascertain the proper rate of depreciation. 3. There is no provision of interest on capital invested in use of assets. .3 Distinguish between the Straight Line Method and Written Down Value Method of Providing Depreciation. ‘Answer 3. Distinction between Straight Line Method and Written Down Value Method of providing Depreciation:- Basis ‘Straight Line Method ‘Written Down Value Mathod 1.) Depreciation | Depreciation is calculated on the | Depreciation is calculated on the Charge ‘original cost of the asset. written down value of the asset. 2.) Amount The amount of depreciation remains | The amount of depreciation reduces the same for all years. year after year. 3.) Zero Balance | After the expiry of the working life of | The balance in the Asset Account will the asset, the balance in the Assets | not reduce to zero. ‘Account reduces to zero. “4) Depreciation | The combined cost_of depreciation | The combined cost of depreciation and Copyright © https://www.studiestoday.com All rights reserved. No part of this publication may be reproduced, distributed, or transmitted in any form or by any means, including phatocopying, recording, or other electronic or mechanical methods, without the prior written permission Downloaded from https:// www.studiestoday.comVownloaded trom nittps:// www.studlestoday.com SB stusiestodey opm! ‘and repairs and repair is lower in the initial years and higher in the later years. repair remains, more or less, equal throughout the period. 5.)Suitability | This method is more suitable for | This method is more suitable for assets assets which get depreciated on | which require more and more repairs in account of expiry of working life of the | the later years of their working life. asset. 6) Calculation | It is easy to calculate the rate of | It is difficult to calculate the rate of depreciation. depreciation. Q.4 State briefly the necessity of providing Depr Answerd, The necessity of providing Depreciation: The following are the necessity of providing depreciation: (i) To find out the correct profit or loss: the profit for any year can be determined only when all cost of earning revenues have been accounted for. Decrease in the value of fixed assets or depreciation shows the cost of earning revenue by use of fixed assets in the accounting year. Depreciation is not optional but compulsory to determine correct profit or loss. (ii) To show true and fair view of the financial position: Depreciation, if not charged, would result in assets being stated at a higher value. As a result of this, the Position Statement or Balance Sheet would not present a true and fair view of the financial position. {ili) Provision for funds out of profits for replacement: Funds should be retained, out of Profits, for replacement of assets at the end of life of the asset. The amount of depreciation is debited to Pr ‘and Loss Account, on account of depreciation are retained in the business as no payment is made like other expense: (iv) To ascertain the correct cost of production: Depreciation should be taken into consideration for calculating the cost of production. If itis not considered the cost of production will not be correct. (v) To meet the legal, requirements: It provisions of the Companies Act and th mandatory to charge Depreciation to comply with the income Tax Act. Q.5 Explain the following briefly: (i) Assets Disposal Account (li) Written Down Value Method of Providing Depreciation Answer 5. (I) Asset Disposal Account: In case of asset being sold. a new account named ‘Asset Disposal Account’ is opened in the ledger for the purpose of calculating profit or loss on the sale of an asset. Journal entries for sale or disposal of asset will depend upon the method of recording depreciation. (ii) Written Down Value/Diminishing Balance/Reducing Balance Method of Charging Depreciation: Under this method, depreciation is charged at a fixed rate on the reducing balance or cost less depreciation every year. A fixed rate on the written down value of the asset is charged as Copyright © https://www.studiestoday.com All rights reserved. No part of this publication may be reproduced, distributed, or transmitted in any form or by any means, including photocopying, recording, or other electronic or mechanical methods, without the prior written permission Downloaded from https:// www.studiestoday.comIEEE OIE NII UAB LT AWWW SUCHE SLOG ay .COM © studtestodoy Soma! depreciation every year the expected useful life of the asset. A fixed depreciation percentage is applied to the book value and not to the cost of the asset. For example the cost of the asset is 1,00,000 and the percentage of depreciation to be written off each year Is 10%. In the first year, the amount of depreciation will be 10.000; this will reduce the book value to 90.000, Second year, the depreciation amount will be 9,000, that is of 90,000. Thus, ‘every year the depreciation amount will go on reducing. Q.6 Ram & Co. purchased machinery for Rs. 21,000 on 1” April, 2019. The estimated life of the machinery is 10 years, after which its residual value will be Rs. 1,000 only. Find the amount of Annual Depreciation according to the Fixed Installment Method. ignore GST. Answer 6. Amount on Annual Depreciation under Fixed installment Method:- Amount to be Depreciated Number of year of life of Machine Gost Price-Scrap Value ‘Number of year of life of Machine 21,000-1,000 10 Years | 20,000 10 Years | = Rs. 2,000 p.a 2.7 On 1" April, 2015, Grand Ltd. Purchased almachinery for Rs. 3,00,000 and incurred Rs. 21,000 towards freight and insurance, Rs.\3,000 towards carriage inward and Rs, 6,000 towards installation charges. It has estimated that the machinery will have a scrap value of Rs. 30,000 at the end of the useful lite whichis four years. What will be the annual depreciation and the value ‘of machinery after four year axcording to the Straight Line Method? Ignore GST. Answer 7. Amount on Annual Depreciation under Straight Line Method:- Amount to be Depreciated “Number of year of life of Machine Cost Price+Fretght+Insurance+Carriage-Scrap Value ‘Number of year of life of Machine 3,00,000+21,000+3,000+6,000-30,000 ‘4Years 3,00,000 “4 Years = RS, 75,000 p.a Value of Machinery after four years= Total Cost- Total Depreciation for Four years = Rs. 3,30,000- Rs. 75,000 x 4 years Copyright © httos://www.studiestoday.com All rights reserved. No part of this publication may be reproduced, distributed, or transmitted in any form or by any means, including photocopying. recording, or other electronic or mechanical methods, without the prior written permission. Downloaded from https:// www.studiestoday.comDownloaded trom nttps:// www.studiestoday.com Psrudiestodoy SDMA! = Rs, 30,000 Q.8 Good Manufactures Ltd, Purchase on 1" October, 2016 a machinery costing Rs. 25,000. A sum of Rs. 1,000 was spent upon its installation. Depreciation is charged @ 10% p.a. on the Diminishing Balance Method. The company closes its books every year on 31” March (ignore GST). What will be the amount of Depreciation for the year ended 31" March 2017, 31" March 2018 and 31" March, 2019? Answer 8, ‘Amount of Annual Depreciation under Diminishing Balance Method for 1" Year = Total Cost xTime Period x % of Depreciation (25,000 + 1,000) x x 10% = Rs. 1,300 Amount of Annual Depreciation under Diminishing Balance Method for 2 Year += Total Cost less Accumulated Depreciation xTime Period x % of Depreciation = (25,000 + 1,000 - 1,300) « 10% = Rs, 2,470 Amount of Annual Depreciation under Diminishing Balance Method for 1" Year = Total Cost less Accumulated Depreciation x % of Depreciation = (25,000 + 1,000 - 1,300 - 2470) x 10% = Rs. 2,223 Practical Problems:- Question 1 Caleuate the Amount of annual Depreciation and Rate of Depreciation under Straight Line Method (SLM) {rom the following: Purchased a second-hand machine for Rs 96,000, spent Rs 24,000 on its cartage, repairs and Installation, estimated useful lite of machine 4 years. Estimated residual value Rs 72,000. Answer 1 Calculation of Rate of Depreciation by Straight line Method Amount of Depreciation = —C0st of Asset_-__Estimated Scrap Value ‘Number of year of life of Asset Amount of Depreciation = —120. reas Amount of | Rate of Depreciation = ——Amountof Depreciation _ 99 Cost of Asset 12,000 Rate of De; atic a —_« = 10% P.A. SS 1,20,000 300 Copyright © https://www.studiestoday.com All rights reserved. No part of this publication may be reproduced, distributed, or transmitted in any form or by any means, including photocopying, recording, or other electronic or mechanical methods, without the prior written permission, Downloaded from https:// www.studiestoday.comVOWTNOaAGEY THOTT! TIYo.