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Accountancy Dk Goel 2018 Solutions for Class 11 Commerce Accountancy Chapter 10 Depreciation are provided here with simple step-by-step explanations. These solutions for Depreciation are extremely popular among class 11 Commerce students for Accountancy Depreciation Solutions come handy for quickly completing your homework and preparing for exams. All questions and answers from the Accountancy Dk Goel 2018 Book of class 11 Commerce Accountancy Chapter 10 are provided here for you for free. You will also love the ad-free experience on Meritnation’s Accountancy Dk Goel 2018 Solutions. All Accountancy Dk Goel 2018 Solutions for class 11 Commerce Accountancy are prepared by experts and are 100% accurate.

Page No 16.53:

Question 1:

On 1st April, 2007, 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 Installment Method. The books are closed on 31st March every year.

Answer:

Machinery Account
Dr.
Cr.
Date Particulars Amount (Rs) Date Particulars Amount (Rs)
2007     2008    
Apr. 01 Bank A/c (1,90,000 + 10,000) 2,00,000 Mar. 31 Depreciation A/c 25,000
      Mar. 31 Balance c/d 1,75,000
    2,00,000     2,00,000
2008     2009    
Apr. 01 Balance b/d 1,75,000 Mar. 31 Depreciation A/c 25,000
      Mar. 31 Balance c/d 1,50,000
    1,75,000     1,75,000
2009     2010    
Apr. 01 Balance b/d 1,50,000 Mar. 31 Depreciation A/c 25,000
      Mar. 31 Balance c/d 1,25,000
    1,50,000     1,50,000
2010     2011    
Apr. 01 Balance b/d 1,25,000 Mar. 31 Depreciation A/c 25,000
      Mar. 31 Balance c/d 1,00,000
    1,25,000     1,25,000
           
 
Depreciation Account
Dr. Cr.
Date Particulars Amount (Rs) Date Particulars Amount (Rs)
2008     2008    
Mar. 31 Machinery A/c 25,000 Mar. 31 Profit and Loss A/c 25,000
    25,000     25,000
2009     2009    
Mar. 31 Machinery A/c 25,000 Mar. 31 Profit and Loss A/c 25,000
    25,000     25,000
2010     2010    
Mar. 31 Machinery A/c 25,000 Mar. 31 Profit and Loss A/c 25,000
    25,000     25,000
2011     2011    
Mar. 31 Machinery A/c 25,000 Mar. 31 Profit and Loss A/c 25,000
    25,000     25,000
           

Working Note: Calculation of Depreciation



Page No 16.53:

Question 2:

On 1st April, 2009, 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, 2010 to the value of ₹ 40,000 (Residual value ₹ 4,000). More additions are made on Oct. 1, 2011 to the value of ₹ 9,800 (Break up value ₹ 800). The working life of both the additional Plant and machinery is 20 years.
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.

Answer:

Plant & Machinery Account
Dr. Cr.
Date Particulars Amount (Rs) Date Particulars Amount (Rs)
2009     2010    
Apr. 01 Bank A/c (P1) 68,000 Mar. 31 Depreciation A/c 6,000
      Mar. 31 Balance c/d 62,000
    68,000     68,000
2010     2011    
Apr. 01 Balance b/d (P1) 62,000 Mar. 31 Depreciation A/c  
Apr. 01 Bank A/c (P2) 40,000  
P1
 6,000  
       
P2
 1,800 7,800
      Mar. 31 Balance c/d  
       
P1
 56,000  
       
P2
 38,200 94,200
    1,02,000     1,02,000
2011     2012    
Apr. 01 Balance b/d   Mar. 31 Depreciation A/c  
 
P1
 56,000    
P1
 6,000  
 
P2
 38,200 94,200  
P2
 1,800  
Oct. 01 Bank A/c (P3) 9,800  
P3 (for 6 months)
 225 8,025
      Mar. 31 Balance c/d  
       
P1
 50,000  
       
P2
 36,400  
       
P3
 9,575 95,975
    1,04,000     1,04,000
2012     2013    
Apr. 01 Balance b/d   Mar. 31 Depreciation A/c  
 
P1
 50,000    
P1
 6,000  
 
P2
 36,400    
P2
 1,800  
 
P3
 9,575 95,975  
P3
 450 8,250
      Mar. 31 Balance c/d  
       
P1
 44,000  
       
P2
 34,600  
       
P3
 9,125 87,725
    95,975     95,975
           

Working Note: Calculation of Depreciation

P1 P2 P3

Page No 16.53:

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.

