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Chapter
Depreciation, Provisions and Reserves
Important multiple choice questions on Depreciation, Provisions and Reserves
Depreciation is a Depreciation is charged on
a. non-cash expense b. cash expense a. fixed assets b. current assets.
c. non-cash gain d. cash gain c. Land d. All of the above
Answer Answer
Answer: A Answer: A
Depreciation is Depreciation is charged
a. decline in the market value of tangible fixed assets. a. to reduce the value of asset to its market value
b. The residual value of a fixed asset b. to adjust the cost the assets by portion of a fixed cost consumed during
c. Cost of a fixed asset’s repair the current accounting period
d. Portion of a fixed cost consumed during the current accounting period c. to increase the value of assets to its market value
Answer d. All of the above
Answer: D Answer
Answer: B
Depletion term is used for depreciation in case of If adequate maintenance expenditure is incurred, depreciation need
a. Fixed assets b. Tangible assets. a. not be charged. b. be charged at lower rate
c. Intangible assets d. Natural Assets c. be charged at usual rate d. be charged at higher rate
Answer Answer
Answer: D Answer: C
Depreciation provides fund for Making excessive provision for doubtful debits builds up the secret reserve
a. replacement b. repairs in the business.
c. expansion of capital d. All of the above a. True b. False
Answer Answer
Answer: A Answer: A
When market value of an asset is higher than book value depreciation is Capital reserves are normally created out of
a. not charged. b. charged at usual rate a. free or distributable profits b. normal operating activities
c. charged at lower rate d. charged at higher rate c. capital profit d. All of the above
Answer Answer
Answer: B Answer: C
Dividend equalisation reserve is an example of Reserve the purpose of which has not been spelt out is
a. general reserve b. Specific reserve a. General reserve b. free reserve
c. capital reserve d. None of the given c. Both A & B d. Revenue Reserve.
Answer Answer
Answer: B Answer: C
To meet future expenses or losses the amount of which is not certain an
Which of the following is/are a charge against profit account is created which is called
a. ‘Provision b. Depreciation a. Depreciation b. Provision
c. Provision and Depreciation d. Provision, Depreciation and Reserve c. Reserve d. Provision and Reserve
Answer Answer
Answer: C Answer: B
Creation of reserve Depreciation is decline
a. reduces taxable profits of the business b. does not reduce taxable profits a. in the historical cost of assets b. in the market cost of assets
of the business c. in the fair cost of assets d. Residual cost
c. may or may not reduce taxable profits of the business Answer
d. None of the give Answer: A
Answer
Answer: B
Cost of assets includes Depreciation arises because of
i. cost of item ii. Installation a. Fall in the market value of an asst. b. Physical wear and tear.
iii. Freight and Transportation iv. Proceeds from Test run c. Fall in the value of money d. None of them.
a. i, ii and iii b. ii, iii and iv Answer
c. i, iii and iv d. All of the above Answer: B
Answer
Answer: A
Types of reserve are Reserve created for maintaining a stable rate of dividend is termed as
i. General Reserve ii. Capital Reserve a. Debenture Redemption Reserve b. Dividend Equalisation Reserve
iii. Accumulated Reserve iv. Specific Reserve c. Capital Reserve d. General Reserve
v. Revenue Reserve Answer
a. i, ii, iii and iv b. i, ii, iv and v Answer: B
c. i, ii, iii and v d. All of the above
Answer