// WWW. SlLUCIe oloUay.COrnl ® studiestodey Gomcar Point of Knowledge:- Cost of Assets = Purchases Price of Machine + Repairs and installation Charg Question 2 On 1st Apri, 2016, X Lid. purchased a machine costing Rs 4, 00,000 and spent RS 50,000 on ts insiallation. The estimated ite of the machinery is 10 years, atter which ts residual value will be Rs $0,000 only. Find the amount of annual depreciation according ‘o the Fixed Installment Method and prepare Machinery Account for the first three years. The books are closed on 31s! March every year. Answer 2: Book of X Lid. Machinery Account cr Dr. ac J Amount rrr Cay Date Praieny [AD aco) To Bank alc By Depreciation aic 40,000 (Cost of Asset+ Expense) By Balance cid 4.10,000 [40.000 | To Balance bid By Depreciation alc 40,000 By Balance cid 3,70,000 410,000 To Balance bid By Depreciation 40,000 By Balance cid 3,30,000 2019 ‘April01__| To Balanse bid Point of Knowledge:- Cost of Assets urchases Price of Machine + Repairs and installation Charge: ‘= 4, 00,000+50,000 = 4, 50,000 Working Note:- Calculation of Depreciation: oe ‘Amount of Dé tion Cost of Asset + Installation Charge - Scrap Value mount of. Depress __ Number of year of life of Asset = 50,000 | amount of Depreciation = = 40,000 P.A. Copyright © https://www.studiestoday.com All rights reserved. No part of this publication may be reproduced, distributed, or transmitted in any form or by any means, including photocopying, recording, or other electronic or mechanical methods, without the prior written permission. Downloaded from https:// www.studiestoday.comMENTING TOM! TUDS. 1) WWW.Studlestoday.com B stuciestoday Spm cat Question 3: On 1st Apri, 2015, Furniture costing Rs 55,000 was purchased. It Is estimated that i's Ife Is 10 years al the End of which it will be sold for Rs 5,000. Additions are made on 1st April 2015 and 1s! October, 2017 to the value of Rs 9,500 and Rs 8,400 (Residual valves Rs 500 and Rs 400 respeciively). Show the Furniture ‘Account for the first four years, if Depreciation is writen off according fo the Straigh: Line Method Answer 3: Particulars eet rare 2015 2016 ‘Aptio7 | To Bank aic -1 58,000 | March 31| By Depreciation ale -1 5,000 March 31) Balance cid 1 50,000 35,000 $5,000 2016 2017 Apriio1 | To Balance bid -1 50,000 | March 31| By Depreciation alc ‘April01 | To Bank alc -2 9,500 1 Rs5,000 2 900 5,900 March 31| By Balance cid 1 Rs.45,000 2 __Rs.8.600 $3,600 59,500 59,500 2017 2018 Apri 07 | To Balance bid March 31) By Depreciation ac 1 Rs.45,000 1 Rs.5.000 2 _Rs8,600 53,600 2 ___Rs900 5,900 March31| By Balance eid 1 Rs.40,000 2 Rs7,700 47.700 600 53,600 a8 2019 Aprii01 | To Balance bid March 31| By Depreciation ave 1 Rs.40,000 1 Rs.5.000 2 _Rs7,700 47,700 2 Re.900 Oct. 01 | To Bank ac -3 8,400 3 Rs.400 6,300 March 31| By Balance cid 1 Rs.35,000 2 Rs.6,800 3 __Rs8,000 49,800 Copyright © https://www.studiestoday.com All rights reserved. No part of this publication may be reproduced, distributed, or transmitted in any form or by any means, including photocopying, recording, or other electronic or mechanical methods, without the prior written permission Downloaded from https:// www.studiestoday.com* MYUWTOAGEed TOM NUPS-/; WWw.studiestoday.com F stuciestoday pM! | | 56,100 | | 56,100 Working Notes: (1) Calculation of Depreciation Amount of Depreciation = —Costot Asset Scrap Value _| cin ‘Number of year of life of Asset For Furniture_1 55, : Amount Deacon = 55500 5000 = 5000 P.A. For Furniture_2 Amount of Depreciation = ~~ — — For Furniture_3 Amount of Depreciation = 800 P.A. Depreciation for Furniture_a (for Six Months) Question 4: From the following transactions of a concern, prepare the Machinery Account for the year ended 3151 ‘March, 2019 1st Apri, 2018 + Purchased a second-hand machinery for Rs 40,000 1st April, 2018 £ Spent Rs. 10,000 on repairs for making it serviceable 30th September, 2018: Purchased additional new machinery for Rs 20,000. 31st December, 2018; Repairs and renewals of machinery Rs 3,000. 31st March, 2019 : Depreciate the machinery a! 10% pa Answer 4 Machinery Account ee ee aa ern cioahg AMI Th) a ce) By Depreciation alc Sept 30 | To Bank alc -2 1 Rs.,000 (6 months) 2 __Rs.1,000 By Balance cid 1 Rs.45,000 Copyright © https://www.studiestoday com All rights reserved. No part of this publication may be reproduced, distributed, or transmitted in any form or by any means, including photocopying, recording, or other electronic or mechanical methods, without the prior written permission. Downloaded from https:// www.studiestoday.comDownloaded from NUPS.// WWW. Studie ota y eM WP studiestodsy (6 months) 2 __Rs.19,000 70,000 Point of Knowledge:- hinery was purchases + ifthe Repair & sing date, expenses on then it should machinery should not be recorded in the Machinery Account. Question 5: ‘An asset was purchased for Rs 10,500 on 1s! Apri, 2012 The scrap value was estimated to be Rs S00 {he end of asset's 10 years’ Ie. Straight Line Method of depreciation was used. The accounting year ends on3ist March every year. The asset was sold for Rs 600 on 31st March, 2018, Caleuiate the following {() The Depreciation expense for the year ended 31s! March, 2013, {l) The net book value of the assel on 318i March, 2017 {ii) The grain or loss on sale ol the asset on 31st March, 2019 Answer 5: ‘Asset Account Dr cr. ae ran ao eae Por a To Bank ac By Depreciation a 1,000 By Balance cid 9,500 10,500 To Balance bid By Depreciation aic 1,000 By Balance cid 8,500 9,500 By Depreciation ac 1,000 By Balance cid are 7,500 500 To Balance bid By Depreciation ave 1,000 By Balance cid 6,500 7,500 To Balance bid By Depreciation alc 1.000 By Balance cid 5,500 6,500 2017 To Balance bid Mar31 | By Depreciation are 1,000 priv erpyright © https. [/www studkestoday.com Al rights reserved. No part ofthis publication ma¥ Be reproduced, distributed, ot transmitted in any form or by any means, including Photocopying. recording, or other electronic or mechanical methods, without the prior written permission. Downloaded from https:// www.studiestoday.com eeevowmoaded Irom Nttps:// www.studiestoday.com © stuciestoday Mar.31 | By Balance cid 5,500 2018 2019 April01 | To Balance bid 4,500 | Mar.31 | By Depreciation ac Mar | By Bank alc Mar.31 | ByP &L a/c (Loss) 7500 —_— (0) Depreciation expense for the year ended 31st March, 2012 7 CostofAsset - Scrap Value Number of year of life of Asset ‘Amount of Depreciation 10,500 - 500 | 10 = 1000 P.A. Amount of Depreciation = (li) The Net book value of the assets on 31" March, 2016 Net Book Value = Cost Price - Depreciation ill date Deen Value of Assets on 01 April,2017 (-) Total Depreciation (10007) 7,000 Net Book value of Asset 3,500 () Sales Price 600 Loss on Sale of Machinery 2,900 Question 6. On 1st Apri, 2015, A Lid. purchased @ machine for Rs 2.40,000 and spent Rs 10,000 on iis erection. On 11st October, 2015 an additional machinery costing Rs 1,00,000 was purchased. On tsi Ociober, 2017, the mechine purchased on 1si April, 2015 was sold for Rs 1,43,000 and on the sarre date, a new machine was. purchased at cost of Rs 2,00,000 Show the Machinery Account for the firs four linancial years ater charging Depreciation at 5% p.a. by the Straight Line Method Answer 6: Machinery Account Dr cr. J. Amount Deere Date Coad (GD Copyright © https://www studiestoday.com All rights reserved. No part of this publication may be reproduced, distributed, or transmitted in any form or by any means, including photocopying, recording, or other electronic or mechanical methods, without the prior written permission. Downloaded from https:// www.studiestoday.com emaewe G studiestoday To Bank ac -1 To Bank alc -2 To Balance bid 1 Rs.2,37,500 2 __Rs.97,500 To Balance bid 1 Rs.2,25,000 2 __Rs.92,500 To Bank afc -3 To Balance bid 2 Re, 87,500 3\_Rs.1,95,000 2,50,000 1,00,000, 3,385,000 3,17,500 2,00,000, 2,82,500 March 31 March 31 2017 March 31 March 31 2017 Oct. 01 Oct. 07 Oct. 01 2018 Mareh31 March 31 2019 March 31 March 31 NAMM THOTT TDS 1) WWW. StUdIEStoday.com Genca By Depreciation ave 1 Rs.12,500 (6 Months) 2 __Rs.2,500 15,000 By Balance cid 1 Re2,37,500 2 __Rs97,500 3,35,000 280,000) By Depreciation ave 1 Rs.12,500 2 __Rs.