Answer:

Machinery Account
Dr. Cr.
Date Particulars Amount (₹) Date Particulars Amount (₹)
2015     2016    
July 01 Bank A/c (8,000 + 3,500) 11,500 Mar. 31 Depreciation A/c (for 9 months) 863
        Balance c/d 10,637
    11,500     11,500
2016     2017    
Apr. 01 Balance b/d 10,637 Mar. 31 Depreciation A/c 1,150
        Balance c/d 9,487
    10,637     10,637
2017     2018    
Apr. 01 Balance b/d 9,487 Mar. 31 Depreciation A/c 1,150
        Balance c/d 8,337
    9,487     9,487
2018     2018    
Apr. 01 Balance b/d 8,337 Sept. 30 Depreciation A/c 575
        Bank A/c (Sale) 6,500
        Profit and Loss A/c (Loss on Sale) 1,262
    8,337     8,337
           

Working Note: Calculation of Profit or Loss on Sale

Particulars Amount
(₹)
Value of Machinery on Apr. 01, 2018 8,337
Less: Depreciation for 6 months
 575
Value of Machinery on Sept. 30, 2018 7,762
Less: Sale Value
 6,500
Loss on Sale 1,262
   

Page No 16.53:

Question 4:

A Ltd. purchased a machine for ₹ 5,00,000 on 1st April, 2012. Further addition were made on 1st October 2012 and on 1st July 2013 for ₹ 4,00,000 and ₹ 3,00,000 respectively. On 1st January, 2015, 1st machine was sold for ₹ 2,85,000 and new machine was purchased for ₹ 6,00,000.
Prepare Machine A/c for three years ending 31st March, 2015 if depreciation is to be charged @ 10% p.a. on straight line basis.

Answer:

Machinery Account

Dr.

Cr.

Date

Particulars

Amount

(Rs)

Date

Particulars

Amount

(Rs)

2012

 

 

2013

 

 

Apr. 01

Bank A/c (M1)

5,00,000

Mar. 31

Depreciation A/c (M1)

50,000

Oct.01

Bank A/c (M2)

4,00,000

 

Depreciation A/c (M2)

20,000

 

 

 

Mar. 31

Balance c/d                   

 

 

 

 

 

M1

4,50,000

 

 

 

 

 

M2                  

3,80,000

8,30,000

 

 

9,00,000

 

 

9,00,000

2013

 

 

2014

 

 

Apr. 01

Balance b/d

 

Mar. 31

Depreciation A/c

 

 

M1                       

4,50,000

 

 

M1

50,000

 

 

M2                       

3,80,000

8,30,000

 

M2

40,000

 

Jul.01

Bank A/c (M3)

3,00,000

 

M3

22,500

1,12,500

 

 

 

Mar. 31

Balance c/d

 

 

 

 

 

M1

4,00,000

 

 

 

 

 

M2

3,40,000

 

 

 

 

 

M3

2,77,500

10,17,500

 

 

11,30,000

 

 

11,30,000

2014

 

 

2015

 

 

Apr. 01

Balance b/d

 

Jan.01

Depreciation A/c (on M1 for 9 months)

37,500

 

M1

4,00,000

 

 

Bank A/c (Sale of M1)

2,85,000

 

M2

3,40,000

 

 

Profit and Loss A/c (Loss on Sale)

77,500

 

M3

2,77,500

10,17,500

Mar. 31

Depreciation on-

 

2015

 

 

 

M2

40,000

 

Jan.01

Bank A/c (M4)

6,00,000

 

M3

30,000

 

 

 

 

 

M4

15,000

85,000

 

 

 

Mar. 31

Balance c/d

 

 

 

 

 

M2

3,00,000

 

 

 

 

 

M3

2,47,500

 

 

 

 

 

M4

5,85,000

11,32,500

 

 

16,17,500

 

 

16,17,500

 

 

 

 

 

 

Page No 16.53:

Question 5:

On 1st January, 2006, A Ltd. Purchased a machine for ₹ 2,40,000 and spent ₹ 10,000 on its erection. On 1st July, 2006 an additional machinery costing ₹ 1,00,000 was purchased. On 1st July, 2008 the machine purchased on 1st January, 2006 was sold for ₹ 1,43,000 and on the same date, a new machine was purchased at a cost of ₹ 2,00,000.
Show the Machinery Account for the first three calendar years after charging depreciation at 5% by the Straight Line Method.

