NCERT Solutions for Class 11 Accountancy Chapter 7 Depreciation, Provisions and Reserves

NCERT
SOLUTIONS
CLASS - 11th

aglase .co

Class : 11th
Subject : Accountancy
Chapter : 7
Chapter Name : Depreciation, Provisions and Reserves

Q1 What is Depreciation?

Answer. Every business acquires fixed assets for its use in the business over a period of time.
As the benefits of these assets can be availed over a long period of time, thus, due to their
regular use, there occurs continuous wear and tear and consequently fall in their value. This fall
in the value of fixed assets, due to their regular use or expiry of time is termed as depreciation.

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Q2 State briefly the need for providing depreciation.

Answer. The needs for providing depreciation are given below.
→ To ascertain true net profit or net loss− Correct profit or loss can be
ascertained only when all the expenses and losses incurred for earning revenues are
charged to Profit and Loss Account. Assets are used for earning revenues and its cost is
charged in form of depreciation to Profit and Loss Account.
→ To show true and fair view of financial statements− If depreciation is not
charged, assets are shown at higher value than their actual value in the
Balance Sheet; consequently, the Balance Sheet does not reflect true and
fair view of financial statements.
→ For ascertaining the accurate cost of production− Depreciation on plant and
machinery and other assets, which are engaged in production, is included in
the cost of production. If depreciation is not included, cost of production is
underestimated, which will lead to low sale price leading to low profit.
→ Distribution of dividend out of profit− If depreciation is not charged, profit will
be overestimated because of which more profit will be distributed as dividend, out of
capital instead of the profit. This leads to the flight of scarce capital out of the business.
→ To provide funds for replacement of assets− Unlike other expenses,
depreciation is not a cash expense. So, the amount of depreciation charged
will be retained in the business and will be used for replacement of fixed
assets after its useful life.

→ Consideration of tax− If depreciation is charged, then Profit and Loss Account
will disclose lesser profit as to when the depreciation is not charged. This
depicts reduced profit and thus the business will be liable for lesser tax
amount.

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Q3 What are the causes of depreciation?

Answer. Following are the various caused of depreciation:
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.
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.
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.
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. For example, if a land is acquired for Rs 1,00,000 for 25 years on lease,
then each year its value depreciates. At the end of the 25th year, the value of the
lease will be zero.
Accident− An asset may lose its value and damage may happen to it due to
mishaps such as a fire accident, theft or a natural calamity. The loss due to accident
is permanent in nature.
Permanent fall in value− Generally, we do not record fluctuations in the market
price of the fixed assets in the books. However, if the fall in market price is
permanent, it is accounted, which leads to a fall in the value of fixed assets in the
books.

Page : 270 , Block Name : Short Answer

Q4 Explain basic factors affecting the amount of depreciation.

Answer. Factors affecting the amount of depreciation are:

Total cost of asset− The total cost of an asset is taken into consideration for
ascertaining the amount of depreciation. The expenses incurred in acquiring,
installing and constructing asset and bringing the asset to its usable condition are
included in the total cost of asset.
Estimated useful life− Every asset has its useful life other than its physical life (in
terms of number of years, units, etc.), used by a business. The useful life of an asset
is considered to estimate the effective life of a fixed asset. For example, land has
indefinite life; however, if business acquiress a piece of land on lease for 25 years,
then the useful life of the piece of land is considered to be 25 years.
Estimated scrap value− It is estimated as the net realisable value or sale value of
an asset at the end of its effective life. It is deducted from the total cost of an asset.
For example, furniture is acquired at Rs 50,000 and its effective life is 10 years.

Page : 270 , Block Name : Short Answer

Q5 Distinguish between straight line method and written down value method of calculating
depreciation.
Answer.

Basis of Difference Straight Line Method Written Down Value Method
Basis for calculation Depreciation is calculated on the Depreciation is calculated on the
original cost of an asset. reducing balance, i.e., the book
value of an asset.
Amount of Equal amount is charged each Diminishing amount of
depreciation year over the effective life of the depreciation (on the written down
asset. value of asset) is charged each
year over the effective life of the
asset.
Book value of asset Book value of the asset becomes Book value of the asset can never
zero at the end of its effective life. be zero.
Suitability It is suitable for the assets like It is suitable for assets that needs
patents, copyright, land and more repair in the later years like,
buildings, etc., which have lesser plant and machinery, car, etc.
possibility of obsolescence and
lesser repair charges.
Effect of depreciation Unequal effect over the life of the Equal effect over the life of the
and repair on profit asset, as depreciation remains asset, as depreciation cost is high
and loss account same over the years but repair and repairs are less in the initial
cost increases in the later years. years but in the latter years the
repair costs increase and

depreciation cost decreases.
Recognition under It is not recognised under the It is recognised under the income
Income Tax Act income tax act. tax act.

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Q6 In case of a long term asset, repair and maintenance expenses are expected to rise in later
years than in earlier year. Which method is suitable for charging depreciation if the management
does not want to increase burden on profits and loss account on account of depreciation and
repair.

Answer. If the management does not want to exert undue burden on the profits due to high
depreciation and repair costs in the latter years of the assets, then ‘written down method’ should
be a preferred method to provide depreciation. This is because the cost of depreciation reduces;
whereas, repair and maintenance expenses increase in the latter years. However, on the whole,
it does not exert increasing burden on profits.

Page : 270 , Block Name : Short Answer

Q7 What are the effects of depreciation on profit and loss account and balance sheet?