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Answer: B
The main object of providing depreciation is Depreciation is a process of
a. To calculate true profit. b. To show true financial position. a. Valuation b. Allocation
c. To reduce tax. d. To provide funds for replacement c. Both valuation and allocation d. None of them.
Answer Answer
Answer: A Answer: A
Under the diminishing balance method, depreciation is calculated on: Under the straight line method of providing depreciation it
a. Scrap value b. On original value a. Increase every year. b. Remain constant every year.
c. On book value d. None of them c. Decreases every year d. None of them.
Answer Answer
Answer: C Answer: B
Under the fixed installment method of providing depreciation it is calculated Under the diminishing balance method depreciation it
on: a. Increases every year. b. Decreases every year.
a. On scrap value b. on balance amount c. Remain constant every year. d. None of them.
c. Original cost d. None of them Answer
Answer Answer: B
Answer: C
The amount of depreciation charged on a machinery will be debited to: Loss on sale of machinery will be:
a. Machinery account b. Repair account a. Debited on machinery A/c b. Credited to machinery A/c
c. Cash account d. Depreciation account c. Credited to profit and loss A/c d. Debited to profit and loss A/c
Answer Answer
Answer: D Answer: D
Asset which have a limited useful life are termed as Process of becoming out of date or obsolete is termed as:
a. Limited assets b. Depreciable assets a. Physical deterioration b. Depletion
c. Unlimited asset d. None of these c. Obsolescence d. Amortization
Answer Answer
Answer: B Answer: C
Loss on sale of plant and machinery should be written off against: Which of the term is used to write off in reference to tangible fixed assets.
a. Share premium b. Sale account a. Depreciation b. Depletion
c. Profit & loss account d. Depreciation fund account c. Amortization d. Both (b) and (c)
Answer Answer
Answer: D Answer: A
The economic factors causing depreciation: Profit prior to incorporation is an example of:
a. Time factor b. Obsolescence and inadequacy a. Capital reserve b. Revenue reserve
c. Wear and tear d. Money valuation c. Secret reserve d. None of these
Answer Answer
Answer: C Answer: A
Total depreciation cannot exceeds its: Depreciation value of an asset is equal to
a. Scrap value b. Cost value a. Cost + Scrap value b. Cost + Market price
c. Market value d. Depreciable value c. Cost – Scrap value d. None of these
Answer Answer
Answer: D Answer: C
Depreciation does not depend on fluctuations as Depreciation is:
a. Market value of asset b. Cost of price of asset a. An income b. An asset
c. Scrap value of asset d. None of these c. A loss d. A liability
Answer Answer
Answer: A Answer: C
The books value of an asset is obtained by deducting depreciation from its Depreciation fund method is also known as:
a. Market value b. Scrap value a. Sinking fund method b. Annuity method
c. Market + Cost price d. Cost c. Sum of years digits method d. None of these
Answer Answer
Answer: D Answer: A
The method is especially suited to natural resources (mines, quarries, sand, In the provision method of depreciation the asset always appears at
pits etc.) is said to be a. Cost price b. Market Price
a. Annuity method b. Depletion method c. Scrap Value d. None
c. Revaluation method d. Sum of digits method Answer
Answer Answer: A
Answer: B
A firm has not recorded the bad debts by mistake. Which of the following is Which of the following is the effect on net income if a business decreases
the effect of bad debts omission? provision for doubtful debts?
a. Net profit would decrease b. Net profit would increase a. It will increase net income b. It will decrease net income
c. Gross profit would overstate d. Gross profit would understate c. It will increase gross profit and net income d. No effect
Answer Answer
Answer:B Answer: A
When it is certain that a debt won’t be recovered. Which of the following is A recovery of bad debt
correct? a. increases net income b. decreases net income
a. Provision for bad debt is created b. Account receivable is credited c. increases gross profit d. increases gross profit and net income
c. Bad debts is credited d. Sales is debited Answer
Answer Answer: A
Answer: B
The opening balance of “provision for doubtful debts account” is ₹ 1000 According to a general rule of accounting, the older a debts is outstanding,