Answer:

Machinery Account
Dr. Cr.
Date Particulars Amount (Rs) Date Particulars Amount (Rs)
2006     2006    
Jan. 01 Bank A/c (M1) (2,40,000 + 10,000) 2,50,000 Dec. 31 Depreciation A/c  
2011      
M1
 12,500  
July 01 Bank A/c (M2) 1,00,000  
M2 (for 6 months)
 2,500 15,000
        Balance c/d    
       
M1
 2,37,500  
       
M2
 97,500 3,35,000
    3,50,000       3,50,000
2007     2007      
Jan. 01 Balance b/d   Dec. 31 Depreciation A/c    
 
M1
 2,37,500    
M1
 12,500  
 
M2
 97,500 3,35,000  
M2
 5,000 17,500
          Balance c/d    
         
M1
 2,25,000  
         
M2
 92,500 3,17,500
      3,35,000       3,35,000
2008       2008      
Jan. 01 Balance b/d     July 01 Depreciation A/c (M1)   6,250
 
M1
 2,25,000     Bank A/c (Sale of M1 )   1,43,000
 
M2
 92,500 3,17,500   Profit and Loss A/c (Loss on Sale of M1)   75,750
July 01 Bank A/c (M3) 2,00,000 Dec. 31 Depreciation A/c    
       
M2
 5,000  
       
M3 (for 6 months)
 5,000 10,000
        Balance c/d    
       
M2
 87,500  
       
M3
 1,95,000 2,82,500
    5,17,500     5,17,500
           

Working Note: Calculation of Profit or Loss on Sale of M1
 
Particulars Amount
Value of Machinery on Jan. 01, 2008 2,25,000
Less: Depreciation for 6 months
 6,250
Value of Machinery on July 01, 2008 28,750
Less: Sale Value
 1,43,000
Loss on Sale 75,750
   



Page No 16.54:

Question 6:

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.

Answer:

Machinery Account
Dr. Cr.
Date Particulars Amount (Rs) Date Particulars Amount (Rs)
2009     2010    
Apr. 01 Bank A/c (M1)                 80,000 Mar. 31 Depreciation A/c 16,000
      Mar. 31 Balance c/d 64,000
    80,000     80,000
2010     2011    
Apr. 01 Balance b/d 64,000 Mar. 31 Depreciation A/c  
Oct. 01 Bank A/c (M2) 50,000  
M1
 16,000  
       
M2 (for 6 months)
 5,000 21,000
      Mar. 31 Balance c/d  
       
M1
 48,000  
       
M2
 45,000 93,000
    1,14,000     1,14,000
2011     2011    
Apr. 01 Balance b/d   Oct. 01 Depreciation A/c (M1) 8,000
 
M1
 48,000     Bank A/c (Sale of M1) 23,000
 
M2
 45,000 93,000   Profit and Loss A/c  (Loss on Sale of M1) 17,000
      2012    
      Mar. 31 Depreciation A/c 10,000
        Balance c/d 35,000
    93,000     93,000
2012     2013    
Apr. 01 Balance b/d 35,000 Mar. 31 Depreciation A/c 10,000
      Mar. 31 Balance c/d 25,000
    35,000     35,000
           

Working Note: Calculation of Profit or Loss on Sale of M1

Particulars Amount
Value of Machinery on Apr. 01, 2011 48,000
Less: Depreciation for 6 months
 8,000
Value of Machinery on Oct. 01, 2011 40,000
Less: Sale Value
 23,000
Loss on Sale 17,000
   

Page No 16.54:

Question 7:

Bhushan & Company purchased a Machinery on 1st April, 2009, for ₹ 54,000 and spent ₹ 6,000 on its installation. On 1st December, 2010, it purchased another machine for ₹ 30,000.
On 30th June 2011, the first machine purchased on 1st April, 2009, is sold for ₹ 36,000 and on the same date it purchased a new machinery for ₹ 80,000.
On December 1, 2012, the second machine (purchased on December 1, 2010) was also sold off for ₹ 26,000.
Depreciation was provided on machinery @ 10% p.a. on Original Cost Method annually o 31st March. Give the machinery account for four years.