Answer. The effects of depreciation on Profit and Loss Account are given below-
→ Depreciation increases the debit side of profit and loss account and hence reduces net
profit.
→ Depreciation increases the total expenses, leading to an excess of debit over credit
balance.
The effects of depreciation on Balance Sheet are given below-
→ It reduces the original cost or book value of the concerned asset.
→ It reduces the overall balance of asset’s column in the balance sheet.

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Q8 Distinguish between provision and reserve.

Answer.

Basis of Difference Provision Reserve
Meaning It is created to meet the known It is created to meet unknown
liability. liability.
Nature Provision is charged against Reserve is appropriation of the
profit. profit.
Purpose It is created for a specific liability. It is created for strengthening
the financial position.
Mode of creation It is created by debiting the profit It is created by debiting the
and loss account. profit and loss appropriation
account.
Use for payment of It cannot be used for payment of It can be used for payment of
dividend dividends. dividends.
Creation Creation of provision is Creation of reserve depends on
compulsory. It is created even if the discretion of the
there is no profit. management. It is created only
when there is profit.

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Q9 Give four examples each of provision and reserves.

Answer. Four examples of provision are given below.
→ Provision for bad and doubtful debts
→ Provision for discount on debtors
→ Provision for depreciation
→ Provision for taxation

Four examples of reserve are given below.
→ General reserve
→ Capital reserve

→ Dividend equalisation reserve
→ Debenture redemption reserve

Page : 270 , Block Name : Short Answers

Q10 Distinguish between revenue reserve and capital reserve.

Answer.

Basis of Difference Revenue Reserve Capital Reserve
Source It is created out of revenue It is created out of capital profit,
profit, i.e., revenue earned from i.e., gain from other than normal
normal activities of business activities of business operations,
operations. such as sale of fixed assets, etc.
Dividend It can be used for dividend. It cannot be used for dividend.
Purpose It is created for strengthening It is created for the purpose laid
the financial position of the down in the Companies Act.
business.

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Q11 Give four examples each of revenue reserve and capital reserves.

Answer. Four examples of revenue reserve are given below.
→ General Reserve
→ Retained Earnings
→ Dividend Equalisation Reserve
→ Debenture Redemption Reserve

Four examples of capital reserve are given below.
→ Issues of shares at premium
→ Profit or issue of shares
→ Sale of fixed assets

→ Profit on redemption of debentures

Page : 270 , Block Name : Short Answer

Q12 Distinguish between general reserve and specific reserve.

Answer.

Basis of Difference General Reserve Specific Reserve
Meaning When the reserve is created When reserve is created for some
without any specified purpose, the specific purpose, the reserve is
reserve is called general reserve. called specific reserve.
Usage It can be used for any purpose. It cannot be used for any purpose
other than the specified purpose
for which it is created.
Examples Retained earnings, reserve funds, Debenture redemption reserve,
etc. dividend equalisation reserve, etc.

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Q13 Explain the concept of secret reserve.

Answer. Reserves that are created by overstating liabilities or understating assets are known as
secret reserves. They are not shown in the balance sheet. These reduce tax liabilities, as the
liabilities are overstated. It is created by management to avoid competition by reducing profit.
Creation of secret reserve is not allowed by Companies Act, 1956 that requires full disclosure of
all material facts and accounting policies while preparing final statements.

Page : 270 , Block Name : Short Answer

Q1 Explain the concept of depreciation. What is the need for charging depreciation and what
are the causes of depreciation?

Answer. Every business acquires fixed assets for its use in the business over a period of time.
As the benefits of these assets can be availed over a long period of time (due to their regular
use), there exists continuous wear and tear and consequently fall in their value. This fall in the
value of fixed assets (due to regular use or expiry of time) is termed as depreciation.
Needs for charging depreciation are given below:
To ascertain true net profit or net loss− Correct profit or loss can be ascertained
when all the expenses and losses incurred for earning revenues are charged to
profit and loss account. Assets are used for earning revenues and its cost is charged
in form of depreciation from profit and loss account.
To show true and fair view of financial statements− If depreciation is not charged,
assets are shown at higher value than their actual value in the balance sheet;
consequently, the balance sheet does not reflect true and fair view of financial
statements.
For ascertaining the accurate cost of production− Depreciation on plant and
machinery and other assets, which are engaged in production, is included in the
cost of production. If depreciation is not included, cost of production is
underestimated, which will lead to low sale price and thus leads to low profit.
Distribution of dividend out of profit− If depreciation is not charged, which leads to
overestimating of profit and consequently more profit is distributed as dividend, out
of capital instead of the profit. This leads to the flight of scarce capital out of the
business.
To provide funds for replacement of assets− Unlike other expenses, depreciation is
not a cash expense. So, the amount of depreciation charged will be retained in the
business and will be used for replacement of fixed assets after its useful life.
Consideration of tax− If depreciation is charged, then profit and loss account will
disclose lesser profit as to when the depreciation is not charged. This depicts
reduced profit and thus the business will be liable for lesser tax amount.
Given below are the causes for depreciation.
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.
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.
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.
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. For example, if a land is acquired for Rs 1,00,000 for 25 years on lease,

then each year its value depreciates. At the end of the 25th year, the value of the
lease will be zero.
Accident− An asset may lose its value and damage may happen to it due to
mishaps such as a fire accident, theft or a natural calamity. The loss due to accident
is permanent in nature.
Permanent fall in value− Generally, we do not record fluctuations in the market
price of the fixed assets in the books. However, if the fall in market price is
permanent, it is accounted, which leads to a fall in the value of fixed assets in the
books.

Page : 270 , Block Name : Long Answer

Q2 Discuss in detail the straight line method and written down value method of depreciation.
Distinguish between the two and also give situations where they are useful.