whereas the closing balance of debtors account is ₹ 100,000. What amount the more likelihood that the debt will turn out to be a
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of provision for doubtful debts should be charged to income statement using a. provision for bad debt b. profitable debt for the business
a 5% provision for doubtful debts for the current accounting period? c. bad debt d. asset for the business
a. ₹ 5000 b. ₹ 4000 Answer
c. ₹ 2000 d. ₹ 1000 Answer: C
Answer
Answer: B
The opening and closing balances of provision for doubtful debts account are Which of the following is the most common cause of bad debt?
₹ 1000 and ₹ 2000 whereas bad debts are totalled ₹ 200 a. Debtor refusal to repayment b. Debtor left the country
a. ₹ 800 is to be deducted from total debtors balance in the balance sheet c. Debtor committed a crime d. Debtor declared to be a bankrupt
b. ₹ 1200 is to be subtracted from total debtors balance in the balance sheet Answer
c. ₹ 800 is to be added to total debtors balance in the balance sheet Answer: D
d. ₹ 1200 is to be added to total debtors balance in the balance sheet
Answer
Answer: B
Which of the following double entries is used to transfer “bad debts What does aged debtors analysis signify?
recovered” to income statement? a. shows how long debts have been outstanding
a. Bad debts recovered Debit and income statement Credit b. How old the customers are
b. Income statement Debit and bad debts recovered Credit c. How long does a business take to repay the bank loans
c. Cash Debit and bad debts recovered Credit d. Minimum number of old debtors
d. Bad debts recovered debit and cash Credit Answer
Answer Answer: A
Answer: A
Total debtors=₹ 5000, the closing balance of provision for doubtful debt a/c Which accounting concept dictates the inclusion of “provision for doubtful
is ₹ 500. Identify what amount should be shown in balance sheet regarding debts” in the financial statements?
the debtors? a. Accrual concept b. Matching concept
a. ₹5000-₹ 500=₹4500 b. ₹5000+₹500=₹5500 c. Going concern concept d. Prudence concept
c. ₹4500-₹500=₹5000 d. ₹4500-₹500=₹4000 Answer
Answer Answer: D
Answer: A
Which of the following is an alternative term for “provision for doubtful At the end of accounting period, XYZ Company finds out that its total debtors
debts”? are ₹10,000. On scrutiny of accounts, it turned out that a bad debt
a. Reserve for doubtful debts b. Stipulation for doubtful debts amounting to ₹1000 was not recorded in the books of accounts.
c. Allowance for doubtful debts d. Discount for doubtful debts Furthermore, having considered the current economic situation,
Answer management of the company decided to increase the provision for doubtful
Answer: C debts by ₹500. Find out what net amount to be expensed out in the income
statement?
a. ₹10,000 b. ₹1000
c. ₹1500 d. ₹11,000
Answer
Answer: C
A firm decided to provide for a 4% or ₹160 allowance for doubtful debts on Which of the following is a commonly used base to create the provision for
all outstanding debts. Which of the following is the value of total doubtful debts?
outstanding debts of the firm at the time of creating the provision? a. Total purchases b. Total credit sales
a. ₹2000 b. ₹5000 c. Total current assets d. Total current liabilities
c. ₹1000 d. ₹ 4000 Answer
Answer Answer: B
Answer: D
Which of the following debtors have highest probability to default on trade Provision for doubtful debts account is a/an
debts? a. Asset account b. Contra asset account
a. Over 90 days old debtors b. 30 to 60 days old debtors c. Nominal account d. Liability account
c. 60 to 90 days old debtors d. Current month debtors Answer
Answer Answer: A
Answer: A
Suppose that provision for doubtful debts account’s opening balance is Provision for cash discount on debtors is a percentage of
₹3222, closing balance=₹5222 and bad debts written off during the a. Debtors b. Net debtors
accounting period amount to ₹500. Work out the total amount needed to c. Net debtors less provision for doubtful debt d. Net sales
debit in the profit and loss account? Answer
a. ₹2500 b. ₹8444 Answer: C
c. ₹8944 d. ₹7944
Answer
Answer: A
If actual bad debts are more than the provisions for bad debts, then there M/s ABC firm has imported a machine from abroad. Which of the following is
will a NOT the element of machine’s cost?