Answer:

Machinery Account
Dr. Cr.
Date Particulars Amount (Rs) Date Particulars Amount (Rs)
2009     2010    
Apr. 01 Bank A/c (M1)  (54,000 + 6,000)            60,000 Mar. 31 Depreciation A/c 6,000
      Mar. 31 Balance c/d 54,000
    60,000     60,000
2010     2011    
Apr. 01 Balance b/d 54,000 Mar. 31 Depreciation A/c  
Dec. 01 Bank A/c (M2) 30,000  
M1
 6,000  
       
M2 (for 4 months)
 1,000 7,000
      Mar. 31 Balance c/d    
       
M1
 48,000  
       
M2
 29,000 77,000
    84,000     84,000
2011     2011    
Apr. 01 Balance b/d   June 30 Depreciation A/c (M1) 1,500
 
M1
 48,000     Bank A/c (Sale of M1) 36,000
 
M2
 29,000 77,000   Profit and Loss A/c  (Loss on Sale of M1) 10,500
June 30 Bank A/c (M3)   80,000 2012    
        Mar. 31 Depreciation A/c  
         
M2
 3,000  
         
M3 (for 9 months)
 6,000 9,000
          Balance c/d    
         
M2
 26,000  
         
M3
 74,000 1,00,000
      1,57,000     1,57,000
2012       2012    
Apr. 01 Bank A/c     Dec. 01 Depreciation A/c (M2) 2,000
 
M2
 26,000     Bank A/c (Sale of M2) 26,000
 
M3
 74,000 1,00,000 2013    
Dec. 01 Profit and Loss A/c (Profit on sale of M2) 2,000 Mar. 31 Depreciation A/c (M3) 8,000
        Balance c/d 66,000
    1,02,000     1,02,000
           

Working Notes:

WN1: Calculation of Profit or Loss on Sale on M1
 
Particulars Amount
Value of Machinery on Apr. 01, 2011 48,000
Less: Depreciation for 3 months
 1,500
Value of Machinery on June 30, 2011 46,500
Less: Sale Value
 36,000
Loss on Sale 10,500
   

WN2: Calculation of Profit or Loss on Sale of M2
 
Particulars Amount
Value of Machinery on Apr. 01, 2012 26,000
Less: Depreciation for 8 months
 2,000
Value of Machinery on Dec. 01, 2012 24,000
Less: Sale Value
 26,000
Profit on Sale 2,000
   

Page No 16.54:

Question 8:

On 1st October, 2009, Raj & Co. purchased machinery worth ₹ 40,000. On 1st October, 2011, it buys additional machinery worth ₹ 10,000. On 30th September, 2012, half of the machinery purchased on 1st Oct., 2009, is sold for ₹ 8,200. The company writes off 10 per cent p.a. on the original cost. The accounts are closed every year on 31st March.
Show the Machinery Account for four years.

Answer:

Machinery Account
Dr. Cr.
Date Particulars Amount (Rs) Date Particulars Amount (Rs)
2009     2010    
Oct. 01 Bank A/c                                          Mar. 31 Depreciation A/c  
 
M1
 20,000    
M1 (for 6 months)
 1,000  
 
M2
 20,000 40,000  
M2 (for 6 months)
 1,000 2,000
          Balance c/d    
         
M1
 19,000  
         
M2
 19,000 38,000
      40,000     40,000
2010       2011    
Apr. 01 Balance b/d     Mar. 31 Depreciation A/c    
 
M1
 19,000    
M1
 2,000  
 
M2
 19,000 38,000  
M2
 2,000 4,000
          Balance c/d    
         
M1
 17,000  
         
M2
 17,000 34,000
      38,000     38,000
2011       2012    
Apr. 01 Balance b/d     Mar. 31 Depreciation A/c    
 
M1
 17,000    
M1
 2,000  
 
M2
 17,000 34,000  
M2
 2,000  
Oct. 01 Bank A/c (M3)   10,000  
M3 (for 6 months)
 500 4,500
        Mar. 31 Balance c/d    
         
M1
 15,000  
         
M2
 15,000  
         
M3
 9,500 39,500
      44,000     44,000
2012       2012    
Apr. 01 Balance b/d     Sept. 30 Depreciation A/c (M1) 1,000
 