Answer.
(1)Straight Line method
It is a simple method of charging depreciation. Under this method, depreciation is charged on
the original cost of an asset, at a fixed rate of percentage. In this method, amount of
depreciation remains same from year to year and asset’s value becomes zero at the end of its
useful life.
Advantages of Straight Line Method
→ It is simple to calculate.
→ Asset can be completely written off, i.e., asset can be depreciated until the net scrap
value is zero.
→ Same amount of depreciation is charged every year. Therefore, it helps in easy
comparison of Profit and Loss Account for different years.
→ It is used for assets that have low repairs and maintenance expenses and are
continuously used over a period of time.
Limitations of Straight Line Method
→ Burden of deprecation is more on profit and loss account in the later years, when repair
and maintenance costs increase, as asset becomes older.
→ Value of asset becomes zero in the books even if asset is still in usable condition in
business.
Uses of Straight Line Method

→ This method is useful where repairs and maintenance expenses on asset are low.
→ It is also useful when an asset is continuously used from one year to another.
→ It is useful when the value of assets, such as patent, copyright, goodwill, etc., becomes
zero
(2)Written Down Value Method
This method is applicable where depreciation is charged on the diminishing balance, i.e., book
value of the asset. In this method, asset’s value goes on diminishing year after year and the
amount of depreciation declines.
Advantages of Written Down Value Method
→ It is based on the logical assumption that asset is used more in the earlier years, so
more cost is charged in form of depreciation.
→ It is suitable for the assets where repairs are more in the later years, as depreciation is
lesser and on a whole the combined burden of depreciation and repairs exerts equal
pressure on the net profit over years.
→ This method is accepted by the income tax authorities.
→ As more depreciation is charged in the earlier years, so the loss due to obsolescence of
the asset is reduced.
Limitations of Written Down Value Method
→ It is difficult to calculate and is a time consuming process.
→ The value of an asset cannot be zero, thus the asset cannot be completely written off.
→ There arises shortage of funds for replacement of new asset. This happens due to the
fact that the amount of depreciation is retained and used in the business. Consequently,
at the end of the useful life of an old asset, business finds it difficult to arrange funds for
its replacement.
Uses of Written Down Value Method
→ It is useful when assets have long life.
→ It is useful for those assets that require more repair and maintenance costs in the later
years.
→ It provides easy calculation to provide depreciation of additional asset purchased during
a year.
Difference between Straight Line Method and Written Down Value Method

Basis of Difference Straight Line Method Written Down Method
Basis for calculation Depreciation is calculated on the Depreciation is calculated on the
original cost of an asset. reducing balance, i.e., the book

value of an asset.
Amount of Equal amount is charged each Diminishing amount of depreciation
depreciation year over the effective life of the (on the written down value of
asset. asset) is charged each year over
the effective life of the asset.
Book value of asset Book value of the asset becomes Book value of the asset can never
zero at the end of its effective life. be zero.
Suitability It is suitable for the assets like, It is suitable for assets that needs
patents, copyrights, land and more repairs and maintenance
buildings, etc., which have lesser costs in the later years like, plant
possibility of obsolescence and and machinery, car, etc.
lesser repair charges.
Effect of depreciation Unequal effect over the life of the Equal effect over the life of the
and repair on profit asset, as depreciation remains asset, as depreciation is high and
and loss account same over the years but repair repairs are less in the initial years
cost increases in the later years. but in the latter years the repair
cost increases and depreciation
cost decreases.
Recognition under It is not recognised under the It is recognised under the Income
Income Tax Act Income Tax Act. Tax Act.

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Q3 Describe in detail two methods of recording depreciation. Also give the necessary journal
entries.

Answer. The two methods of recording depreciation are given below:
Charging depreciation to Asset Account− Under this method, depreciation is directly
credited to the asset account and no separate account is prepared for provision of
depreciation. Under this method, the original cost of an asset and the total amount
of depreciation cannot be determined from the Balance Sheet, as the Asset Account
appears at its written down value.
Journal entries for depreciation are given below.
When depreciation is charged to Assets Account
Depreciation A/c Dr
.

To Assets A/c
(Being depreciation charged to
Assets Account)
Closing of Depreciation Account
Profit and Loss A/c Dr
.
To Depreciation A/c
(Being depreciation transferred to Profit and
Loss Account)
Creating Provision for Depreciation Account− Under this method, depreciation is not
credited to the Assets Account; in fact, it is credited to the provision for Depreciation
Account. At the year end, asset is shown at the original cost in the Balance Sheet
and total depreciation up to the date of Balance Sheet is shown as Provision for
Depreciation Account.
Journal entries for depreciation are:
Charging depreciation-
Depreciation A/c Dr.
To Provision for Depreciation A/c
(Being depreciation charged)
Closing of Depreciation Account-
Profit and Loss A/c Dr
.
To Depreciation A/c
(Being depreciation account transferred to Profit and Loss
Account)
When the asset is sold, the accumulated depreciation on that asset is credited to the Asset
Account by passing the following Journal entry:
Provision for Depreciation A/c Dr.
To Asset A/c
(Being accumulated depreciation
transferred to Assets Account)

Page : 270 , Block Name : Long Answer

Q4 Explain determinants of the amount of depreciation.

Answer. The determinants of the amount of depreciation are given below:
Total cost of asset− The total cost of an asset is taken into consideration for
ascertaining the amount of depreciation. The expenses incurred in acquiring,
installing and constructing of assets and bringing the assets to their usable
condition are included in the total cost of asset.
Estimated useful life− Every asset having it’s useful life other than it’s physical life,
in terms of number of years, units, etc. are considered to estimate the effective life
of a fixed asset. For example, land has indefinite life; however, if business acquires
a piece of land on lease for 25 years, it’s useful life is considered to be 25 years.
Estimated scrap value− It is estimated as the net realisable value or sale value of
an asset at the end of it’s effective life. It is deducted from the total cost of an
asset. For example, furniture is acquired at Rs 50,000 having estimated scrap value Rs.
10,000 and effective life of 10 years. Then the difference amount (40,000) is divided over 10
years in the form of depreciation.