§,000, 17,500 By Balance cid 1 Re.2,25,000 2 Rs 92,500 3,17,500 [335.000] By Depreciation alc 6,250 (For 6emonihe) By Bank alc -1 1.43,000 By P&L ae(loss on sale) 75,750 By Depreciation alc 2 Rs.5,000 (6 months)3 __Rs.5,000 10,000 By Balance cid 2 887,500 3 _RS1,95,000 2,82,500 37,500 By Depreciation alc 2 -Rs.5,000 3 _Rs.10,000, 15,000 By Balance c/d 2 882,500 3 _ps.1,85,000| | 2,67,500 [282,500 | int of Knowledge:- Cost of Assets = Purchases Price of Machine + Repairs and installation Charge ‘= 2, 40,000 + 10,000 += 2, 50,000 Copyright © https://www.studiestoday.com All rights reserved. No part of this publication may be reproduced, distributed, or transmitted in any form or by any means, including photocopying, recording, or other electronic or mechanical methods, without the prior written permission. Downloaded from https:// www.studiestoday.comoe MAMET ARS THOTT NUD S.// WWW.Sltudiestoday.com Bstudiestoday fewcw Working Notes:- (1) Calculation of Deprecation Amount of Depreciation = Cost of Asset x Rate of Depreciation For Machine_1 Amount of Depreciation = 2,50,000 x 7 12,500 P.A, | Amount of a 500 PA. ‘Machi Amount of Depreciation = 100,000 « —© For Machine_2 (Six Month) ~ Amount of Depreciation = 1,00,000 x —® For Machine _3 * Amount of Depreciation = 2,00,000 x sep = 10,000P.A. on sale of Machine -1 ross (Rs.) (2) Calculation of Profit or Lo: Petrie’ Value of Machinery on 01 April,2017 (-) Total Depreciation on Machine 1 Value of Machinery on 01 Oct,2017 2,18,750 i () Sales Price |__1,43,000 _Loss on Sale of Machinery 75,750 Question 7: ‘AVan was purchased on 1st Apri, 2016 for Rs 60,000 and Rs $,000 was spent on i's repait and Registration. On si October, 2017 another van was purchased for Rs 70,000 On 1s! Apri, 2018. the frst van purchased on 1st Apri, 2019 was sold for Rs 45,000 and a new van costing Rs 1, 70,000 was purchased on the same daie. Show the Van Accourt rom 2016-17 to 2078-19 on the basis o! Sirah! Line Method. I the rate of Depreciation charged is 10% p.a, Assume thal books are closed on 31si March every year. Answer 7: Van Account Dr. ao (aD) Pai Cento To Bank alc -1 65,000 | March31 | By Depreciation ae -1 By Balance c’d Copyright © https://www studiestoday.com All rights reserved. No part ofthis publication may be reproduced, distributed, or transmitted in any form or by any means, including Photocopying, recording, or other electronic or mechanical methods, without the prior written Permission. Downloaded from https:// www.studiestoday.comVUWIIOGUEU THOTT TIWo.// WY WV. StU owuuady.' © studiestodoy (2017 2018 April 01 | To Balance b/d -1 98,500 | March 31 | By Depreciation alc Oct.01 | To Bank a’c -2 1 6,500 (6 rmonth) 2 _3,500 Mareh31 | By Balance eid 1 52,000 2 66,500 2018 2018 Apriot | By Bank alc-1 ‘Aprioy | By P & Lac (Loss on Sale) 2019 April 01 | To Balance bid 2 March 31 | By Deprecialion alc Aptii01 | To Bank ac -3 2 7,000 3 17,000 March 31 | By Balance c/d 2 59,500 3 _1,53,000 Working Notes:- (1) Calculation of Depreciation:- Amount of Depreciation = CostofAsset x Rate of Depreciation For VAN_1 Amount of Depreciation = 65,000 = 300 = 6S00P.A. For VAN_2 Amount of Depreciation = 70,000 x —W-= 7,000P.A. For VAN_2 (Six Month) mount ofDepreciation = 70,000 * —— = 5 = 53,500 For VAN_3 Amount of Depreciation = 1,70,000 * s 17,000 P.A. 2) Calculation of Prof! and loss on sale of Van} Value of Machinery on 01 April,2017 {Total Depreciation on Van 1 Copyright © httos://www.studiestoday.com All rights reserved. No part of this publication may be reproduced, distributed, or transmitted in any form or by any means, including photocopying, recording, or other electronic or mechanical methods, without the prior written permission Downloaded from https:// www. studiestoday.comVOWMoaGded TOM NUps.// WWW. StudIestoday.Com © studiestoday Semen! ‘Value of Machinery on 01 April,2017 52,000 () Sales Price 45,000 Loss on Sale of Machinery 7,000 Question 8 On 1" Apri, 2015, Star Lid. Purchased 5 machines for Rs. 60,000 each. On 1" Apri, 2017, one of the machines was sold at a loss of Rs. 8,000. On 1" July, 2078, second machine was sold at a loss ol Rs. 12,500. A new machine was purchased for Rs. 1,00,000 on 1” October, 2018. Prepare Machinery Account for 4 years, assuming accounis are closed on 31° March each year and depreciation is charged @ 10% per annum as per Straight Line Method. Answer 8 Dr. cr Amount 9, ee Uo (Rs) [ae Pry enn 2" Year ToBankac 3,00,000 | March 31 | By Depreciation afc 30,000 (Rs. 60,000 x 50) By Balance cid 2,70,000 3,00,000 | 3,00,000 2” Year 3" Year Aprii01 | To Balance bid 2,70,000 | March 31 | By Depreciationaie 30,000 March 31 | By Balance cid 2,40,000 2,70,000 2,70,000 3" Year 3° Year Aprii01 | To Balance bid 2.40,000 | Aprii01 | By Statement of P&L 8,000 ‘Apriioy | By Bank Ac Sold 40,000 (60,000-12,000-8,000) 4” Year March 31 | By Depreciation ale 24,000 (2,40,00010%) By Balance cid 1.58.00 | 2,40,000 2,40,000 4” Year 4” Year Apion | To Balance bid 7,68,000 | July 01 | By Statement of P&L ac 12,800 Octo | To Bank Ale 1,00,000 | Julyo1 | By Bank Ac: sold (81F) (60,000-6,000-6,000- 6,000: 1,500-12,500) 5" Year March 31 | By Depreciation Alc 24,500 (1,80,000%10% +1,00,00 (010% 6/12460,000%10 593/12) March 31 | By Balance cid 2,03,000 Copyright © https://www.studiestoday.com All rights reserved. No part of this publication may be reproduced, distributed, or transmitted in any form or by any means, including photocopying, recording, or other electronic or mechanical methods, without the prior written permission, Downloaded from https:// www.studiestoday.comVOWMOAaGEG HOM MUps.// WWW. Studie stoday.COrl Psuaertety Som cat l |_| 268,000 | |__| 2,66,000 | Question 9: ‘A company whose accounting year is @ financial year, purchased on 1s1 July, 2014 machinery costing Rs 30,000. |i purchased further machinery on 1st January, 2015 costing Rs 20,000 and on 1st October, 2015 costing Rs 10,000. On 1si April, 2016, one-third of the machinery installed on 1s: July, 2014 became obsolete and was sold for Rs 3,000 Show how Machinery Account would appear in the books o the company. I! being given thai machinery was depreciated by Fixed Installment Method at 10% p.a. What would be the value o! Machinery Account ‘om 1st April, 20177 Answer 9: Dr. Pn) Cate July 01 | To Bank ae -1 2015 Jan.01 | To Bank alc -2 2015 Apriio1 | To Balance bid 1 27,750 2 _19,500 Oct. 01 | To Bank aic -3 2016 Apriot | To Balance b/d 1 24,750 2 17,500 3 __ 9,500 Copyright © https://www.stur reproduced, distributed, or Machinery Account era (Rs) Prd cr. Prete an By Depreciation ac (9 months) 1 2,250, 2 S00 2,750 By Balanced cid 1 27,750 2 _19,500 47,250 50,000 By Depreciation aic 1 3,000 2 2,000 3 500 5,500 By Balance cid 1 24,780 2 = (17,500 3 __9,500 51,750 57,250 By Bank ac 1 3,000 (173 portion) By P&L alc (Loss on Sale)- 5,250 1 By Depreciation ac (23 portion) 1. 2,000 ,diestoday.com All rights reserved. No part of this publication may be transmitted in any form or by any means, including photocopying, recording, or other electronic or mechanical methods, without the prior written permission. Downloaded from https:// www.studiestoday.com areVOW MOaGe? TOM) MUpPs// WWW. StuUdIesStoday.Com @ studiestoday By Balance cid (213portar Working Notes: 1. Calculation of Depreciation Amount of Depreciation = Cost of Asset Rate of Depreciation ‘Amount of Depreciation, for Machinery 1 in) 114,500 2 15,500 3 _9,500 10 100 ‘Amount of Depreciation = 30,000 = Rs. 3,000P.A, ‘Amount of Depreciation, for Machinery 1 (For 9 Months) ; 10 8 ‘Amount of Depreciation = 30,000 x we hs. 23 preciation iG — x3 = Rs.2250 ‘Amount of Depreciation. for Machinery 2 Amount of Depreciation = 20,000, = = 2,000P.A. ‘Amount of Depreciation, for Machinery 3 ‘Amount of Depreciation = 10,000 « so = 1,000.4. . Calculation of Profit & Loss on sale of 1/3 Part of Machin /alue of Machinery on O1 April,2016 30,000 (-) Total Depreciation on Machinery 1 5,250 Value of Machinery on 01 April,2016. 