M1
 15,000     Bank A/c (Sale of M1) 8,200
 
M2
 15,000     Profit and Loss A/c (Loss on Sale of M1) 5,800
 
M3
 9,500 39,500 2013    
      Mar.31 Depreciation A/c  
       
M2
 2,000  
       
M3
 1,000 3,000
        Balance c/d    
       
M2
 13,000  
       
M3
 8,500 21,500
    39,500     39,500
           

Working Note: Calculation of Profit or Loss on Sale of M1
 
Particulars Amount
Value of Machinery on Apr. 01, 2012 15,000
Less: Depreciation for 6 months
 1,000
Value of Machinery Sept. 30, 2012 14,000
Less: Sale Value
 8,200
Loss on Sale 5,800
   

Note: In order to make easy calculation machinery purchased on October 01, 2009 has been divided into two parts i.e. M1 and M2

Thus, M1 represents the first part i.e. sold for Rs 8,200

M2 represents the second part, which remains in the business

Page No 16.54:

Question 9:

On 1st April, 2010, Plant and Machinery was purchased for ₹ 1,20,000. New machinery was purchased on 1st Oct., 2010, for ₹ 50,000 and on 1st July, 2011, for ₹ 25,000.
On 1st January, 2013, a machinery of the original value of ₹ 20,000 which was included in the machinery purchased on 1st April, 2010, was sold for ₹ 6,000. Prepare Plant & Machinery A/c for three years after providing depreciation at 10% p.a. on Straight Line Method. Accounts are closed on 31st March every year.

Answer:

Plant & Machinery Account
Dr. Cr.
Date Particulars Amount (Rs) Date Particulars Amount (Rs)
2010     2011    
Apr. 01 Bank A/c                                          Mar. 31 Depreciation A/c  
 
M1
 20,000    
M1
 2,000  
 
M2
 1,00,000 1,20,000  
M2
 10,000  
Oct. 01 Bank A/c (M3)   50,000  
M3 (for 6 months)
 2,500 14,500
        Mar. 31 Balance c/d    
         
M1
 18,000  
         
M2
 90,000  
         
M3
 47,500 1,55,500
      1,70,000     1,70,000
2011       2012    
Apr. 01 Balance b/d     Mar. 31 Depreciation A/c    
 
M1
 18,000    
M1
 2,000  
 
M2
 90,000    
M2
 10,000  
 
M3
 47,500 1,55,500  
M3
 5,000  
July 01 Bank A/c (M4)   25,000  
M4 (for 9 months)
 1,875 18,875
        Mar. 31 Balance c/d    
         
M1
 16,000  
         
M2
 80,000  
         
M3
 42,500  
         
M4
 23,125 1,61,625
      1,80,500     1,80,500
2012       2013    
Apr.01 Balance b/d     Jan. 01 Depreciation A/c (M1) 1,500
 
M1
 16,000     Bank A/c (Sale of M1) 6,000
 
M2
 80,000     Profit and Loss A/c (Loss on Sale of M1) 8,500
 
M3
 42,500   Mar. 31 Depreciation A/c  
 
M4
 23,125 1,61,625  
M2
 10,000  
       
M3
 5,000  
       
M4
 2,500 17,500
      Mar. 31 Balance c/d    
       
M2
 70,000  
       
M3
 37,500  
       
M4
 20,625 1,28,125
    1,61,625     1,61,625
           

Working Note:  Calculation of Profit or Loss on Sale of M1
 
Particulars Amount
Value of Machinery on Apr. 01, 2012 16,000
Less: Depreciation for 9 months
 1,500
Value of Machinery on Jan.01, 2013 14,500
Less: Sale Value
 6,000
Loss on Sale 8,500
   

Note: In order to make easy calculation plant and machinery purchased on April 01, 2010 has been divided into two parts i.e. M1 and M2.

Thus, M1: Rs 20,000 (sold for Rs 6,000)
 
M2: Rs 1,00,000 (remains in the business)



Page No 16.55:

Question 10:

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

2012    
April 1 :  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.

Answer:

Machinery Account
Dr. Cr.
Date Particulars Amount (Rs) Date Particulars Amount (Rs)
2012     2013    
Apr. 01 Bank A/c (M1) (40,000 + 10,000) 50,000 Mar. 31 Depreciation A/c  
Sept.30 Bank A/c (M2) 20,000  
M1
 5,000  
       
M2 (for 6 months)
 1,000 6,000
        Balance c/d  
       
M1
 45,000  
       
M2
 19,000 64,000
    70,000     70,000
           

Note: Repair charges of Rs 2,000 are categorised under revenue expenditure because these are incurred on December 31, 2012 but machinery has been purchased on September 30, 2012.

