ILLUSTRATION 13 on 1st January,

1992.

Rs. 20,000
bought one printing machine forscrap value
ProvIde
& Sons 2,000.
ranjan of Rs.interest.
The useful life was estimated at three years with a investment to
-

o carry 5% p.a.
depreciation on Depreciation Fund Investment Method,
will, in three y
CAuny table shows that Re. 0.317208 at 5% p.a. A iEW

realised for Rs. 12,5U0.

year the investments
were
nwas
idchine end offorthird
e purchased Rs. 22.000 in dlace of old one on the same u a . .
for tnree yeald.
accounts in the books of
Niranjan & Sons
d necessary ledger
Make the calculations to the nearest rupee.
March, 1998]
[N. U.

Solution:
Workings
Amount required RS. 20,000 (-) Rs. 2,000
Rs. 18,000

Annual Depreciation Re. 0.317208x Rs. 18,000

Rs. 5,709.74 or
Rs. 5,710 (Approximately )

In the Books of Niranjan & Sons

Machine Account

Date Particulars Rs. Date Particulars Rs.

1992 1992
Jan. 1 To Bank A/c 20,000 Dec. 31 By Balance c/d 20,000

1993 1993
Jan 1 To Balance b/d 20,000 Dec. 31 By Balance c/d
-
20,000
=======

1994 1994
Jan.1 To Balance b/d 20,000 Dec. 31 By Bank Alc
Dec. 31 To Bank Alc 22,000
(Scrap) 2000
By Dep. Fund Alc 18,000
(Purchased) By Balance cld 22,000
42,000
42,000
=====

1995
Jan. 1 To Balance b'd 22.000
 Depreciation Fund Account
unt
Particulars
Date
Rs. Date
Particulars Rs.
992
To Bala
To Balance c/d 1992
Dec. 31 5,710 Dec. 31
By Depreciation Alc 5,710

1993
Balance c/d 1993
o
Dec. 31 11,706 Jan. 1 By Balance b/d 5,710
Dec. 31 By Interest on
Investment A/c 286
By Depreciation ANc ,/10

11,706
11,706
1994 1994
o Machine Alc 18,000
Dec. 31 Jan. 1 By Balance bld 11,706
(Transferred ) Dec. 31 By Interest on
Investment A/c 585
By Depreciation A/c 5,710
To Transferred to Profit
By Dep. Fund Invest
&Loss A/c. (Bal.fig.) 795 ment A/c. 794

18,795 18,795

Depreciation Fund nvestment Account

Date Particulars Rs Date Particulars Rs.

1992 1992
By Balance cld 5,710
Dec. 31 To Bank A/c 5,710 Dec. 31 -

1993 1993
Jan. 1 To Balance b/d 5,710 Dec. 31 By Balance cld 11,706
Dec. 31 To Bank Alc 5,996

11,706 11,706

1994 1994
Dec. 31 By. Bank A/c (Sales) 12,500
Jan,1 To Balance b/d 11,706
Dec. 31 To Profit transferred 794
to Dep. Fund Ac

2.500 12,500
 ILLUSTRATION14
Bajirao and Company purchased a machine for Rs. 1,10,000 on 1st April, 1988 and
decided to charge depreciation at the rate of Rs. 19,600 a year. He invested the above
amount in 6% securities of Rs. 100 each, Investment is made on 31st March, every year and
interest is also payable on the same date. He sold the machine as Scrap for Rs. 1,500 on
31st March, 1993 and replaced it by a new machine costing Rs. 1,50,000 on the same date.
Securities were sold at the rate of Rs. 102 each on 31st March, 1993.
Write Depreciation Fund Account and Depreciation Fund Investment Account tor five
years and Machine Account for the last year.
[N. U. March, 1994]

Solution
In the Books of Bajirao &
Depreciation Fund Account
Dr. Cr.
Date Particulars Rs. Date Particulars Rs.

31-3-89 To Balance c/d ,600 31-3-89 By Depreciation A/c 19,600

31-3-90 To Balance c/d 40,376 1-4-89 By Balance b/d 19,600

31-3-90 By Interest on
Investment A/c 1,176
By Depreciation Alc 19,600

40,376 40,376

31-3-91 To Balance c/d 62,394 1-4-90 By Balance b/d 40,376

31-3-91 By Interest on
Investment A/c 2,418
By Depreciation A/cc 19,600
--**--~--~--

62,394 62,394
=======

31-3-92To Balance c/d 85,732 1-4-91 By Balance b/d 62,394

31-3-90 By Interest on
Investment A/c 3,738
By Depreciation Alc 19,600
***********