50, Value of 1/3rd Part of Machinery on 04 April,2016 (24,750x1/3) 8,250 ()Sales Price 3,000 Loss on Sale of Machinery 5,250 Question 10: ‘On 1st July, 2015, A Co. Lid. purchases second-hand machinery for Rs 20,000 and spends Rs 3,000 on reconditioning and installing f. On st January, 2016, the fim purchases new machinery worth Rs 12,000 ‘On 30th June, 2017, the machinery purchased on 1si January, 2016, was sold for Rs 8,000 and on 1s: July, 2017, a fresh plant was installed. Payment for this plant was to be made 18 follows: Copyright © https://www.studiestoday.com All rights reserved. No part of this publication may be reproduced, distributed, or transmitted in any form or by any means, including photocopying recording, or other electronic or mechanical methods, without the prior written permission. Downloaded from https:// www.studiestoday.comVOwnmOaGed TOM NUPS-// WWW. StUGIestoday.Com @stuciestoday ‘st July, 2017 Rs 5,000 (30th June, 2018 Rs 6,000 30th June, 2019 Rs 5,500 Payments in 2018 and 2019 include interest of Rs 1,000 and Rs S00 respectvely, ‘The company writes off 10% p.. on the original cost. The accounts are closed every year on 31s: March, ‘Show the Machinery Account or the year ended 31si March, 2018. Answer 10: Books of A. Co. Lid Machinery Account Dr cr. Date ees ee) a ie 2015 uy 01 | To Bank atc -1 By Depreciation ac 2016 (@ months) 11,725 Jano1 | To Banka'c-2 @ months)2 __ 300 2,025 By Balance cid 120.275 211.700 32,975 35,000, 2016 ‘Aptii01 | To Balance bid By Depreciation ac 1 21,275 1 2,300 ¥ 211,700, 2 _ 1.200 3,500 ( 1 18.975 “ 2 10,500 29,475 32,975 2017 ‘apri'01 | To Balance bid By Bark alc -2 8,000 118,975 By Depreciation alc -2 300 @ months) 2 _10,500 By PAL alc (Loss on Sale) 2,200 July 01 | To Bank alc -3 July 01 | To Creditors ave -3 By Deprectation atc 1 2,300 (9 rronths) 3 _1.125 3,425 By Balance cid 1 16,675 313,875 30,550 44475 Working Notes:- Copyright © https://www.studiestoday.com All rights reserved. No part of this publication may be reproduced, distributed, or transmitted in any form or by any means, including photocopying, recording, or other electronic or mechanical methods, without the prior written permission. Downloaded from https:// www.studiestoday.comEEE ISLE NIT NEADS WWW. Studiestoday.com Pstudiestoday ‘Say at 1. Calculation of Depreciation Amount of Depreciation = Costof Asset x Rate of Depreciation Amount of Depreciation, for Machinery 1 Amount of Depreciation = 23,000 x 10 - Rs.2.300P.A. 100 “ ‘Depreciation on Machinery 1 for 9 Months 9 2300 x = Rs.1725 Amount of Depreciation forMachinery2 000 Amount of Depreciation = 12,000 = 20 = 1200P.A. 00 A Depreciation on Machinery 2 for 3 Months 1,200 x 2 DD Rs. 300 Amount of Depreciation, for Machinery 3 Amount of Depreciation = 15,000 x 2 = 1500p. Depreciation on Machinery 3 for 9 Months 9 1,500 x = Rs. n s. 1125, (2) Calculation of profit on loss on sale of Machine (2) ee Ame Value of Machinery on 03 July, 2035 12,000 () Total Depreciation on Machinery 2 1,800 Value of Machinery on 01 April,2017 10,200 () Sales Price 8,000 Loss on Sale of Machinery 2,200 Question 11 ‘On 11 Apri, 2015, Shivam Enterprise purchased second-hand machinery for Rs 52.000 and spent Rs 2,000 on cartage, Rs 3,000 on unloading, Rs 2,000 on installation and Rs 1,000 as brokerage of the middie ‘man, |i was estimated that the machinery will have a scrap value of Rs 6,000 al the end of ts useful life, Which is 10 years. On 31s! December 2015, repairs and renewals amounted to Rs 2,900 were paid. On Ist October, 2017, this machine was sold for Rs 30,600 and an amount of Rs 600 was paid as commission 10 an agent. Celcuste the armours of annual depreciation and rate of depreciation. Also prepare the Machinery Account for frst 3 years, assuming that fim follows financial year for accounting, Answer 11 Copyright © https://www.studiestoday.com All rights reserved. No part of this publication may be reproduced, distributed, or transmitted in any form or by any means, inciuding photocopying, recording, or other electronic or mechanical methods, without the prior written permission Downloaded from https:// www.studiestoday.com et eeeDownloaded from AUpPS-// WWW. StUGdIeStOUay.cuir! @ studiestodoy me Calculation of Depreciation Cost of Asset + Installation Charge _- Scrap Valu ‘Amount of Depreciation = Number of year of fe of Asset Amount of Depreciation Calculation of Rate of Depreciation ‘Amount of Depreciation = —Amount of Depreciation, 499 Rate of Depreciation no _ 5.400 = % 60,000 Machinery Account br. cr. Pn ey Pr Cray To Bank Ac By Depreciation Ave By Balance c/d To Balance bid By Depreciation Ac By Balance c/d See To Balance bid By Depreciation A/c (6 months) By Bank Ac (Sale) By P&L A’c (Loss on Sale) Working Notes:- (1) Cost of Machinery: - $52,000+2,000+3,000+2,000+1,000 = Rs. 60,000/- (2) Calculation of Profit or Loss on Sale rors Cer ed (iS) Value of Machinery on 01 April,2015 60,000 (-) Total Depreciation on Machinery 13,500 Copyright © http://www studiestoday.com All rights reserved. No part of this publication may be Teproduced, distributed, or transmitted in any form or by any means, including photocopying, recording, or other electronic or mechanical methods, without the prior written permission. Downloaded from http: / www.studiestoday.comVOWMOAGE HOM MNUPS.// WWW. Stugiestogay.Cornl WF studiestodey Gomca’ Value of Machinery on 01 Oct.,2017 (.)Sales Price Loss on Sale of Machinery 16,500 Point of Knowledge: 1. If the nature of Expense Is recurring It will not be added to Machinery A/c. 2 All th es which incurred on the date of purchases will be added to cost of machine. Question 12 Modem Lid. purchased a machinery on 1si August, 2015 for RS 60,000. On 1st October, 2016, i purchased another machine ‘or Rs 20,000 plus CGST and SGST @ 6% each On 30th June, 2017, tt sold ihe firsi machine purchased in 2015 for Rs 38,500 charging IGST @ 12%. Depreciailon is provided @ 20% 2. on the onginal cost each year. Accounts are closed on 315i March every year. Prepare the Machinery Arc for three years Answer 12: Books of Madern Lid. Machinery Account cr. or aera Cr ae Particulars aa) To Bank alc -1 By Depreciation ale -1 8,000 (@ moms) Balance cid 52.000 60,000, To Balance bid By Depreciation alc To Bank alc -2 1 v2.00 (6 mors) 2 2.000 14,000 By Balance cid 1 40,000 2 18,000 $8,000 72,000 To Balance bid By Depreciation alc -1 3,000 (3 months) 140,000 By Bank ac -1 38,500 2 18,000 To P&L al (provi) By Depreciation ale -2 4,000 By Balance cid 14000 59,500 Working No Copyright © https://www.studiestoday.com All rights reserved. No part of this publication may be reproduced, distributed, or transmitted in any form or by any means, including photocopying, recording, or other electronic or mechanical methods, without the prior written permission. Downloaded from https:// www.studiestoday.comMNES TOM AUDS.// WWwW.studlestoday.com Fstudiestoday Boma! (1), Calculation of Depreciation Amount of Depreciation = Cost of Asset x Rate of Depreciation ‘Amount of Depraciation_ for Machinery 1 Amount of Depreciation = 60,000 x —22 12,000 P.A. Depreciation on Machinery 2 for 8 Months 8 12000 x 5 = ks. 8,000 2 * Depreciation on Machinery 1 for 3 Months 12000. x = Rs. 3,000 Amount of Depreciation_ for Machinery 2 Amount of Depreciation = 20,000 x (2). Calculation of Profit or Loss on Sale ror i Value of Machinery on 01 April,2015 60,000 (-) Total Depreciation on Machinery 23,000 Value of Machinery on 01 Oct.,2017 (37,000 (-) Sales Price |__ 38,500 | Profit on Sale of Machinery it 1,500 Total Depreciation = 8,000 + 12,000 + 3,000 = 23,000 (3). Journal entries for purchase and sale. Journal Debit Credit Coat ey or ee (Rs) (Rs) Machinery Alc or Input CGST Ale Or. Input SGST Alc or To Bank Alc (Being Purchased Machinery, CGST & SGST @ 6% paid) Copyright © https://www.studiestoday.com All rights reserved. No part of this publication may be reproduced, distributed, or transmitted in any form or by any means, including photocopying, recording, or other electronic or mechanical methods, without the prior written permission, Downloaded from https:// www.studiestoday.comVOWMOAaGed IfOM NUPS.// Www.studiestoday.com @stuciestodsy 2017 Jun 30 | Bank A’c Or. 43,120 To Machinery Ac 38,500 To Output IGST Alc 4,620 (Being Machinery sold & IGST @ 12% charged) Question 13: On 1st Juy, 2015, Sohan Lal & Sons purchased a plant costing Rs 60,000. Additonal plant was purchased on 1st January, 2016 for Rs 40,000 and on 1st October, 2076, for Rs 20,000, paying CGST and SGST @ 6% each. On 1s1 Apri, 2017, one: third of the plant purchased on tsi July, 2075, was found ‘o have become obsolete and was sold for Rs 6,000, charging CGST and SGST @ 6% each Prepare the Plant Account forthe ‘rst three years in the books o! Sohan Lal & Sons. Depreciation is charged @ 10% p.a. on Straight Line Method Accounts are closed on 3181 March each year, Answer 13: Books of Sohan Lal & Sons. lant Account ci 28 July 01 | To Bank alc -1 60,000 | March 31 | By Depreciation a'c (9 months)? 4,500 2016 (3 months) 2 __ 1,000 5,500, Jan.01 | To Bank ale -2 40,000 | March 31 | By Balance cid 1 $5,500 2 _39,000 94,500, [isco | [120.000] 2016 2017 April01 | To Balance bid March 31 | By Depreciation aic 1 55,500 1 6,000 2 _39.000 94,500 2 4,000 Oct 01] To Bank ac -3 20,000 (6 momhs)3 1,000 11,000 March 31 | By Balance cid 1 49,500 2 35,000 3 _19,000 103,500. AL 1,14,500 2017 2017 April 01 | To Balance bid Aprii01 | By Bank aie 6,000 1 49,500 April | By P&L a/c(loss) 10,500, (16,500 - 6,000) ana 2 35,000 March 31 | By Depreciation aic 3 _19,000 1,03,500 1 4,000 2 4,000 Copyright © https://www.studiestoday.com All rights reserved. No part of this publication may be reproduced, distributed, or transmitted in any form or by any means, including photocopying, recording, or other electronic or mechanical methods, without the prior written permission. Downloaded from https:// www.studiestoday.comOEE OIA NWOT TADS. WWW. Studlestoday.com @ studiestody fom as 3 _ 2,000 10,000 March 31 | By Balance cid 1 23,000 2. 