Page No 16.55:

Question 11:

A plant is purchased for ₹ 60,000 on 1st April, 2009. It is estimated that the residual value of this plant at the end of its working life of 10 years will be ₹ 20,920. Depreciation is to be provided at 10% p.a. on diminishing balance method.
You are required to show the Plant Account for 4 years, assuming that the books are closed on 31st March every year.

Answer:

Plant Account
Dr. Cr.
Date Particulars Amount (Rs) Date Particulars Amount (Rs)
2009     2010    
Apr. 01 Bank A/c 60,000 Mar. 31 Depreciation A/c 6,000
      Mar. 31 Balance c/d 54,000
    60,000     60,000
2010     2011    
Apr. 01 Balance b/d 54,000 Mar. 31 Depreciation A/c 5,400
      Mar. 31 Balance c/d 48,600
    54,000     54,000
2011     2012    
Apr. 01 Balance b/d 48,600 Mar. 31 Depreciation A/c 4,860
      Mar. 31 Balance c/d 43,740
    48,600     48,600
2012     2013    
Apr. 01 Balance b/d 43,740 Mar. 31 Depreciation A/c 4,374
      Mar. 31 Balance c/d 39,366
    43,740     43,740
           

Note: When deprecation is charged as per written down value method, scrap value of asset is ignored.

Page No 16.55:

Question 12:

On 1st July, 2005, Geeta Paper Limited purchased a Plant for ₹ 1,50,000 and paid ₹ 10,000 as freight on its carriage. Depreciation was provided at 10% p.a. on the Written Down Value Method on this plant. On 1st Oct., 2008, this plant was sold for ₹ 80,000.
Prepare Plant A/c for 4 years, assuming that the books are closed on 31st March every year.

Answer:

Plant Account
Dr. Cr.
Date Particulars Amount (Rs) Date Particulars Amount (Rs)
2005     2006    
July 01 Bank A/c (1,50,000 + 10,000) 1,60,000 Mar. 31 Depreciation A/c (for 9 months) 12,000
        Balance c/d 1,48,000
    1,60,000     1,60,000
2006     2007    
Apr. 01 Balance b/d 1,48,000 Mar. 31 Depreciation A/c 14,800
      Mar. 31 Balance c/d 1,33,200
    1,48,000     1,48,000
2007     2008    
Apr. 01 Balance b/d 1,33,200 Mar. 31 Depreciation A/c 13,320
      Mar. 31 Balance c/d 1,19,880
    1,33,200     1,33,200
2008     2008    
Apr. 01 Balance b/d 1,19,880 Oct. 01 Depreciation A/c 5,994
        Bank A/c (Sale) 80,000
        Profit and Loss A/c (Loss on Sale) 33,886
    1,19,880     1,19,880
           

Working Note:  Calculation of Profit or Loss on Sale
 
Particulars Amount
Value of Plant on Apr. 01, 2008 1,19,880
Less: Depreciation for 6 months
 5,994
Value of Plant on Oct. 01, 2008 1,13,886
Less: Sale Value
 80,000
Loss on Sale 33,886
   

Page No 16.55:

Question 13:

A Company purchased a second-hand machine on 1st April, 2016, for ₹ 30,000 and immediately spent ₹ 4,000 on its repair and ₹ 1,000 on its installation. On Oct. 1, 2018, the machine was sold for ₹ 25,000. Prepare Machine Account after charging depreciation @ 10% p.a. by diminishing balance method, assuming that the books are closed on 31st March every year. IGST was charged @ 12% on purchase and sale of machine.

Answer:

Machinery Account
Dr. Cr.
Date Particulars Amount (₹) Date Particulars Amount (₹)
2016     2017    
Apr. 01 Bank A/c (30,000 +4,000 + 1,000) 35,000 Mar. 31 Depreciation A/c 3,500
        Balance c/d 31,500
    35,000     35,000
2017     2018    
Apr. 01 Balance b/d 31,500 Mar. 31 Depreciation A/c 3,150
      Mar. 31 Balance c/d 28,350
    31,500     31,500
2018     2018    
Apr. 01 Balance b/d 28,350 Oct. 01 Depreciation A/c 1,418
        Bank A/c (Sale) 25,000
        Profit and Loss A/c (Loss on Sale) 1,932
    28,350     28,350
           