85,732 85,732
===

31-3-93 To Machine A/c 1,08,5001-4-92

(Transfer )
By Balance bld 85,732
31-3-93 By Interest on
To Transferred to Investment A/c
Profit & Loss Alc
5,142
3.588 By Depreciation AC 19,600
(Bal. fig.) By Dep. Fund Invest
ment A/c 1,714

.12.189 2.08
 Depreciation Fund Investment Account

Date
Particulars Rs Date Particulars Rs
To Bank Ac 19.600
31-3-89 31-3-89 By Balance dd

1-4-89 To Balance b/d 19,600 31-3-90 By Balance cd 40.309

To Bank Ac 20,700
31-3-90
*-*~**--

40,300 40.300
======
1-4-90 To Balance b/d 40,300 31-3-91 By Balance cd 62,300
31-3-91 To Bank Ac 22,000

62,300 62.300

1-4-91 To Balance b/d 62,300 31-3-92 By Balance cld 85.700

31-3-92 To Bank ANc 23,400

85,700 85,700
=====

To Balance b/d 85,700 31-3-93 By Bank A/c 87414

1-4-92 (857x Rs. 102)
31-3-93 To Profit transferred
to Dep. Fund Alc 1,714
(Bal. fig. ----
87.414
87,414

Machine Account

Rs. Date Particulars Rs.

Date Particulars
1,500
1-4-92 To Balance b/d
1,10,000 31-3-93 By Bank A/Nc
1,50,000 (Scrap)
31-3-93 To Bank Alc By Dep. Fund A/c 1,08,500
(Purchased ) By Balance 1,50,000

2,60,000
2,60,000

Workings
Calculation of amount Invested
1) Balance
Interest Total Amount
Previous balance Depreciation (A+B+C) Invested
for Current earned
Year ofamount invested
year
Rs. (B) Rs. (C) Rs. Rs. Rs
Rs. (A)
19,600 19,600
31-3-89 19,600
1,176 20,776 20,700 76
19,600
31-3-90 94
19,600 2,418 22,094 22,000
31-3-91 76
23,400 32
94 19,600 3,738 23,432
31-3-92
32 19,600 5,142 24,774
31-3-93
ILLUSTRATION 15
A Company purchased a four year's lease on 1st April, 1994 for Rs. 10,00.000. It
IS decided to provide for the replacement of the lease at the end of four years by setting up
a Depreciation Fund. It is expected that investments will fetch interest at 12 percent per
annum. Sinking Fund tables show that Re. 0.209234 invested each year will produce Re. 1
at the end of four years at 12% per annum. Investments were made in 12% Bonds of Rs.
100 each. Interest was receivable
yearly on 31st March.
On 31st March, 1998 the investments were sold for Rs. 6.98,940. On 1st April, 1998
the lease
same was renewed for a further period of 4.years by payment Rs.
Prepare the Depreciation Fund Account and Depreciation Fund Investment Account.
of 12.00.000
Books are closed on 31st March every year.
[N.U. March, 19991

Solution:
In the Books of Company
Lease Account
Date Particulars Rs. Date Particulars Rs.
1-4-94 To Bank Alc 10,00,000 31-3-95 By Balance cld
===
10,00,000
1-4-95 To Balance b/d 10,00.000 31-3-96 By Balance c/d 10,00,000
-=
1-4-96 To Balance b/d
10,00,000 31-3-97 By Balance c/d 10,00.000
===-=-=
=======
1-4-97 To Balance b/d 10,00;000 31-3-98By Transferred to Dep.
Fund A/c 10,00,000
1-4-98 To Bank Alc 12.00,000

Depreciation Fund Account

Date Particulars Rs. Date Particulars Rs.
31-3-95 To Balance c/d
2,09,23431-3-95 By Depreciation AVc 2,09,234
31-3-96 To Balance c/d
4.43,5721-4-95 By Balance b/d 2,09,234
31-3-96 By Interest on
nvestment Alc 25,104
By Depreciation ANc 2,09,234
-----*****

4,43,572
4.43,572
31-3-97 To Balance cld 7,06,026 | 1-4-96 By Balance b/d 4.43,572
31-3-91 By Interest on
Investment A/c 53,220
By Depreciation A/c 2.09.234
- - - - - - - - - - -

7,06,026 7,06.026
31-3-98 To Lease Ac 10,00.000 1-4-97 By Balance b/d 7,06.026
(Transferred) 31-3-98 By Interest Invest
To Dep. Fund Invest- on A/c 84 720
7.060 By Depreciation Aic
ment Ac (Trans.) 2 09.23
By Transferred lo
Profit& Loss A 0
Bal. fig
10,07,050 1
 Depreciation Fund Investment Account

Particulars Rs. Date Particulars Rs.