a. Credit balance of Provision for Bad Debts Account a. Purchase price of machine b. Import duty
b. Debit balance of Provision for Bad Debts Account c. Demurrage charges d. Refundable tax
c. Debit balance of Bad Debts Account Answer
d. Debit balance of Discount on Debtors Account Answer: D
Answer
Answer: C
In the calculation of depreciation, all of the following items are actually Which of the following fixed assets is not depreciated in the ordinary
estimates except: circumstances?
a. Useful life b. Residual value a. Plant and machinery b. Building
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c. Historical cost d. Salvage value c. Land d. Equipment
Answer Answer
Answer: B Answer: C
A car was purchased for ₹ 550000. Its residual value was estimated to be ₹ An increase in the value of fixed asset is referred to as:
50000 while its monthly depreciation expenses are ₹ 10000 using straight a. Addition b. Acclamation
line method. Which of the following is the annual rate of depreciation? c. Appreciation d. Attraction
a. 25% b. 24% Answer
c. 22% d. 20% Answer: C
Answer
Answer: C
A fixed asset having book value of ₹ 25000 was sold for ₹22000. Which of Decline in the value of intangible assets is termed as
the following is the gain or loss on the sale of fixed asset? a. Amortisation b. Depletion
a. Gain of ₹3000 b. Loss of ₹ 3000 c. Declination d. Subtraction
c. Gain of ₹ 22000 d. Loss of ₹ 25000 Answer
Answer Answer: A
Answer: B
Which of the following is a biological asset Items of property, plant and equipment can be recognized as assets when
a. Dog b. Horse their cost can be measured reliably and it is likely that the future economic
c. Cow d. All of the above benefits associated with the assets will
Answer a. increase gradually b. Will diminish with the passage of time
Answer: C c. will flow to the entity d. not be available
Answer
Answer: C
Under the revaluation model of fixed assets provided by the international A company purchased a new machine for ₹ 5000000 and machine’s test run
accounting standards, the revaluation of the fixed assets should be carried was started to make sure that machine works properly. There was expense
out of ₹ 75000 incurred on test run, however the sale proceeds of test
a. After 10 years b. After 7 years production were ₹ 70000. You are required to find out the total cost of
c. Once 2 to 5 years d. Once 3 to 5 year machine?
Answer a. ₹ 5000000 b. ₹ 4930000
Answer: D c. ₹ 5075000 d. ₹ 5005000
Answer
Answer: D
Which of the following is the correct formula for calculating depreciation Which of the following is a double entry for depreciation expenses?
using service hours’ method? a. Accumulated depreciation debit and depreciation expenses Credit
a. Depreciation=(Cost – Scrape value) / Total hours X Actual hours b. Depreciation expenses Debit and accumulated depreciation Credit
b. Depreciation=(Cost – Accumulated depreciation) / Total hours X Actual c. Cash Debit and depreciation expenses Credit d. Depreciation expenses
hours Debit and cash Credit
c. Depreciation=(Cost – Accumulated depreciation) / Total hours X Total Answer
hours Answer: B
d. Depreciation=(Cost – Scrape value) / Actual hours X Total hours
Answer
Answer: A
The estimate about useful life of a fixed asset The purchase price of a software that will be used for more than 12 months
a. can never be changed b. can be changed should be regarded as
Answer a. A revenue expenditure b. A capital expenditure
Answer: B c. A deferred revenue expenditure d. A deferred capital expenditure
Answer
Answer: A
Cost of a fixed asset – Accumulated depreciation expenses of the fixed Depreciable amount + Residual value of a fixed asset =?
asset= a. Depreciation expenses b. Accumulated depreciation
a. Book value of a fixed asset b. Market value of a fixed asset c. Cost of the fixed asset d. Future economic benefits of a fixed asset
c. Historical cost of a fixed asset d. Recoverable amount of a fixed asset Answer
Answer Answer: C
Answer: A
A fixed asset was bought for ₹ 500000. Its accumulated depreciation is ₹ An alternative term used for accumulated depreciation expenses?
400000 and rate of depreciation is 20%. Calculate its depreciation expenses a. Provision for depreciation b. Cumulative depreciation
for the current accounting period using reducing balance method? c. Targeted depreciation d. Progressive depreciation
a. ₹ 100000 b. ₹ 80000 Answer
c. ₹ 40000 d. ₹ 20000 Answer: A