31,000 317,000 77,000 1,93,500 1,03,500 Working Notes:~ (1), Calculation of Depreciation:- Amount of Depreciation. for Plant 1 Amount of Depreciation = 60.000 « —1™-= 6,000P.A. Amount of Depreciation. for Pant 1 (2/3 Part) Amount of _ w 2 2 cz Depreciation 7 80000 xx 2x 2s 4000P.A Amount of Depreciation. for Plant 2 10 | Amount of Depreciation = 40,000 x <7 = 4,000. Amount of Depreciation. for Plant 3 \ — — 10 _ Amount of Depreciation = 20,000 x 4° = 2,000 P.A. 2. Calculation of protit or loss on Sale of Plant | Particulars Value of Machinery on 01 July,2015 {-) Total Depreciation on Machinery Value of Machinery on 01 April, 2017 Value of 1/3rd Part of Machinery on 01 April,2017 (49,500x1/3) 16,500 (1) Sales Price 6,000 | Loss Machinery ‘Total Depreciation = 4,500 + 6,000 = 10,500 (3). Journal entries for purchase an Journal TTT Caen) ee eT cay (Rs) Machinery Ac input CGST A’e Input SGST Ac Copyright © https://www studiestoday.com All rights reserved. No part of this publication may be reproduced, distributed, or transmitted in any form or by any means, including photocopying, recording, or other electronic or mechanical methods, without the prior written permission. Downloaded from https:// www.studiestoday.comvLownoaded TOM NUPS-// WWW.studiestoday.com Pstudiestodsy Smal To Bank Ac 22,400 (Being Purchased Machinery with CGST and SGST @ 6% paid) " 2017 Apr | Bank Ac or 6,720 To Machinery Ac 6,000 To Oupul CGST Ac “360 To Oulput SGST Alc 360 (Being Machinery sold with CGST and SGST @ 6% each) _ Question 14 Following balances appear in the books of Rama Bros Machinery Ac 80,000, Provision for Depreciation Ac 36,000, On 1s! Apt, 2015, they decided to sell a machine for Rs 8,700. This machine was purchased for RS ‘16.000 in Apri, 2011 Prepare the Provision for Depreciation Account and Machinery Account on 31s1 March, 2016, assuming the firm has been charging Depreciation at 10% p.a. on Straight Line Method fist April, 2075 Answer 14: In the Books of Rama Bros. Machinery Account cr. J. Amount (Rs) rrr Cen or Particulars To Balance bid By Bank alc 8,700 By Provision for Depreciation a'c 6,400 900 By P&L alc (loss) Balance cid To Balance bid Provision for Depreciation Account cr. ao = Pare) oo Ca =a ai hp Particulars aero} By Balance bid 36,000 ‘To Machinery alc ioe i By Depreciation alc To Balance cid (064,000 @10%) 42,400 by Balance bid 36,000 Working Notes:~ Ail rights reserved. No part of this publication may be ny form or by any means, including pROtOCOPY'NE, without the prior written permission. Copyright © https://www.studiestoday.com buted, or transmitted in af reproduced, distri Jectronic or mechanical methods, recording, or other e Downloaded from https:// www. studiestoday.comDownloaded from Nttps.i/ WWW oe Value of Machinery on 01 April,2015 {-) Total Depreciation on Machinery ‘Value of Machinery on 01 April,2015 ()SalesPrice _ _ Profit on Sale of Machinery _ = : ‘Amount of Depreciation = ‘Total Depreciation = 1,600%4 Question 15: Following balances appear in the books of Priyank Brothers: fachinery rovision for Depreciation Alc fist Apri, 2016 om si Apri, 2016, they decide to sell a machine for Rs 5,00,000. This machine was purchased for RS 9'59,000'on ist Apt. 2073. Prepare the Machinery Account and Provision for Depreciation Account for {he Jear ended 31<1 March, 2017 assuming tha the frm has been charging Depreciation @ 10% p.a onthe Straight Line Method. Answer 15: Books of Priyank Brothers Machinery Account ror Perey Particulars Je. (Rs) To Balance bid By Bank arc By Provision for Depreciation aie By PAL aic(Loss) By Balance cid By Balance bid Provision for Depreciation Account peer or Ce ar. “Tps) (Date aie “ee Copyright © https://www.studiestoday.com All rights reserved. No part of this publication may be reproduced, distributed, or transmitted in any form or by any means, including photocopying, recording, or other electronic or mechanical methods, without the prior written permission. Downloaded from https:// www.studiestoday.comONES OSI WOTT TIS LT WWW, SUUCIEeStoday.com WF studiestoday Spe ca! AprilO1 | To Machinery alc 2,25,000 | April01| By Balance bid 8,00,000 2017 2017 Mar31 | To Balance cid 7,00,000 | Mar31 | By Depreciation ac 1,25,000 9 .25,000 9,25,000 2017 April 1 | By Balance bid 7,900,000, Working Notes Calculation of Value of Machine on 01 Aj pril 2015 & Loss on Sale of Machine. ee Value of Machinery on 01 April,2015. (-) Total Depreciation on Machinery Value of Machinery on 01 April,2017 $28,000, (-) Sales Price _ 500,000 Profit on Sale of Machinery 25,000 Amount of Depreciation = 7,50,000 x 00 Total Depreciation= 75000x3 = 2, 25,000 PAGE NO 14.52: ‘Question 16: Following balances appear in the books of X Lid. as on 1s! Apri, 2017. jachinery Ac 5,00,000 rovision for Depreciaion Ae | 2,25,000, ‘The machinery is depreciated @ 10% p.2. on the Fixed Instalment Method. The accounting year being ‘Apri March. On Ist October, 2017, a machinery which was purchased on 1st July, 2014 for Rs 1,00,000 was sold for Rs 42,000 plus CGST and SGST @ 6% each and on the same date anew machine was purchased for Rs 2,00,000 paying IGST @ 12%. Prepare Machinery Account and Provision for Depreciation Account (or the year ended 3181 March, 2018. Answer 16: tn The Books of X Lid. Machinery Account ry ei ory (Rs) ae) (C5) ey To Balance bid 5,00,000 | Oct.01) By Bank alc To Bank ale 2,00,000 | Oct.01| By Proviston for Depreciation alc Copyright © https://www studiestoday.com All rights reserved. No part of this publication may be reproduced, distributed, or transmitted in any form or by any means, including photocopying, recording, or other electronic or mechanical methods, without the prior written permission. Downloaded from https:// www.studiestoday.com1! www .studiestoday.com ‘omc! (0c1.01| By P&L aie (oss) 25,500 2018 ‘Mar 31} By Balance cid Lt 6,00,000 7,00,000 aie Apri Ov | By Balance cid 6,00,000 Provieton for Depreciation Account br cr. ro io) ores aT (Rs) __Date Particulars 3 Oct01 | To Machinery ale 2018 ‘Mar 31 | To Balance cid By Balance bid 2,25,000 By Depreciation ale 55,000 2,80,000 h By Balance bid 2.47,500 Working Notes:- 4) Calculation of Loss on Sale of Machiner GE ened Cost of Machine Sold (1) Depreciation 2014-15 = 1,00,000 x 10% x 9/12 = 7,500 7,500 (-) Depreciation 2015-16 = 1,00,000 « 10% = 10,000 10,000 (-) Depreciation 2016-17 = 1,00,000 x 10% = 10,000 10,000 (-) Depreciation 2017-18 = 1,00,000x 10% x6/12= 5,000 5,000 32,000 ‘Written down value on the date of sale | Selling price of Machinery Depreciation on 1st Machines (4,00,000*10%) 40,000 Depreciation on 2nd Machines (2,00,000x10%%6/12) 10,000 Depreciation on 3rd Machines (1,00,000x10%x6/12) 5,000 | Total Depreciation for the year 2017-18 | 35,000 (9). Journal entries for sale and purchase Journal Debit Credit CCT (Rs) (Rs) Particulars Bank Alc To Machinery Alc To Output CGST Ae Copyright © https://www.studiestoday.com All rights reserved. No part of this publication may be reproduced, distributed, or transmitted in any form or by any means, including photocopying, recording, or other electronic or mechanical methods, without the prior written permission. Downloaded from https:// www.studiestoday.comVOwnoaGed TOM NUPS-// WWW. StudiestOday.Com BF stuciestoday To Ourpul SGST Alc 2,520 (Being Machinery sold with CGST and SGST @ 6% Charged) Oct1 | Machinery A’c Dr. 200,000 Inpur IGST Ale Or. 24,000 To Bank Ac 2.24,000 (Being Bought Machinery & IGST @ 12% pak!) ‘Question 17: ‘A boller was purchased from abroad for Rs 10,000; shipping and forwarding charges Rs 2,000, Import duty Rs 7,000 and expenses of installation amounted to Rs 1,000. Calctlate the depreciation forthe lirs three years (separately for each year) @ 10% on Diminishing Balance Method Answer 17: Boller Account Dr. cr. roa Amount Pr Cees JF. (Rs) __—Date fous aT a To Bank ac 20,000 | 1 year | By Depreciation ac 2,000 | year | By Balance cid 18,000, | 20,000 | To Balance bid il year | By Depreciation aic 1,800 e i year| By Balance cid 16,200 18,000 , ‘WM year} By Depreciation alc 1,620 til year) By Balance c/d Point of Knowledge:- Cost of Boller = Cost of Boller + Shipping and forward charges + import Duty + installation Char = 10,000#2000+7000+1000 = Rs. 20,000 Calculation of Depreciation:- ‘Amount of 2] Opening Depreciation | Balance 2,000 20,000 1,800 18,000 x 10% 1,620 16,200 x 10% Question 18: The onginal cost of furniture amounted to Rs 4,000 and it s decided to write off 5% on the orginal cos! as depreciation at the end of each year. Show the Ledger Account as it will appear during the first four years, Copyright © httos://www.studiestoday.com All rights reserved. No part of this publication may be reproduced, distributed, or transmitted in any form or by any means, including photocopying, recording, or other electronic or mechanical methods, without the prior written permission. Downloaded from https:// www.studiestoday.comvVownloaded from nttps:// www.studiestoday.com Goma ‘Show also how the same account will appear ff was decided 10 write off S% on the diminishing balance of the asset each year. PF stuciestodoy Answer 18: (a), Original Cost Basis: Furniture Account br. cr ror frat as) By Depreciation aic By Balance cid rg Cr ae a Pr) To Bank alc By Depreciation alc By Balance cid By Depreciation aie By Balance old To Balance bid 3,600 By Depreciation alc By Balance cid Working Not _ Amount of Depreciation = 4,000 x —© 100 (b).Diminishing Balance Method Dr ‘Amount cy rc ne el ey cr) Coated Depreciation Balance cid year Depreciation Bolance cid year year Depreciation Balance cid iilyear tilyear Balance bid Balance bid W year | Depreciation m” I year | Balance cid 3,258 3,429 Working Note:- Copyright © https://www.studiestoday.com All rights reserved. No part of this publication may be reproduced, distributed, or transmitted in any form or by any means, including photocopying, recording, or other electronic or mechanical methods, without the prior written permission, Downloaded from https:// www.studiestoday.comMOwWMoadged irom NUps:// www.studiestoday.com PP studiestoday [roms cepeeditins [ Gpening |x| Rate of Depreciation Year 200 = ‘4000 x = WYear 190 = 3800 : sx Year wis 310 x x WYear | 171 3429 % 5% Point of Knowledge:- (1) Straight tine Method is also known as Original Cost Method in this method the ammount of depreciation is unform{rom year to year. Sometimes in this method, the book value of assets becomes zero, sill he assets are used in the business. @) Written down value method is also known as Diminishing Balance Method in this method, depreciation is charged at a fied rate on the reducing balance every year. Question 19: Babu purchased on 1s! Apri, 2016, a machine for Rs 6,000. On 1s! October, 2016, he also purchased another machine ‘or Rs 5,000. On 1st Ociober, 2017, he soid the machine purchased on 1st Apri, 2016 for Rs 4,000. Iwas deckied that Depreciation @ 10% p.a, was to be wrtten oll every year under Diminishing Balance Method ‘Assuming the accounts were closed on 31s! March every year, show the Machinery Account for the years ended 3181 March, 2017 and 2018. Answer 19: Books of Babu ; Machinery Account a br cr. j ror rT ‘ oon Pet} Pipe Poet matey) . To Bank alc -7 By Depreciation ae To Bank arc -2 1 600 (6 onths) 2 __250 850 By Balance cid 1 5,400 2 _4750 10,150 11,000 To Balance bid By Depreciation ai 270 (6 months) By Bank aic-1 4,000 By P&L alc (Loss) 1.130 By Depreciation atc -2 475 By Balance cid-2 275 10,150 Apro1_| To Balance bid Copyright © https://www.studiestoday.com All rights reserved. No part of this publication may be reproduced, distributed, or transmitted in any form or by any means, including photocopying, recording. or other electronic or mechanical methods, without the prior written permission. Downloaded from https:// www.studiestoday.comvownloaded trom ntps:// www.studiestoday.com © seusiestoday mat Working Note:- Etcetera Cost of Machine Sold (-) Depreciation 2015-16 = 6000 x 10% = 600 (-) Depreciation 2016-17 = 5400 x 10% x6/12 = 270 ‘Written down value on the date of sale _(-) Selling price of Machinery Loss on sale of Machinery Calculation of Depreciation: For Machinery 1 Formula | Amount of |_| Opening Rate of || Number of Depreciation |“ | Balance | “| Depreciation Months Year 600 6,000 10% = 12Months |uyear | 270 5400 x 10% x Months | For Machinery 2 Amount of | _ Rateof | ‘Number of | formula | Depreciation | = || pepreciation |"! Months Year 250 = x 10% x 6 Months NYear 475 = 4750 10% x12 Months Question 20: X bought a machine for Rs 25,000 on which he spent Rs 5,000 for carriage and freight. Rs 1,000 for brokerage of the middleman, Rs 3,500 for Installation and Rs 500 for an fon pad. The machine is depreciated @ 10% every year on Writien Down Valve basis, Aller three years, the machine was sold to ¥ for Rs 30,500 and Rs 500 was paid as commission 'o the broker through whom the sale was effected Find out the prot! and loss on sale of machine. Answer 20: Books of X Machinery Account Dr. cr Date Paty PT er pears a3 I year | To Bank ac By Depreciation aie 3,500 By Balance cid liyear | To Balance bid By Depreciation ale 3,150 By Balance cid 28,350 31,500 year By Depreciation alc 2,835 By Balance cid 25.515 28,350. year | To Balance bid By Bank ac 30,000 Copyright © https://www.studiestoday.com All rights reserved. No part of this publication may be reproduced, distributed, of transmitted in any form or by any means, including photocopying, recording, or other electronic or mechanical methods, without the prior written permission. Downloaded from https:// www.studiestoday.comvVownloaded trom nutps:// www.studiestoday.com WT stusiestodey Bom a! dec31 | ToPaL ale (Prott) | 4405 | | po 30,000 30,000 Point of Knowledge:- (@). Book Value of Machinery = Cost of Machine + Freight + Brokerage + Insta = 25,000 + 5,000 + 1,000 + 3,500 + 500 tion (b). Selling price of Machinery = 30800 - $00 = Rs. 30,000 {Caly ri a machinery includes fate hooks any sf expanaen are dows on eofing wil not be a Working Note:- Seinen en Cost of Machine Sold (-) Depreciation 2015-16 = 35,000 x 10% = 3500 3,500 (-) Depreciation 2016-17 = 31,500 x 10% = 3150 3,150 (+) Depreciation 2017-18 = 28,350 x 10% = 2835 2,835 | 9,485 Written down value on the date of sale 25,515 Selling price of Machinery 000 Profit on sale of Machi Calculation of Depreciation- ‘Amount of | Opening Ty Rate of ‘Number of Formula Depreciation 8 Depreciation | x | Months Year 3500 = 35000 x 10% x 12Months Year 3150 = 31,500 x ~—10% = 12 Months Year 2835 = 28,350 x 10% =~ _12 Months Question 21: ‘Acompany purchased machinery for Rs $0,000 on 1st October, 2016. Another machinery costing RS 10,000 was purchased on 1st December, 2017. On 31st March, 2019, the machinery purchased in 2016 was sold at a loss of Rs 5,000. The company charges depreciation @ 15% p.a. on Diminishing Balance ‘Method. Accounts are closed on 31st March every year, Prepare the Machinery Account for 3 years. Answer 21 Machinery Account Dr. “ rer oe ELT) To Bank ale -1 (6 Momhs) By Balance cid Copyright © https://www.studiestoday.com All rights reserved. No part of this publication may be reproduced, distributed, or transmitted in any form or by any means, including photocopying, recording, or other electronic or mechanical methods, without the prior written permission. Downloaded from https:// www.studiestoday.comVOWTMOaUSE TOM THM sS.// WWW. SlUGIeslouay.Corll © studiestoday Bomcat Apr.01 | To Balance bid -1 46,250 | Mar.31| By Depreciation aic Dec.01 | To Bark ale-2 10,000 1 6.938 2 500. 