Date

To Bank Alc 2,09,200 31-3-95 By Balance c/d 2,09,200

31-3-95

Balance cld 4,43,500

1-4-95 To Balance b/d 2,09,200 31-3-96 By
31-3-90 To Bank Alc 2,34,300
***

4,43,500
4,43,500

4.43,50031-3-97By Balance cld 7,06,000

1-4-96 To Balance b/d
31-3-97 To Bank Alc 2,62,500
*******"***

7,06,000
7,06,000

By Bank AWc 6,98,940

1-4-97 To Balance b/d 7,06,000 31-3-98 By Loss transferred
to Dep. Fund 7,060

7,06,000
7,06,000

Workings
Annual Depreciation Re. 0.209234 x Rs. 10,00,000
1)
Rs. 2,09,234

2) Calculation of amount Invested

Previous balance Depreciation Interest Total Amount Balance

Year of amount invested for Current earned (A +B+C) Invested
year
Rs. (A) Rs. (B) Rs. (C) Rs. Rs. Rs
31-3-95 2,09,234 2,09,234 2,09,200 34

31-3-96 34 2,09,23425,104 2,34,372 2,34,300 72

31-3-97 72 2,09,234 53,220 2,62,526 2,62,500 26

31-3-98 26 2,09,234 84,720 2,93,980

3) Calculations are made to the nearest rupee.

 ILLUSTRATION 16
S . Aditya Engineering Corporation purchased a machine for Rs. 1,00,000 on 1st
iy 1990. Estimated life of the machine was 10 years. The Corporation decided to
t e a depreciation fund and to invest the money in investments at 4% interest per annum
a n g necessary amount for the replacement of the machine at the end of 10 years
Depreciation fund table shows that to get Re. 1 at 4% interest p.a. at the end or 10
years
annually Re. 0.083291 should be invested.
At the end of fifth year the machine was sold as scrap for Rs. 48,000.
Investments were realised for 95% of its book value. New machine was
for Rs. 1,25,000. purchased

ment
write Machine Account, Depreciation Fund Account and Depreciation Fund Invest
Account for five years in the
Aditya Engineering Corporation.
ledger of M/s

[N. U. Oct., 19951

Solution
Workingss
Annual Depreciation Re. 0.083291 x Rs. 1,00,000
Rs. 8,329.10

In the Books of M/s.

Aditya Engineering Corporation
Machine Account

Date Particulars Rs. Date Particulars Rs

1990
1990
Jan. 1 To Bank Alc
1,00,000 Dec. 31 By Balance c/d 1,00,000
1991
Jan 1 To Balance b/d
1991
1,00,000 Dec. 31 By Balance c/d 1,00,000

1992
1992
Jan 1 To Balance b/d 1,00,000 Dec. 31 By Balance cld 1,00.000
1993
1993
Jan 1 To Balance b/d 1,00,000 Dec. 31 By Balance c/d 1,00,000

1994
1994
Jan. 1 To Balance b/d
1,00,000Dec.31 By Bank ANc
(Scrap sold) 48,000
By Dep. Fund Alc 52.000
****
(Bal. fig.
- -~o-~~--*

1,00,0000 1.00.000
1995
Jan. 1 To Bank AWc. (New) 1.25.000
 Depreciation Fund Account
Date Particulars Rs. Date Particulars Rs
1990
1990
Dec. 31 To Balance c/d 8,329.10 Dec. 31 By Depreciation Alc 8,329.10
--
1991 1991
Dec. 31 To Balance cld 16,991.36 Jan. 1 By Balance b/d 8,329.10
Dec.31 By Interest on
Investment A/c 333,16
By Depreciation Alc 8,329.10
*-*--*-*-=*

16,991.36 16,991.36
-

1992 1992
Dec. 31 To Balance c/d 25,666.96 Jan. 1 By Balance b/d 16,991.36
Dec. 31 By Interest on
Investment A/c 346,50
By Depreciation Alc 8,329.10

25,666.96 25,666.96
::---=

1993 1993
Dec. 31 To Balance c/d 34,356.41 Jan. 1 By Balance b/d 25,666.96
Dec. 31 By Interest on
Investment Alc 360,35
By Depreciation Alc 8,329.10