Answer
Answer: D
Which of the following is/are a kind of depreciation expenses? Which of the following is the normal balance of an accumulated depreciation
a. Depletion b. Depletion and Amortisation account?
c. Depletion and Appreciation d. Depletion, Amortisation and Appreciation a. Debit balance b. Credit balance
Answer c. either debit or credit balance d. Nil balance
Answer: B Answer
Answer: B
A company purchased a vehicle for ₹ 600000. I will be used for 5 years and Dividend Equalisation Reserve is a
its residual value is expected to be ₹100000. What is the annual amount of a. Capital Reserve b. General Reserve
deprecation using straight line method of depreciation? c. Revenue Reserve d. Deferred Revenue Reserve
a. ₹ 100000 b. ₹ 140000 Answer
c. ₹ 120000 d. ₹ 110000 Answer: C
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Answer
Answer: A
Secret reserve is a reserve Showing contingent liabilities as actual liabilities is an example of
a. appears in the balance sheet on Assets Side b. appears in the balance a. Provision b. Revenue Reserve
sheet on Liabilities Side c. Capital Reserve d. Secret Reserve
c. appears equally on both Assets and Liabilities Side Answer
d. does not appear in the balance sheet Answer: D
Answer
Answer: A
Which of the following represent Secret Reserve Which of the reserve(s) following is/are capital reserve
i. Undervaluation of inventories/stock ii. Charging capital expenditure to P&L i. Premium on issue of shares or debenture ii. Workman Compensation Fund
account iii. Profit on redemption of debentures iv. Profit on revaluation of fixed asset
iii. Making excessive provision for doubtful debts & liabilities.
iv. Showing contingent liabilities as actual liabilities a. i, ii and iii b. i, ii and iv v. Profits prior to incorporation a. i, ii, iii and iv b. i, iii, iv and v
c. ii, iii and iv d. All of the above c. ii, iii, iv and v d. All of the above
Answer Answer
Answer: D Answer: B
Importance of creating reserves are General reserve is a type of
i. reducing the taxable profit ii. Meeting a future contingency a. Revenue reserve b. Capital Reserve
iii. Strengthening the general financial position of the business c. Both A&B d. Neither A nor B
iv. Redeeming a long-term liability like debentures etc. a. i, ii and iii b. i, iii Answer
and iv Answer: A
c. ii, iii and iv d. All of the above
Answer
Answer: C
Where the provision for depreciation account or accumulated method of Which is known as fixed percentage on original cost method of depreciation?
depreciation is in place, assets in balance sheet is a. Written Down Value b. Straight Line
a. shown at original cost for the successive year c. Annuity d. None of the given
b. shown at depreciated cost for the successive year Answer
c. not shown Answer: B
d. either A or B
Answer
Answer: A
Which of the reserve(s) following is/are capital reserve Importance of creating reserves are
i. Premium on issue of shares or debenture ii. Workman Compensation Fund i. reducing the taxable profit ii. Meeting a future contingency
iii. Profit on redemption of debentures iv. Profit on revaluation of fixed asset iii. Strengthening the general financial position of the business
& liabilities. iv. Redeeming a long-term liability like debentures etc. a. i, ii and iii b. i, iii
v. Profits prior to incorporation a. i, ii, iii and iv b. i, iii, iv and v and iv
c. ii, iii, iv and v d. All of the above c. ii, iii and iv d. All of the above
Answer Answer
Answer: B Answer: C
If the original cost of the asset is ₹ 2,00,000 and depreciation is charged @
If the original cost of an asset is ₹ 5,00,000 and rate of the depreciation is 10% p.a. at written down value, the book value of the assets after a period of
10% what will be difference in the book value of the cost under SLM and three account year will be
WDV method after a period of 3 years? a. ₹ 140000 b. ₹ 160000
a. NIL b. ₹ 14500 c. ₹ 162000 d. ₹ 145800
c. ₹ 22500 d. ₹ 18750 Answer
Answer Answer: D
Answer: B
If the original cost of the asset is ₹ 2,50,000 The useful life of the asset is 10
Depreciation is years and net residual value is estimated to be ₹ 50,000, the rate of
a. credited to Income and Expenditure Account b. Debited to Income and depreciation under straight line method will
Expenditure Account a. 10% b. 12.5%
c. credited to Balance Sheet b. Debited to Balance Sheet c. 8% 9. 8.33%
Answer Answer
Answer: B Answer: C