Working Note:  Calculation of Profit or Loss on Sale
 
Particulars Amount
(₹)
Value of Machinery on Apr. 01, 2018 28,350
Less: Depreciation for 6 months
 1,418
Value of Machinery on Oct. 01, 2018 26,932
Less: Sale Value
 25,000
Loss on Sale 1,932
   

Page No 16.55:

Question 14:

A firm purchased on 1st April, 2009, a second-hand Machinery for ₹ 36,000 and spent ₹ 4,000 on its installation. On 1st Oct. in the same year another Machinery costing ₹ 20,000 was purchased. On 1st Oct., 2011, the Machinery bought on 1st April, 2009 was sold off for ₹ 12,000 and on the same date a fresh Machine was purchased for ₹ 64,000. Depreciation is provided annually on 31st March, @ 10% p.a. on the Written Down Value Method. Show the Machine A/c from 1st April, 2009 to 31st March, 2013.

Answer:

Machinery Account
Dr. Cr.
Date Particulars Amount (Rs) Date Particulars Amount (Rs)
2009     2010    
Apr. 01 Bank A/c (M1) (36,000 + 4,000)       40,000 Mar. 31 Depreciation A/c  
Oct. 01 Bank A/c (M2) 20,000  
M1
 4,000  
       
M2 (for 6 months)
 1,000 5,000
      Mar. 31 Balance c/d    
       
M1
 36,000  
       
M2
 19,000 55,000
    60,000       60,000
2010     2011      
Apr. 01 Balance b/d     Mar. 31 Depreciation A/c    
 
M1
 36,000    
M1
 3,600  
 
M2
 19,000 55,000  
M2
 1,900 5,500
        Mar. 31 Balance c/d    
         
M1
 32,400  
         
M2
 17,100 49,500
      55,000     55,000
2011       2011    
Apr. 01 Balance b/d     Oct. 01 Depreciation A/c (M1) 1,620
 
M1
 32,400     Bank A/c (Sale of M1) 12,000
 
M2
 17,100 49,500   Profit and Loss A/c (Loss on Sale of M1) 18,780
Oct. 01 Bank A/c (M3)   64,000 2012    
        Mar. 31 Depreciation A/c  
         
M2
 1,710  
         
M3 (for 6 months)
 3,200 4,910
        Mar. 31 Balance c/d    
         
M2
 15,390  
         
M3
 60,800 76,190
      1,13,500     1,13,500
2012       2013    
Apr. 01 Balance b/d     Mar. 31 Depreciation A/c    
 
M2
 15,390    
M2
 1,539  
 
M3
 60,800 76,190  
M3
 6,080 7,619
      Mar. 31 Balance c/d    
       
M2
 13,851  
       
M3
 54,720 68,571
    76,190     76,190
           

Working Note: Calculation of Profit or Loss on Sale
 
Particulars Amount
Value of Machinery on Apr. 01, 2011 32,400
Less: Depreciation for 6 months
 1,620
Value of Machinery on Oct. 01, 2011 30,780
Less: Sale Value
 12,000
Loss on Sale 18,780
   



Page No 16.56:

Question 15(A):

State four main causes of providing depreciation.

Answer:

The four main causes of depreciation are as follows. 

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

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

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

4. Expiry of legal rights: If an asset is acquired for a specific period of time, then, whether the asset is put to use or not, its value becomes zero at the end of its useful life.

Page No 16.56:

Question 15(B):

A Company purchased a machinery for ₹ 50,000 on 1st Oct., 2007. Another machinery costing ₹ 10,000 was purchased on 1st Dec., 2008. On 31st March, 2010, the machinery purchased in 2007 was sold at a loss of ₹ 5,000. The Company charges depreciation at the rate of 15% p.a. on Diminishing Balance Method. Accounts are closed on 31st March every year.
Prepare Machinery account for 3 years.

Answer:

Machinery Account
Dr. Cr.
Date Particulars Amount (Rs) Date Particulars Amount (Rs)
2007     2008    
Oct. 01 Bank A/c (M1)                             50,000 Mar. 31 Depreciation A/c (for 6 months) 3,750
      Mar. 31 Balance c/d 46,250
    50,000     50,000
2008     2009    
Apr. 01 Balance b/d 46,250 Mar. 31 Depreciation A/c  
Dec. 01 Bank A/c (M2) 10,000  
M1