35,356.41 34,356.41

1994 1994
Dec.31 To Machine Alc 52,000 Jan.1 By Balance b/d 34,356.41
Dec. 31 By Interest on
(Transferred)
Investment A/c 374,76
By Depreciation A/c 8,329.10
By Tran. to P & LA/Nc 8,939.73
******* ***

52,000.000 52,000.00

Depreciation Fund Investment Account

Rs. Date Particulars Rs.
Date Particulars

1990 1990
Dec. 31 To Bank Alc 8,329.10Dec. 31 By Balance c/d 8,329.10

1991 1991
Balance b/d 8,329.10 Dec. 31 By Balance cld 8,662.26
Jan. 1To
Dec. 31 To Bank Alc 333.16
-

8,662.26 8.662.26
 1992 1992
Jan.1 To Balance b/d 8,662.26Dec. 31
By Balance c/d 9,008.76
Dec. 31 To Bank Ac
346.50
*===---~m-

008.76 9,008.76
1993
1993
Jan. 1To Balance b/d 9,008.76 Dec. 31 By Balance cld 9,369.11
Dec. 31 To Bank Alc 360.35

9,369.11 9,369.11
1994
1994
Jan. 1 To Balance b/d By Bank Alc ( Sale)
9,369.11 Dec. 31 9,369.11
9,369.11 9,369.11

ILLUSTRATION 17
A lease is
purchased
on 1st January, 1986 for a term of 5
years by payment of Rs.
40,000. The lease is to be renewed at the end of 5
years for which purpose a sinking fund
IS established. It is
expected that investment will earn 5 percent interest. Sinking fund table
shows that Rs. 7,239
invested each year will produce at the end of 5
Investments are made in
years Rs. 40,000.
multiples of Rs. 10.
On
December 31, 1990 investments were sold for Rs.
same lease was renewed 32,200. On 1st January, 1991
for 5 years by making
Show Lease Account, payment of Rs. 40,0000.
Depreciation
Account for 5 years. Calculations to be
Fund Account and Depreciation Fund
Investment
made to the nearest rupee.

[N.U. Oct., 1993]

Solution
Lease Account
Date Particulars Rs Date Particulars Rs.
1986 1986
Jan. 1 To Bank Alc 40,000 Dec. 31 By Balance c/d 40,000
1987 1987
Jan 1 To Balance b/d
40,000 Dec. 31 By Balance c/d 40,000
1988 1988
Pan 1 To Balance b/d 40,000 Dec. 31 By Balance cld 40,000
1989 1989
Jan 1 To Balance b/d 40,000 Dec. 31 By Balance c/d 40.000
1990 1990
Jan. 1 To Balance b/d 40,000 Dec. 31 By Depreciation
Fund A/c
40,000
1991
an To Bank Alc. 40,000
 Depreciation Fund Account

Particularss Rs. Date Particulars Rs

Date
1986
1986 ANc 7,239
Dec. 31 To Balance cld 7,239 Dec. 31By Depreciation
1987
1987 Balance b/d 7,239
To Balance c/d 14,840 Jan. 1 By
Dec. 31 By Interest on
Dec. 31 362
Investment A/c
By Depreciation Ac 7.239
********--

14,840
14,840

1988
1988 By Balance b/d 14,840
22,821 Jan. 1
Dec. 31 To Balance cld
Dec. 31 By Interest on
Investment Alc 742
By Depreciation A/c ,239
===

22,821
22,821 ===

1989
1989 By Balance b/d 22,821
Dec. 31 To Balance c/d
31,201 Jan. 1
By Interest on
Dec. 31
Investment Ac 1,141
By Depreciation A/c 7,239
- - - -

--**-***-
31,201
31,201

1990
1990 Jan. 1 By Balance b/d 31,201
To Lease Alc 40,000
Dec. 31 Dec. 31 By Interest on
Investment A/c 1,560
By Depreciation Alc 7,239
To Transferred to
Fund Invest
Profit& Loss A/c 1,000 By Depr.
ment Ac 1,000
-----**-***

***********

41,000
41,000

Investment Account
Depreciation Fund
Particulars Rs
Rs. Date
Particulars
Date
1986
1986 Balance cld 7.230
Dec. 31 To Bank A/c 7,230 Dec. 31 By
-

1987
1987 Balance cd 14,840
Balance bid 7,230 Dec. 31 By
Jan. 1 To 7,610
Bank Ac
Dec. 31To
14,340
4,S40

Ccnt
 Depreciation Fund Investment Account
1988
Jan. 1
To Balance 1988
Dec. 31 bld 14,840 Dec. 31 By Balance c/d 22,820
To Bank A/c
7,980