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Q5 Name and explain different types of reserves in details.

Answer. Reserves− Reserves are created for strengthening the financial positions
and future growth. It is created out of profit earned by business.
Different types of reserves are given below:
Revenue Reserve− It is created out of revenue profit, i.e., revenue earned from
normal activities of the business. It can be used for either general purpose or
specific purpose. It is of two types:
a. General Reserve− When the reserve is created without any specified purpose,
then the reserve is called general reserve. It is a free reserve and so can be used for
any purpose. It can also be used for future growth and expansion. For example,
reserve funds, retained earnings, contingencies reserves, etc.
b. Specific Reserve− When reserve is created for some specific purpose, then the
reserve is called specific reserve.
Examples of specific reserve are given below.
→ Debenture Redemption Reserve
→ Investment Fluctuation Reserve
→ Dividend Equalisation Reserve

→ Workmen Compensation Fund
Capital Reserve− It is created out of capital profit, i.e., gain from other than normal
activities of business operations, such as sale of fixed asset, etc. It is created to
meet the capital loss. It cannot be distributed as dividend. The example of capital
reserves are given below.
→ Premium on issue of shares
→ Premium on issue of debentures
→ Profit on redemption of debentures
→ Profit on sale of fixed assets
→ Profit on reissue of forfeited shares
→ Profit prior to incorporation
Secret Reserves− Reserves that are created by overstating liabilities or understating
assets are known as secret reserves. They are not shown in the Balance Sheet.
These reduce tax liabilities, as the liabilities are overstated. It is created by
management to avoid competition by reducing profit. Creation of secret reserve is
not allowed by Companies Act, 1956, which requires full disclosure of all materials
facts and accounting policies, while preparing final statements.

Page : 271 , Block Name : Long Answer

Q6 What are provisions? How are they created? Give accounting treatment in case of provision
for doubtful Debts.
Answer. Provisions are the amount that is created against profit to meet the known liability;
however, the amount of liability is uncertain. It is created for specific liability. Creation of
provision is compulsory even if, there is no profit. The underlying principle behind creation of
provision is conservatism, viz., to prepare for future loss. The main rationale for making
provisions is to provide cushion to the future business performance against the uncertain and
unforeseen losses that may arise from the past transactions. A few examples of provisions are
given below.
→ Provision for bad and doubtful debts
→ Provision for depreciation
→ Provision for taxation
→ Provision for discount on debtors

Provisions are made by debiting the Profit and Loss Account on estimate basis. The provisions
are created on the basis of past experiences. Every year, a business may experience common
losses, such as depreciation of fixed assets, taxation, etc., which are although known; however,

their exact amount of future period is unknown. Thus, business creates provision of certain
percentage every year, which is truly based on the intuitions and past experiences. These
unascertained liabilities in form of provisions are kept aside, which help future business
activities, undisturbed from the future losses.
Accounting treatment for provision for doubtful debts is:
Profit and Loss A/c Dr
.
To Provision for Doubtful
Debts
(Being provision for doubtful
debt made)

Page : 271 , Block Name : Long Answer

Q1 On April 01, 2010, Bajrang Marbles purchased a Machine for Rs 2,80,000 and
spent Rs 10,000 on its carriage and Rs 10,000 on its installation. It is estimated that
its working life is 10 years and after 10 years its scrap value will be Rs 20,000.
(a) Prepare Machine account and Depreciation account for the first four years by
providing depreciation on a straight line method. Accounts are closed on March
31st every year.
(b) Prepare Machine account, Depreciation account and Provision for depreciation
account (or accumulated depreciation account) for the first four years by
providing depreciation using straight line method accounts are closed on March
31 every year.
Answer.
In the books of Bajrang Marbles
(a) Machinery Account
Dr. Cr.

Date Particulars J.F. Amount Date Particulars J.F. Amount
Rs Rs

2010 2011
April 1 To Bank A/c 3,00,00 March By Depreciation 28,000
0 31 A/c
March By Balance c/d 2,72,000
31

3,00,00 3,00,000
0

2011 2012
April 1 To Balance b/d 2,72,00 March By Depreciation 28,000
0 31 A/c
March By Balance c/d 2,44,000
31

2,72,00 2,72,000
0

2012 2013
April 1 To Balance b/d 2,44,00 March By Depreciation 28,000
0 31 A/c
March By Balance c/d 2,16,000
31

2,44,00 2,44,000
0

2013 2014
April 1 To Balance b/d 2,16,00 March By Depreciation 28,000
0 31 A/c
March By Balance c/d 1,88,000
31

216000 216000

Working notes: Calculation of annual depreciation
Annual depreciation = Original cost + carriage charges +
Installation charges - Scrap value
Estimated life
(280000+ 10000+ 10000-20000) /10
= 28000

Depreciation Account
Dr. Cr.

Date Particulars J.F Amount Date Particulars J.F Amount
. .
Rs Rs

2011 2011
March To Machinery A/c 28,000 March By Profit and Loss A/c 28,000
31 31

28,000 28,000

2012 2012
March To Machinery A/c 28,000 March By Profit and Loss 28,000
31 31 A/c

28,000 28,000

2013 2013
March To Machinery A/c 28,000 March By Profit and Loss 28,000
31 31 A/c

28,000 28,000

2014 2014
March To Machinery A/c 28,000 March By Profit and Loss 28,000
31 31 A/c

28,000 28,000

(b)

Machinery Account
Dr. Cr.