7,438 Mar31| By Balance e'd 1 39,312 2 _ 9,500 48,812 56,250 56,250, 2018 2019 Apr.01 | To Balance bid Mar.31| By Depreciation ac 1 39,312 1 8897 2 _ 9,500 48,812 2 _ 1,425 7,322 ‘Mar.31| By Bank ale -1 28,415 ‘Mar.31) By P&L alc (Loss) 5,000 Mar.31| By Balance cid -2 8,075 48,812 48812 Working Note: Sie eee cd Cost of Machine Sold ‘50,000 {-) Depreciation 2016-17 = 50,000 x 15% x 6/12 = 3750 3,750 {-) Depreciation 2017-18 = 46250 x 15% = 6937.5 6,938 +) Depreciation 2018-19 = 39312 x 15% = 5896.8 5,897 | 16,585 Written down value on the date of sale 33,415 Question 22: ‘On 1st Apri, 2016, machinery was purchased for Rs 20,000. (On 1st October, 2017 another machine was: purchased for Rs 10,000 and on 1st Apri, 2078, one more machine was purchased for Rs $000 The firm Gepreciates tis machinery @ 10% p.2. on the Dirrinshing Balance Method deprecieies I purl of Depreciation forthe years ended 31s! March, 2017; 2018 and 2019? What wil be the balance in Machinery Account as on 31st March, 20197 Answer 22: (). Calculation of Depreciation from April 01, 2015 10 March 31, 2019 Machinery 1" Year ceeeae =| Opening Balance | = on x Namneret (2015-16 2,000 20,000 x 10% = 12Months (2016-17 1,800 s {20,000-2000)=18000 x 10% « 12Months 2017-18 1,620 = _(18,000-1800) 16200 x 10% _*_12Months Copyright © https://www. studiestoday.com All rights reserved. No part of this publication may be by any means, including photocopying, reproduced, distributed, or transmitted in any form or recording, or other electronic or mechanical methods, Downloaded from https:// www. studiestoday.com without the prior written permissionVownloaded from nttps:// www.studiestoday.com PF studiestoday Gmc Machinery 2"* Amount of Rate of ‘Number of Year Depreciation | =| Opening Balance | x | Toe) Months 2015-16 . - * - x - 2016-17, 500 = x * 6 Months 2017-18 950 =. x x 12 Months Machinery 3 Yew ‘Amount of | x | Rateot |, | Number of Depreciation | " Dep. | *| Months 2015-16 : = x - Ke \ 2016-17 . = . * . xe | 2017-18 500 5000 x 10% 12 Months Machinery | Machinery2 | Machinery3 | Total Depreciation 2015-16 2000 : : 2000 2016-17 1800 500 - 2300 2017-18 1620 950 500 ___3070 (W). The Balance in Machinery Account as on March 31, 2019 will be Rs 27,630 Machinery Account Dr. cr. on orm eto mount pate Cast) ms To Bank Ac-1 By Depreciation Alc -1 2,000 By Balance c/d -1 18,000 20,000 To Balance bid -1 By Depreciation Ac To Bank Ac-2 1 1,800 2 __ ‘500 2,300 By Balance cid 1 16,200 2 _91500| 25,700 2018 Aprii01 | To Balance bid By Depreciation Ale 1 16,200 1 1,620 2 _ 9,500 2 950 ‘Apri | To Bank Ac -3 3 __500 3,070 By Balance cid 1 14,580 2 8,550 3 _4'500| _27.630 "30,700 Copyright © https://www.studiestoday.com All rights reserved. No part of this publication may be reproduced, distributed, or transmitted in any form or by any means, including photocopying, recording, or other electronic or mechanical methods, without the prior written permission. / www.studiestoday.com Downloaded from http:VOWMOAaGeS TOM! MUps.// WWW. Stucgiestoday.Corl WF stuciestoday Gomca! Question 23: Mss. P & Q purchased machinery for Rs 40,000 on 1st October, 2016. Depreciation is provided @ 10% p.a. on the Diminishing Balance. On 31st January, 2019, one-lourh of the machinery was found unsuitable and disposed off for Rs 5,600. On the same date new machinery at a cost of Rs 15,000 was purchased, Write up the Machinery account for the years ended 31s! March, 2016, 2017 and 2019, Accounis are closed on 31st March each year Answer 23 Machinery Account Dr. cr. rors Va WE 2 2016 2017 Oct.01 | To Bank ale 30,000 | Mari | By Depreciation we Oct.01 | To Bank ac 10,000 (30,000%10%%6/12) 1,500 (10,000*10%%6'12) 500, 2,000 Mar31 | By Balance cid (30,000-1500) 28,500 (10,000-500) __ 9.500 38,000 [49,000 | [40,000 2017 2018 apro1 | Balance bid Mar31 | By Depreciation Ave 1(@i4) 28,500 (28500x10%) 2.850 (0/4) _9.500 38,000 (9500*10%) 950, 3.800 Mar31 | Balance cid (28500-2850) 25,650 (0500 - 950) 8,550 [-3aa00| 2018 2019 pron | Balance bid Jan31 | By Depreciation Ave ns (8550*10%%10/12) 184) 25,650 Jan31 | By Bank Ac 5,600 209 |1qis) 8,550 By Prof & Loss Ac (Loss onsale of machine) 34,200 (8550 - 713 ~ $600 = 2237) 2.237 Jangi | To Bank Ac 15,000 | Mart | By Depreciation arc (256s0x10%%12/12) 2,565 (15000x10%%2/12)_250, 2.815 Mar31 | Balance cid (25650-2568) 23,085 (15000 - 250) 14.750 37,835. 200 ae Working Note:~ Copyright © https://www.studiestoday.com All rights reserved. No part of this publication may be reproduced, distributed, ar transmitted in any form or by any means, including photocopying, recording, or other electronic or mechanical methods, without the prior written permission. Downloaded from https:// www.studiestoday.comMOWMOaged rom NUpS-// www.studiestoday.com F stuciestoday pena! Smnno enn 1/4 Cost of Machine Sold 8,550 (-) Depreciation for 10 months = 8550 x 10% x 10/12= 712.5 713 Written down value on the date of sale 7,837 (-) Selling price of Machinery Loss on sale of Machinery Calculation of Depreciation:- Amount of [Formula Depreciation | = 2015. 1= 1500 . 6 Months S00 . * 6 Months 2016-17 |- 2850 12 Months 1-950 x 12Months 2017-18 |. 2565 12 Months W713 * 10Months Point of Knowledge:~ 1. Always highlight your final answer at the end othe question Question 24: On 1st October, 2015, Meenal Sharma bought a machine for Rs 25,000 on which he spent Rs 5,000 for carriage and freighy; Rs 1,000 for brokerage of the middle-man, Rs 4,000 for installation. The machine ts depreciated @ 10% p.a. on writien down value basis. On 31si March, 2018 the mechine was sold to Deepa for Rs 30,500 and Rs 500 was paid as commission to broker through whom the sales was effected. Find ‘out the profkt or loss on sale of machine if accounts are closed on 31st March, every year. Answer 24: Machinery Account cr. Amount corr ed ee) Particulars Tea To Bank ac By Depreciation ave 4,750 (35000*10%»9/12) By Balance cid 33.250 35,000 To Balance bid By Depreciation ave 3,325 (99250"10%) By Balance cid 29,925 33,250, To Balance bid By Depreciation a'c 2,993 (29,925*10%) To P&L Arc (Prott) By Bank Arc 30,000 Copyright © https://www.studiestoday.com All rights reserved. No part of this publication may be reproduced, distributed, or transmitted in any form or by any means, including photocopying, recording, or other electronic or mechanical methods, without the prior written permission. Downloaded from https:// www.studiestoday.comVownloaded trom nttps:// www.studiestoday.com P studiestoday Gomca! Mar31 (30,500 - 500) | 32993 | [32983 | Point of Knowledg (0). Book Value of Machinery = Cost of Machine + Freight + Installation = 25000 5000 + 000+ 400 = e.35, Selling price of Machinery = 30500 - 500 30,000 (Only price of machinery includes in the books any of expenses are don added) Working Note: Srorneiiete as 1/3 Cost of Machine Sold (-) Depreciation 2015-16 = 35000x10%x9/12 = 1750 {-) Depreciation 2016-17 = 33250 x 10% = 3325 (+) Depreciation 2017-18 = 29925 x 10% = 2993 | Written down value an the date of sale Selling price of Machinery Profit on sale of Machir Question 25; ‘A company purchased on 1st Juty, 2015 machinery costing Rs 30,000. It futher purchased machinery on ‘1st January, 2016 costing Rs 20,000 and on 1s! Ociober, 2016 costing Rs 10,000. On 1si April, 2017, one- third of the machinery installed on 1s! July, 2015 became obsolete and was sold for Rs 3,000. The ‘company follows financial year 3s accounting yeer. Show how the machinery Account would appear in the books of company # depreciation is charged @ 10% p.a.on Wrtten Down Value Method Answer 25: Machinery Account Dr cr. a) Particulars eno 7 A eS) To Bank ac -1 By Depreciation alc (30,000%10%%9/12)= 2250 To Bank ac -2 (20,000%10%x3/12) = __ 500 Mar.31| By Balance cid (30,000-2250)= 27,750 (20,000-500) = __19,500 2016 prov Copyright © https://www.studiestoday.com All rights reserved. No part of this publication may be reproduced, distributed, or transmitted in any form or by any means, including photocopying, recording, or other electronic or mechanical methods, without the prior written permission. To Balance bid Mar 31 | By Depreciation ale Downloaded from https:// www.studiestoday.comMOUWIHOaGe TOM TMYS.// WWW. Studglestoday.Com ® studiestoday — (27,750*10%) 1 (19,500*10%) 2 (10,000*10%) 3 By Balance cid (27,750-2,775)1 (19,800-1,950) 2 (10,000-500) 3 nT a By Bank aic 11/3) By PAL alc(Loss) 2 «(17,550 7314 By Depreciation ac 3 _9,500 (24,975x10%*2/3) 1 (17,55010%) 2 (9,500x10%) 3 By Balance cid (16650-1665) 1 (17880-1755) 2 (9500-950) 3 Eminent ed 11/3 Cost of Machine Sold 10,000 (+) Depreciation 2015-16 = 10000 * 10% x 9/12= 750 750 (+) Depreciation 2016-17 = 9250 x 10% = 950 92s | 1,675 Written down value on the date of sale 8,325 price of Machinery 3,000 Question 26: Atha Engineering Works purchased 2 mechine on 1* Juty, 2015 for Rs 1,80,000 and spent Rs 20,000 on tts instalation. (On 1st Apri, 2016, # purchased another machine for Rs 2,40,000. On 181 Ociober, 2077, the machine purchased on 1st July, 2015 was gold for Rs 1,45,000. On 1st January, 2018, another machine was purchased lor Rs 4,00,000 plus |GST @ 12%. Prepare the Machinery Account forthe years ended 31st Merch, 2016 to 2018 after charging Depreciation @ 10% p.a. by Diminishing Balance Method. ‘Accounts are closed on 31s! March every year. Answer 26: Book of Astha Engineering Works Machinery Account Dr. cr Copyright © https://www studiestoday.com All rights reserved. No part ofthis publication may Be "Teproduced, distributed, or transmitted in any form or by any means, including photocopying. recording, or other electronic or mechanical methods, without the prior written permission. Downloaded from https:// www. studiestoday.comDownloaded trom NUps.// WWW. stuuicowmeayen™ WP stusiesTodsy Goma! en July 01 | To Bank ac -1 2,00,000 | Mar.31| By Depreciation alc 15,000 (2,00,000%10%x9/12) Mar.31| By Balance cid 1,85,000 200,000 2016 2017 ‘Apr. | To Balance bid -1 Mar.31| By Depreciation alc ‘Apr.01 | To Bank ac -2 (1,85,000*10%) 1 18,500 (2,40,000%10%) 2 _24,000. 