22,820 22,820
1989
Jan. 1 To 1989
Dec. 31 To Balance b/c 22,820D Dec. 31 By Balance c/d 31,200
Bank Alc
8,380

31,200 31,200
1990 =======

Jan. 1To 1990

Dec.
Balance b/d 31.200 Dec. 31
31 To By Bank A/c ( Sale) 32,200
Depr. Fund Ac 1.000
(Balance transferred)
-

32,200 32,200

Workings
Calculation of amount Invested
Previous balance
Year of amount invested Depreciation Interest Total Amount
for Current earned
Balance
year
(A+B+ C)Invested
Rs. (A) Rs. (B) Rs. (C) Rs. Rs. Rs
1986
7,239 7,239
1987 9.00 7,230 9.00
7,239 362 7610
1988 7,610
7,239 742 7981
1989 1.00 7,980 1.00
7,239 1,141.00
1990 1.00
8.381 8,380 1.00
7,239 1,560.00 8,800

ILLUSTRATION 18
On 1st July, 1996, Pearl Ltd.
Purchased a machine for Rs.
6,000 on its installation. The expected life of the 1,10,000 and spent Rs
estimated scrap value will be Rs. 16,000. machine is 4 years at the end of which the
its life the Desiring to replace the
machine on the expiry of
company establishes a Sinking Fund. Investments
interest. On 30th June 2000, the are expected to
machine was sold realise 5%
off as
scrap for Rs
investments were realised at 5% less than the book value. 18,000 and the
On 1st July, 2000, a new machine is
Fund tables show that Re. 0.2320
installed at a cost of Rs.
invested each year will produce Re. 1 at 1,25,000. Sinking
at 5%. the end of 4
ycars
Show the necessary Ledger Accounts in the
books of Peart Ltd. for all
Calculation to be made to the nearest rupee. the years.

C.A Inter
 Solution
Workings Rs. 16,000
Amount required Rs 1,10,000+ Rs. 6,000
Rs. 1,00,000
Re. 0.2320 x Rs. 1,00,000
Annual Depreciation
Rs. 23,200

In the Books of Pearl Ltd.

Machine Account

Particulars Rs.
Particulars Rs. Date
Date 1,16.000
By Balance c/d
1-7-96 To Bank Ac (cost) 1,10,000 30-6-97
To Bank A/c (Expenses) 6,000
1,16,0000
1,16,000

1,16,00030-6-98By Balance c/d 1,16,00pO

1-7-97 To Balance b/d =======
=====

Balance c/d 1,16,00DO

1-7-98 To Balance b/d 1,16,000 30-6-99 By
=======

1,16,000 30-6- By Bank A/c

To Balance b/d
1-7-99
2000 (Scrap sold ) 18,000
1
By Transfered to
Dep. Fund A/c 98,000

1,16,0000
1,16,000 ==

1-7-2000 To Bank Alc ( New 1,25,000

Depreciation Fund Account

Rs. Date Particulars Rs.

Date Particulars

23,200 30-6-97 By Depreciation A/c 23,200

30-6-97 To Balance c/d ======

.47,560 1-7-97 By Balance b/d 23,200

30-6-98 To Balance c/d
30-6-98 By Interest on
Investment Alc 1.160
By Depreciation Alc 23,200D
~ - - - - - - - - w - -

47,560 47,560
===

73,138 1-7-98 By Balance b/d 47,560

30-6-99 To Balance cld
30-6-99 By Interest on
Investment A/C 2.378
By Depreciation Ac 23.200

73,138 73,138

30-6 To Machine A/c 98,000 1-7-99 By Balance b/d 73,138

2000 30-6-2000 By Interest on Invest Alc| 3,657
To Dep. Fund Invest- 3,657 By Depreciation Alc 23,200
ment A/c By Transferred to
Profit & Loss AWc 1.662
1,01,657 1,01.657
 AccOunt
Depreciation Fund Investment
Date Particulars RS.
Particulars Rs. Date
Balance c/d
23.200
30-6-97 To Bank A/c 23,200 30-6-97 By === ===E

=====5
By Balance c/d 47,560
1-7-97 To Balance b/d 23,20030-6-98B
31-6-98 To Bank A/c 24,360

47.560
47,560

1-7-98 To Balance b/d 30-6-99 By Balance c/d 73,138

47,560
30-6-99 To Bank Alc 25,578
73,138
73,138
======
- - = = =

By Bank A/c (Sales) 69.481

1-7-99 To Balance b/d 73,138 30-6
2000 (73,138. - 3,657)
1
By Transferred to
Dep. Fund A/c 3.657
73.138
73,138