Date Particulars J.F Amoun Date Particulars J.F Amount
. t .
Rs
Rs

2010 2011
April 1 To Bank A/c 3,00,0 March By Balance c/d 3,00,00
00 31 0

3,00,0 3,00,00
00 0

2011 2012
April 1 To Balance b/d 3,00,0 March By Balance c/d 3,00,00
00 31 0

3,00,0 3,00,00
00 0

2012 2013
April 1 To Balance b/d 3,00,0 March By Balance c/d 3,00,00
00 31 0

3,00,0 3,00,00
00 0

2013 2014
April 1 To Balance b/d 3,00,0 March By Balance c/d 3,00,00
00 31 0

3,00,0 3,00,00
00 0

Provision for Depreciation Account
Dr. Cr.

Date Particulars J.F Amoun Date Particulars J.F Amount
. t .
Rs
Rs

2011 2011
March To Balance c/d 28,000 March By Depreciation A/c 28,000
31 31

28,000 28,000

2011
April 1 By Balance b/d 28,000
2012 2012
March To Balance c/d 56,00 March By Depreciation A/c 28,000
31 0 31

56,000 56,000

2012
April 1 By Balance b/d 56,000
2013 2013
March To Balance c/d 84,00 March By Depreciation A/c 28,000
31 0 31

84,000 84,000

2013
April 1 By Balance b/d 84,000
2014 2014
March To Balance c/d 1,12,0 March By Depreciation A/c 28,000
31 00 31

1,12,0 1,12,00
00 0

Depreciation Account
Dr. Cr.

Date Particulars J.F Amount Date Particulars J.F. Amount
.
Rs Rs

2011 2011
March To Provision for 28,000 March By Profit and Loss 28,000
31 Depreciation A/c 31 A/c

28,000 28,000

2012 2012
March To Provision for 28,000 March By Profit and Loss 28,000
31 Depreciation A/c 31 A/c

28,000 28,000

2013 2013
March To Provision for 28,000 March By Profit and Loss 28,000
31 Depreciation A/c 31 A/c

28,000 28,000

2014 2014
March To Provision for 28,000 March By Profit and Loss 28,000
31 Depreciation A/c 31 A/c

28,000 28,000

Page : 271 , Block Name : Numerical Problems

Q2 On July 01, 2010, Ashok Ltd. Purchased a Machine for Rs 1,08,000 and spent Rs
12,000 on its installation. At the time of purchase it was estimated that the effective
commercial life of the machine will be 12 years and after 12 years its salvage value
will be Rs 12,000.
Prepare machine account and depreciation Account in the books of Ashok Ltd. For
first three years, if depreciation is written off according to straight line method. The
account are closed on December 31st, every year.
Answer.

Books of Ashok Ltd.
Machinery A/c
Dr. Cr.

Date Particulars J.F. Amount Date Particulars J.F. Amount
Rs Rs

2010 2010
July 1 To Bank A/c 1,20,000 Dec By Depreciation A/c 4,500
31
Dec By Balance c/d 1,15,500
31

1,20,000 1,20,000

2011 2011
Jan 1 To Balance b/d 1,15,500 Dec By Depreciation A/c 9,000
31
Dec By Balance c/d 1,06,500
31

1,15,000 1,15,500

2012 2012
Jan 1 To Balance b/d 1,06,500 Dec By Depreciation A/c 9,000
31
Dec By Balance c/d 97,500
31

1,06,500 1,06,500

2013
Jan 1 To Balance b/d 97,500

Depreciation Account
Dr. Cr.

Date Particulars J.F. Amount Date Particulars J.F. Amount
Rs Rs

2010 2010
Dec 31 To Machinery A/c 4,500 Dec By Profit and Loss 4,500
31 A/c

4,500 4,500

2011 2011
Dec 31 To Machinery A/c 9,000 Dec By Profit and Loss 9,000

31 A/c

9,000 9,000

2012 2012
Dec 31 To Machinery A/c 9,000 Dec By Profit and Loss 9,000
31 A/c

9,000 9,000

Working Note:
Calculation of annual depreciation
(1,08,000 + 12,000 –
Annual
= 12,000)
Depreciation
12 years
= Rs. 9000
Page : 271 , Block Name : Numerical Problems

Q3 Reliance Ltd. Purchased a second hand machine for Rs 56,000 on October 01,
2011 and spent Rs 28,000 on its overhaul and installation before putting it to
operation. It is expected that the machine can be sold for Rs 6,000 at the end of its
useful life of 15 years. Moreover an estimated cost of Rs 1,000 is expected to be
incurred to recover the salvage value of Rs 6,000. Prepare machine account and
Provision for depreciation account for the first three years charging depreciation by
fixed Instalment Method. Accounts are closed on March 31, every year.
Answer.

Books of Reliance Ltd.
Machinery Account
Dr. Cr.

Date Particulars J.F. Amount Date Particulars J.F. Amount
Rs Rs

2011 2011

Oct 1 To Bank A/c 84,000
Dec 31 By Balance c/d 84,000

84,000 84,000

2012 2012
Jan 1 To Balance b/d 84,000
Dec 31 By Balance c/d 84,000

84,000 84,000

2013 2013
Jan 1 To Balance b/d 84,000
Dec 31 By Balance c/d 84,000

84,000 84,000

Provision for Depreciation Account
Dr. Cr.