42,500 Mar.31| By Balance cid (1,85,000-18,500) 166,500, (2.40,000-24,000) _2.16,000 2017 2017- 18 ‘Apr.01 | To Balance bid Oct. 01| By Depreciation ac -1 8,325 (1,66,500x 10% 6/12) 1 1,66,500 Oct. 01} By Bank alc 1,458,000 2018 2 _2.16,000 Oct. 01} By P&L a’c (Loss) 13,175 Jan.01 | To Bank alc -3 ‘Mar.31| By Depreciation alc (2,16,000%10%) 2 21,600 (400000%10%x3/12)3 _ 10,000 31,600 Mar.31| Balance cid (2,16,000-21,600) _1,94,400 (4,00,000-10,000) __3.90,000 Point of Knowledge:- Total Cost of Machinery = Cost of Machinery + Installation charge Rs. 1, 80,000 + Rs. 20,000 = Rs. 2, 00,000 Journal entry for purchase Journal rT Pr Particulars eeu) (Rs) __(Rs) Machinery A‘c i Input IGST Ale Dr. To Bank Ac (Being Machinery purchased & IGST @ 12% paid) 4,48,000 Working Note: Copyright © https://www. studiestoday.com All rights reserved. No part of this publication may be reproduced, distributed, or transmitted in any form or by any means, including photocopying, recording, or other electronic or mechanical methods, without the prior written permission Downloaded from https:// www.studiestoday.comDownloaded from https:// www.studiestoday.com SB studiestodoy Som ca! Poem tion 2015-16 = 2,00,000 x 10% x 9/12 = 15000 15,000 | (+) Depreciation 2016-17 = 1,85,000 x 10% = 18500 (-) Depreciation 2017-18 = 1,66,500 x 10% x 6/12 = 8325 ‘Written down value on the date of sale (-) Selling price of Machinery snes appear in the books o! MIs. Amt! as on 11 Apri, 2018: 2018 | st April Machinery Ave 60,000, Provision for Depreciation Alc 36,000 On ta Apr, 2018 they decided o depose ot machinery for Re 8.400 which was purchased on 1st Apt, 2014 for Rs'16,000 You are required 10 prepare the Machinery Ac, Provision for Depreciation A’c and Machinery Disposal Ac for the year ended 31” March, 2019. Depreciation was charged al 10% on Cos! following SLM. ‘Answer 27: | in the Books of M/s. Am«it | Machinery Account aa Carty Cena et) 2018 Aprigi | To Balanee bid Jo Balance bid Machinery Disposal Account Amount ‘Amount Particulars rT eee ores rer S) To Machinery aic 16,000 | Aprio1 | By Provision for 6.400 Depreciation alc Mar 31) By Bank ac ‘Mar 31] By P&L alc (Loss) Copyright © https://www-studiestoday.com All rights reserved. No part of this publication may be reproduced, distributed, or transmitted in any form or by any means, including photocopying, recording, or other electronic or mechanical methods, without the prior written permission. Downloaded from https:// www.studiestoday.comVOWMOAGES TOM NNDS.// WWW. Stualestoday.Corrl Pstudiestodoy om cal | 16,000 16,000 Provision for Depreciation Account (1600%4) Mar.31 | To Balance cid 34,000 | Mar31] By Depreciation alc (44,000*10%), 4,400 40,400 40,000. Working Not Value of Machinery on 01 April,2014 16,000 {-) Total Depreciation on Machinery (1,600x4) 6,400_ Value of Machinery on 01 April,2018 9,600 (-) Sales | 8.400 | Loss on Sale of Machinery 1,200 Point of Knowledge:- (2). The Amount of depreciation is same every year. (0). the rate of depreciation Is given, depreciation is computed on the original cost. Question 28: On 1st October, 2011, X Ld. purchased a machinery for Rs 2,50,000. A part of machinery which w purchased for Rs 20.000 on 1si October, 2011 became obsolete and was disposed off on 7st January 2014 (having a book value Rs 17,100 on 1st Apri, 2013) for Rs 2,000. Deprecialion is charged @ 10% annually on writen down value. Prepare machinery disposal account and also show your workings. The books being closed on 31st March o! every year. Answer 28: Machinery Account Se ee ec ey eretr (a) 2011 | | 2012 Oct. 01 | To Cash A/c 2,50,000 Mar.31 By Balance c/d Copyright © https://www-studiestoday.com All rights reserved. No part of this publication may be reproduced, distributed, or transmitted in any form or by any means, including photocopying, recording, or other electronic or mechanical methods, without the prior written permission. Downloaded from https:// www.studiestoday.comVownloaded from nttps:// www.studiestoday.com 2012 L-Apr 2013 L-Apr 2014 L-Apr To Balance b/d To Balance b/d To Balance b/d ay 2012 Mar.31 2013 Mar.31 2014 Jan.01 Mar. 31 ro 2014 Jan.01 ct anes To Balance c/d To Balance c/d To Machinery Disposal A/c (1000+1900+1282) To Balance c/4 ae To Machinery a/c |_2,50,000 | 2013 2,50,000 Mar. 31 | By Balance c/d 000 2014 Ian Mar. 31 2,50,000 By Machinery Disposal A/c By Balance c/a gem a! 2,50,000 2,50,000 2,50,000 20,000 2,30,000 2,50,000 preciation Account Poesy) Particulars (U5) 2012 12,500 Mar.31 | By Depreciation a/c (2,50,000x10%x6/12) 12,500 Mar. 31 | By Balance b/d 36,250 2013 31 Mar. | By Depreciation a/c (2,50,000-12500)x10% By Balance b/d 4182) 2014 Jan.01 | By Depreciation a/c (27100%10%x9/12) 53015 | Mar. 31 | gy Depreciation a/c | (250000-36250- 17100)x10%) 37197 | | Apr.01 | By Balance b/d ‘Machinery Disposal Account Amount Date (Rs.) ny D 2014 20,000 Jan.01_| By Provision for Depreciation A/c Jan.01 | By Bank a/c Jan.01 | By P&L a/c (loss) 20,000 LF. coors 12,500 | 12,500 23,750 36250 36,250 1282 | 19665 57197 53015 peers Copyright © https://www.studiestoday.com All rights reserved. No part of this publication may be reproduced, distributed, or transmitted in any form of by any means, including photocopying, recording, or other electronic or mechanical methods, without the prior written permission. Downloaded from https:// www.studiestoday.comVownloaded Irom nttps:// www.studiestoday.com @studiestoday ees Ss Cost of Machinery sold on 01 Oct.11 20,000 (+) Depreciation 2011-12 = 20,000%10%x6/12=1000 1000 Written down value as on 31 March 12 19000 (Depreciation 2012-13 = 19,000x10%x=1900 L 1900 Written down value as on 31 March 13 17100 (+) Depreciation 2013-14 = 17,100*10%x9/12 = 1282 1282 ‘Written down value as on 01 Jan. 14 15818 ) Sale Price 2000 Loss on sale of Machi 13818 Point of Knowledge:~ ‘Asset Disposal Account = When an asset being sold, a new account titled ‘Asset Disposal Account’ Is opened in the ledger for the calculating profit & loss on the sale of an asset. Question 29: ‘Sharma & Co. whose books are closed on 31s! March, purchased a machinery for Rs 1,50,000 on 1st ‘Apri, 2016, Additional machinery was acquired for Rs 50,000 on 1st Ociober, 2016. Cercain machinery which was purchased for Rs 50,000 on 1st October, 2016 was sold for Rs 40,000 on 30th September, 2018 Prepare the Machinery Account and Accumulated Depreciation Account for all he years up to the year ended 31s! March, 2019. Depreciation is charged @ 10% p.a. on Straight Line Method. Also, show the Machinery Disposal Account. Answer 29: Machinery Account Dr. cr a) eae or Cans er) eed ane} By Balance cid 2,00,000 2,00,000 To Balance bid By Balance cid 2,00,000 2,00,000 To Balance bid By Machinery Disposal A/c 50,000 By Balance cid 1,530,000 2,00,000 Copyright © https://www.studiestoday.com All rights reserved. No part of this publication may be reproduced, distributed, or transmitted in any form or by any means, including photocopying, recording, or other electronic or mechanical methods, without the prior written permission. Downloaded from https:// www.studiestoday.comvownioaded trom nttps:// www.studiestoday.com ®studiestoday DMC A! Provision Depreciation Account rent Petey Cod cramer) 17,500 17,500 Mar.31 | To Balance cid By Depreciation ac 2018 Mar31 To Balance cid By Balance bid 17,500 By Depreciation alc 2018 Sep 30 2019 Mar31 To Machinery disposal alc (2,500+5,000+2,500) To Balance c/d By Balance bid By Depreciation alc By Depreciation ac 37,500 Machinery Disposal Account Dr. ror a (Rs) ar Date Sep 30 | To Machinery alc Sep 30} By Bank alc Sep 30] By Provision for Depreciation Are oe ato cr. C5) Working note: SEM eee Poms) Depreciation 1 = 150000«10% = 15000 15000 Depreciation 2 = 50000x10%x6/12 = 2500 2500 Total Depreciation for the year 2016-17 17500 Calculation of Depreciation for the year 2017-18 ‘Amount (Rs.) Depreciation 1 = 150000«10% = 15000 15000 Depreciation 2 = 50000 x10% = 2500 _____ 5000 Total Depreciation for the year 2017-18 ee 20000 Calculation of Profit or Loss eT ‘Onginal Cos! Oci 01, 2016 (-) Depreciation Book Value on Sept 30, 2018 () Sale Value Copyright © https://www.studiestoday.com All rights reserved. No part of this publication may be reproduced, distributed, or transmitted in any form or by any means, including photocopying, recording, or other electronic or mechanical methods, without the prior written permission. Downloaded from https:// www.studiestoday.com