Important Questions on Depreciation

Question 1: On 1st April, 2015, a limited company purchased a Machine for ₹ 1,90,000 and spent ₹ 10,000 on its installation. At the date of
purchase, it was estimated that the scrap value of the machine would be ₹ 50,000 at the end of sixth year.

Give Machine Account and Depreciation A/c in the books of the Company for 4 years after providing depreciation by Fixed Instalment Method.
The books are closed on 31st March every year.

Question 2: On 1st April, 2015, a Company bought Plant and Machinery costing ₹ 68,000. It is estimated that its working life is 10 years, at the
end of which it will fetch ₹ 8,000. Additions are made on 1st April, 2016 to the value of ₹ 40,000 (Residual value ₹ 4,000). More additions are
made on Oct. 1, 2017 to the value of ₹ 9,800 (Break up value ₹ 800). The working life of both the additional Plant and machinery is 20 years.

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Show the Plant and Machinery account for the first four years, if depreciation is written off according to Straight Line Method. The accounts
are closed on 31st March every year.

Question 3: Chandra Ltd. purchased a second-hand machine for ₹ 8,000 plus CGST and SGST @ 6% each on 1st July, 2015. They spent ₹ 3,500
on its overhaul and installation.

Depreciation is written off 10% p.a. on the original cost. On 30th September, 2018, the machine was found to be unsuitable and sold for ₹
6,500. Prepare the Machinery A/c for four years assuming that accounts are closed on 31st March.

Question 4 A company purchased on 1st April, 2009, a machinery for ₹ 80,000. On 1st October, 2010, it purchased another machine for ₹
50,000 and on 1st October, 2011, it sold off the first machine purchased in 2009 for ₹ 23,000. Depreciation was provided on the machinery at
the rate of 20% p.a. on the original cost annually.

Give the Machinery Account for four years commencing from 1st April, 2009.

Accounts are closed on 31st March every year.

Question 5 : Bhushan & Company purchased a Machinery on 1st April, 2015, for ₹ 54,000 and spent ₹ 6,000 on its installation. On 1st
December, 2016, it purchased another machine for ₹ 30,000.

On 30th June 2017, the first machine purchased on 1st April, 2015, is sold for ₹ 36,000 and on the same date it purchased a new machinery for
₹ 80,000.

On December 1, 2018, the second machine (purchased on December 1, 2016) was also sold off for ₹ 26,000.

Depreciation was provided on machinery @ 10% p.a. on Original Cost Method annually on 31st March. Give the machinery account for four
years.

Question 6: From the following transactions of a concern, prepare Machinery Account for the year ending 31st March, 2013 :-

April 1 2012 : Purchased a second-hand machinery for ₹ 40,000.

April 1 : Spent ₹ 10,000 on repairs for making it serviceable.

Sept. 30 : Purchased additional new machinery for ₹ 20,000.

Dec. 31 : Repairs and renewals of machinery ₹ 2,000.

2013

March 31 : Depreciate the machinery at 10% p.a.

Question 7: Ashoka Ltd. bought a machine on 1st April, 2010 for ₹ 2,40,000 and spent ₹ 4,000 on its carriage and ₹ 6,000 towards installation
cost. On 1st July, 2011 it purchased a second hand machinery for ₹ 75,000 and spent ₹ 25,000 on its overhauling.

On 1st January, 2013 it decided to sell the machinery bought on 1st April, 2010 at a loss of ₹ 20,000. It bought another machine on the same
date for ₹ 40,000. Company decided to charge depreciation @ 15% p.a. on written down value method. Prepare machinery account for 3
years. Books are closed each year on 31st March.