Date Particulars J.F. Amount Date Particulars J.F. Amount
Rs Rs

2011
Dec 31 By Depreciation 1,316
A/c
2011
Dec 31 To Balance c/d 1,316

1,316 1,316

2012
Jan 1 By Balance b/d 1,316

2012 Dec 31 By Depreciation 5,267
A/c
Dec 31 To Balance c/d 6,583

6,583 6,583

2013
Jan 1 By Balance b/d 6,583
2013 Dec 31 By Depreciation 5,267
A/c
Dec 31 To Balance c/d 11,850

11,850 11,850

2014
Jan 1 By Balance b/d 11,850

Working Note:
Calculation of annual depreciation
Annual depreciation = (56000+ 28000 +1000 - 6000)/15
= 5267
Page : 271 , Block Name : Numerical Problems

Q4 Berlia Ltd. Purchased a second hand machine for Rs 56,000 on July 01, 2015 and
spent Rs 24,000 on its repair and installation and Rs 5,000 for its carriage. On
September 01, 2016, it purchased another machine for Rs 2,50,000 and spent Rs
10,000 on its installation.
(a) Depreciation is provided on machinery @10% p.a on original cost method
annually on December 31. Prepare machinery account and depreciation account
from the year 2015 to 2018.
(b) Prepare machinery account and depreciation account from the year 2015 to
20018, if depreciation is provided on machinery @10% p.a. on written down value
method annually on December 31.
Answer.
(a)

Books of Berlia Ltd.
Machinery Account (Original Cost Method)
Dr. Cr.

Date Particulars J.F. Amount Date Particulars J.F. Amount
Rs Rs

2015 2015
July 1 To Bank A/c (M1) 85,000 Dec By Depreciation A/c 4,250
31
(5,6000 + 24,000 + Dec By Balance c/d 80,750
5,000) 31

85,000 85,000

2016 2016
Jan 1 To Balance b/d 80,750 Dec By Depreciation A/c
31
Sep 1 To Bank A/c (M2) 2,60,000 M1 8,500 17,167
M2 8,667
(2,50,000 + 10,000) Dec By Balance c/d 3,23,583
31
M1
72,250
M2
2,51,333

3,40,750 3,40,750

2017 2017
Jan.01 To Balance b/d 3,23,583 Dec.3 Depreciation
1
M1 M1 8,500 34,500
72,250
M2 26,000
M2
2,51,333

Dec.3 Balance c/d
1
M1 2,89,083
63,750
M2
2,25,333

3,23,583 3,23,583

2018 To Balance b/d 2018
Jan.01 M1 2,89,083 Dec.3 By Depreciation A/c
63,750 M2 1
2,25,333
M1 8,500 34,500
M2
26,000
Dec.3 By Balance c/d
1
M1 2,54,583
55,250 M2
1,99,333

2,89,083 2,89,083

Depreciation Account
Dr. Cr.

Date Particulars J.F. Amount Date Particulars J.F. Amount
Rs Rs

2015 2015
Dec 31 To Machinery A/c 4,250 Dec 31 By Profit and Loss 4,250
A/c

4,250 4,250

2016 2016
Dec 31 To Machinery A/c Dec 31 By Profit and Loss 17,167
A/c
17,167

17,167 17,167

2017 2017
Dec 31 To Machinery A/c 34,500 Dec 31 By Profit and Loss 34,500
A/c

34,500 34,500

2018 2018
Dec 31 To Machinery A/c 34,500 Dec 31 By Profit and Loss 34,500
A/c

34,500 34,500

Working notes: Calculation of annual depreciation
(i) Annual Depreciation on Machinery Purchased on July 01, 2015
(56,000 + 24,000 + 5,000) ×10/100 = ₹8500
(ii)Annual Depreciation on Machinery purchased on September 01, 2016.
(2,50,000 + 10,000) ×10/100 = ₹26000
(b)

Machinery Account (Written Down Value method)

Dr. Cr.

Date Particulars J.F. Amount Date Particulars J.F. Amount
Rs Rs

2015 2015
Jul.01 To Bank A/c(i) 85,000 Dec.3 By Depreciation A/c 4,250
1
(5,600 + 24,000 + Dec.3 By Balance c/d 80,750
5,000) 1

85,000 85,000

2016 2016
Jan.01 To Balance b/d (i) 80,750 Dec.3 By Depreciation A/c
1
Sep.0 To Bank A/c (ii) 2,60,000 (i) 16,742
1 8,075
(ii)
8,667
(2,50,000 + 10,000) Dec.3 By Balance c/d
1
(i) 3,24,008
72,675
(ii)
2,51,333

3,40,750 3,40,750

2017 2017
Jan.01 To Balance b/d 3,24,008 Dec.3 By Depreciation A/c
1
(i) 72,675 (i) 7,268 32,401
(ii) (ii)
2,51,333 25,133
Dec.3 By Balance c/d
1

(i) 2,91,607
65,407 (ii)
2,26,200

3,24,008 3,24,008

2018 To Balance b/d 2018
Jan.01 (i) 2,91,607 Dec.3 By Depreciation A/c
65,407 1
(ii)
2,26,200
(i) 6,540 29,160
(ii)
22,620
Dec.3 By Balance c/d
1
(i) 58,867 2,62,447
(ii)
2,03,580

2,91,607 2,91,607

Depreciation Account
Dr. Cr.

Date Particulars J.F. Amount Date Particulars J.F. Amount
Rs
Rs

2015 2015
Dec To Machinery A/c 4,250 Dec 31 By Profit and Loss 4,250
31 A/c

4,250 4,250

2016 2016

Dec To Machinery A/c Dec 31 By Profit and Loss 16,742
31 A/c
16,742

16,742 16,742

2017 2017
Dec To Machinery A/c Dec 31 By Profit and Loss 32,401
31 A/c
32,401

32,401 32,401

2018 2018
Dec To Machinery A/c Dec 31 By Profit and Loss 29,160
31 A/c
29,160

29,160 29,160

Page : 271 , Block Name : Numerical Problems

Q5 Ganga Ltd. purchased a machinery on January 01, 2014 for Rs 5,50,000 and
spent Rs 50,000 on its installation. On September 01, 2014 it purchased another
machine for Rs 3,70,000. On May 01, 2016 it purchased another machine for Rs
8,40,000 (including installation expenses).
Depreciation was provided on machinery @10% p.a. on original cost method
annually on December 31. Prepare:
(a) Machinery account and depreciation account for the years 2014, 2015, 2016 and
2017.

(b) If depreciation is accumulated in provision for Depreciation account then prepare
machine account and provision for depreciation account for the years 2014, 2015,
2016 and 2017.
Answer.
the years 2014, 2015, 2016 and 2017.
(a)
In the books of Ganga Ltd.
Machinery Account
Dr. Cr.

Date Particulars J.F. Amount Date Particulars J.F. Amount
Rs Rs

2014 2014
Jan 1 To Bank A/c (M1) 6,00,000 Dec By Depreciation A/c 72,333
31
M1 60,000
M2 12,333
(5,50,000 + Dec By Balance c/d
50,000) 31
Sep 1 To Bank A/c (M2) 3,70,000 M1 8,97,667
5,40,000
M2
3,57,667

9,70,000 9,70,000

2015 2015
Jan 1 To Balance b/d Dec By Depreciation A/c
31
8,97,667 M1
60,000 M2
37,000
May 1 To Bank A/c (M3) 8,40,000 M3 1,53,000
56,000
Dec By Balance c/d

31
M1
4,80,000
M2
3,20,667
M3 15,84,667
7,84,000

17,37,667 17,37,667

2016 2016
Jan 1 To Balance b/d 1584667 Dec By Depreciation A/c
31
M1 60,000
M2 37,000
M3 84,000 1,81,000
Dec By Balance c/d
31
M1
4,20,000
M2
2,83,667
M3 14,03,667
7,00,000

15,84,667 15,84,667

2017 2017
Jan 1 To Balance b/d 14,03,667 Dec By Depreciation A/c
31
M1 60,000
M2
37,000
M3 84,000 1,81,000
Dec By Balance c/d

31
M1
3,60,000
M2
2,46,667
M3 12,22,667
6,16,000

14,03,667 14,03,667

Depreciation Account
Dr. Cr.

Date Particulars J.F. Amount Rs Date Particulars J.F. Amount
Rs

2014 2014
Dec To Machinery A/c 72,333 Dec By Profit and Loss 72,333
31 31 A/c

72,333 72,333

2015 2015
Dec To Machinery A/c 1,53,000 Dec By Profit and Loss 1,53,000
31 31 A/c

1,53,000 1,53,000

2016 2016
Dec To Machinery A/c 1,81,000 Dec By Profit and Loss 1,81,000
31 31 A/c

1,81,000 1,81,000

2017 2017
Dec To Machinery A/c 1,81,000 Dec By Profit and Loss 1,81,000
31 31 A/c

1,81,000 1,81,000

(b)

Machinery Account
Dr. Cr.

Date Particulars J.F. Amount Date Particulars J.F. Amount
Rs Rs

2014 2014
Jan 1 To Bank A/c (M1) 6,00,000
(5,50,000 + Dec By Balance c/d
50,000) 31
Sep 1 To Bank A/c (M2) 3,70,000 9,70,000

9,70,000 9,70,000

2015 2015
Jan 1 To Balance b/d 9,70,000

May 1 To Bank A/c (M3) 8,40,000 Dec By Balance c/d 18,10,000
31

18,10,000 18,10,000

2016 2016
Jan 1 To Balance b/d 18,10,000 Dec By Balance c/d 18,10,000
31

18,10,000 18,10,000

2017 2017
Jan 1 To Balance b/d 18,10,000 Dec By Balance c/d 18,10,000
31

18,10,000 18,10,000

Provision for Depreciation Account
Dr. Cr.

Date Particulars J.F. Amount Date Particulars J.F. Amount
Rs Rs

2014 2014
Dec 31 To Balance c/d 72,333 Dec By Depreciation A/c 72,333
31

72,333 72,333

2015
2015 Jan 1 By Balance b/d 72,333
Dec 31 To Balance c/d 2,25,333 Dec By Depreciation A/c 1,53,000
31

2,25,333 2,25,333

2016
2016 Jan 1 By Balance b/d 2,25,333
Dec 31 To Balance c/d 4,06,333 Dec By Depreciation A/c 1,81,000
31

4,06,333 4,06,333

2017
2017 Jan 1 By Balance b/d 4,06,333
Dec 31 To Balance c/d 5,87,333 Dec By Depreciation A/c 1,81,000
31

5,87,333 5,87,333

Page : 272 , Block Name : Numerical Problems

Q6 Azad Ltd. purchased furniture on October 01, 2014 for Rs 4,50,000. On March
01, 2015 it purchased another furniture for Rs 3,00,000. On July 01, 2016 it sold off
the first furniture purchased in 2014 for Rs 2,25,000. Depreciation is provided at
15% p.a. on written down value method each year. Accounts are closed each year
on March 31. Prepare furniture account, and accumulated depreciation account for
the years ended on March 31, 2015, March 31, 2016 and March 31, 2017. Also give
the above two accounts if furniture disposal account is opened.
Answer.

In the books of Azad Ltd.
Furniture Account
Dr. Cr.