Question 8:

The Sameer Transport Company purchased 10 Trucks at ₹ 90,000 each on 1st April 2011. On 1st October 2013 one of the Trucks was involved
in an accident and is completely destroyed. ₹ 56,200 was received from the Insurance company in full settlement. On the same date another
truck was purchased by the company for the sum of ₹ 1,00,000. The company writes off 20% per annum on the Diminishing Balance Method.
The company maintains the calendar year as its financial year. Show the Truck Account for four years ending 31st December, 2014.

Question 9: On July 1, 2016 Pushpak Ltd. purchased a machinery for ₹ 5,70,000 and paid ₹ 30,000 for its overhauling and installation.
Depreciation is provided @ 20% p.a. on Original Cost Method and the books are closed on 31st March every year. The machine was sold on
31st January 2019 for a sum of ₹ 1,60,000. You are required to show the Machinery Account and Provision for Depreciation Account for three
years.

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Question 10: On 1st April 2008, a Company purchased 6 machines for ₹ 50,000 each. Depreciation at the rate of 10% p.a. is charged on
Straight Line Method. The accounting year of the Company ends on 31st March and the depreciation is credited to a separate 'Provision for
Depreciation Account'.

On 1st October, 2010, one machine was sold for ₹ 30,000 and on 1st April, 2011 a second machine was sold for ₹ 24,000.

You are required to prepare Machinery Account and Provision for Depreciation Account for four years ending 31st March, 2012.

Question 11: On 1st July 2015, ABC Ltd. purchase 4 machines for ₹ 80,000 each. The accounting year of the company ends on 31st March every
year. Depreciation is provided at the rate of 15% p.a. on original cost.

On 1st April, 2017 one machine was sold for ₹ 50,000 and on 1st January, 2019 a second machine was sold for ₹ 40,000. Another machine with
a higher capacity which cost ₹ 2,00,000 was purchased on 1st January, 2019.

You are required to show: (i) Machinery Account, (ii) Depreciation Account, and (iii) Provision for Depreciation Account for four years ending
31st March, 2019.

Question 12: The following balances appear in the books of Y Ltd:

Machinery A/c as on 1-4-2014 8,00,000

Provision for Depreciation A/c as on 1-4-2014 3,10,000
On 1-7-2014, a machinery which was purchased on 1-4-2011 for ₹ 1,20,000 was sold for ₹ 50,000 and on the same date another machinery
was purchased for ₹ 3,20,000.

The firm has been charging depreciation at 15% p.a. on Original Cost Method and closes its books on 31st March every year. Prepare the
Machinery A/c and Provision for Depreciation A/c for the year ending 31st March 2015.

Question 13: On 1st April, 2018, following balances appeared in the books of M/s Krishna Traders:

Furniture Account 50,000

Provision for Depreciation on Furniture Account 22,000
On 1st October, 2018 a part of Furniture purchased for ₹ 20,000 on 1st April, 2014 was sold for ₹ 5,000. On the same date a new furniture
costing ₹ 25,000 was purchased.

The depreciation was provided @ 10% p.a. on original cost of the asset and no depreciation was charged on the asset in the year of sale.
Prepare 'Furniture Account' and 'Provision for Depreciation Account' for the year ending 31st March, 2019.

Question 14: The following balances appear in the books of M/s Amrit:

1st April, 2018 Machinery A/c 60,000

1st April, 2018 Provision for depreciation A/c 36,000
On 1st April, 2018, they decided to dispose off a machinery for ₹ 8,400 which was purchased on 1st April, 2014 for ₹ 16,000.

You are required to prepare Machinery A/c, Provision for Depreciation A/c and Machinery Disposal A/c for 2018-19. Depreciation was charged
at 10% p.a on original cost method.

Question 15:

On April 01, 2010 Jain & Sons purchased a second hand plant costing ₹ 2,00,000 and spent ₹ 10,000 on its overhauling. It also spent ₹ 5,000 on
transportation and installation of the plant. It was decided to provide for depreciation @ 20% on written down value. The plant was destroyed
by fire on Oct. 31, 2013 and an insurance claim of ₹ 50,000 was admitted by the insurance company. Prepare plant account assuming that the
company closes its books on March 31, every year.

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