Date Particulars J.F. Amount Date Particulars J.F. Amount
Rs
Rs

2014 2015
Oct 1 To Bank A/c (i) 4,50,000

2015 March By Balance c/d 7,50,000
31
March To Bank A/c (ii) 3,00,000
1

7,50,000 7,50,000

2015 2016
April 1 To Balance b/d 7,50,00 March By Balance c/d
0 31
(i)
450000
7,50,000
(ii)
300000

7,50,000 7,50,000

2016 2016
April 1 To Balance b/d 7,50,000 July 1 By Furniture 4,50,000
Disposal A/c
2005
March By Balance c/d 3,00,000
31 (ii)

7,50,000 7,50,000

Accumulated Depreciation Account
Dr. Cr.

Date Particulars J.F. Amount Date Particulars J.F. Amount
Rs Rs

2015 2015

March To Balance c/d 37,500 March By Depreciation
31 31 A/c
(i) 37,500
33,750
(ii) 3,750

37,500 37,500

2016 2015
March To Balance c/d 1,44,37 April 1 By Balance b/d 37,500
31 6
2016
March By Depreciation
31 A/c
(i) 1,06,876
62,438
(ii)
44,378

1,44,37 1,44,376
6

2016 2016
July 1 To Furniture 1,09,45 April 1 By Balance b/d 1,44,376
Disposal A/c 6
2017 July 1 By Depreciation 13,268
A/c (i)
March To Balance c/d 85,960 2017
31
March By Depreciation 37,772
31 A/c (ii)

1,95,41 1,95,416
6

Furniture Disposal Account
Dr. Cr.

Date Particulars J.F. Amount Date Particulars J.F. Amount
Rs
Rs

2016 2016
July 1 To Furniture A/c 4,50,00 July 1 By Accumulated 1,09,456
0 Depreciation A/c
July 1 By Bank A/c 2,25,000
July 1 By Profit and Loss 1,15,544
(Loss) A/c

4,50,00 4,50,000
0

Working Note:
Furniture (i)
Years Opening Depreciation Closing
Balance Balance
2014 – 2015 4,50,000 – 33,750 = 4,16,250
2015 – 2016 4,16,250 – 62,438 = 3,53,812
2016 3,53,812 – 13,268 (3 = 3,40,544
months)
1,09,45
6
Balance on July 01, 3,40,544
2016
Less: Sale on July 01, (2,25,000)
2016
Loss on sale of 1,15,544

furniture
Page : 272 , Block Name : Numerical Problems

Q7 M/s Lokesh Fabrics purchased a Textile Machine on April 01, 2011 for Rs
1,00,000. On July 01, 2012 another machine costing Rs 2,50,000 was purchased.
The machine purchased on April 01, 2011 was sold for Rs 25,000 on October 01,
2015. The company charges depreciation @15% p.a. on straight line method.
Prepare machinery account and machinery disposal account for the year ended
March 31, 2016.
Answer.

In the books of M/s. Lokesh Fabrics
Machinery Account
Dr. Cr.

Date Particulars J.F. Amount Date Particulars J.F. Amount
Rs Rs

2011 2012
April 1 To Bank A/c (i) 1,00,000 March By Depreciation A/c 15,000
31
March By Balance c/d 85,000
31

1,00,000 1,00,000

2012 2013
April 1 To Balance b/d 85,000 March By Depreciation A/c
31
July 1 To Bank A/c (ii) 2,50,000 (i) 15,000 43,125
(ii)
28,125
March By Balance c/d
31
(i) 70,000 2,91,875

(ii)
2,21,875

3,35,000 3,35,000

2013 2014
April 1 To Balance b/d March By Depreciation A/c
31
2,91,875 (i) 15,000 52,500
(ii) 37,500
March By Balance c/d
31
(i) 55,000 2,39,375
(ii)
1,84,375

2,91,875 2,91,875

2014 2015
April 1 To Balance b/d March By Depreciation A/c
31
2,39,375 (i) 15,000 52,500
(ii)
37,500
March By Balance c/d
31
(i) 40,000 1,86,875
(ii)
1,46,875

2,39,375 2,39,375

2015 2015

April 1 To Balance b/d 1,86,875 Oct 1 By Depreciation A/c 7,500
Oct 1 By Machinery 32,500
Disposal A/c
2016
March By Depreciation A/c 37,500
31 (ii)
March By Balance c/d 1,09,375
31

1,86,875 1,86,875

Machinery Disposal Account
Dr. Cr.

Date Particulars J.F. Amount Date Particulars J.F. Amount
Rs Rs

2015 2015
Oct 1 To Machinery A/c 32,500 Oct 1 By Bank A/c 25,000
Oct 1 By Profit and Loss 7,500
A/c

32,500 32,500

Page : 272 , Block Name : Numerical Problems

Q8 The following balances appear in the books of Crystal Ltd, on Jan 01, 2015
Rs
Machinery account on 15,00,00
0

Provision for depreciation 5,50,000
account
On April 01, 2015 a machinery which was purchased on January 01, 2012 for Rs
2,00,000 was sold for Rs 75,000. A new machine was purchased on July 01, 2015 for
Rs 6,00,000. Depreciation is provided on machinery at 20% p.a. on Straight line
method and books are closed on December 31 every year. Prepare the machinery
account and provision for depreciation account for the year ending December 31,
2015.
Answer.

Machinery Account
Dr. Cr.

Date Particulars J.F. Amount Date Particulars J.F. Amount
Rs Rs

2015 2015
Jan 1 To Balance b/d 15,00,00 April 1 By Machinery 2,00,000
0 Disposal A/c
(13,00,000 +
2,00,000)
July 1 To Bank A/c 6,00,000 Dec 31 By Balance c/d 19,00,000

21,00,00 21,00,000
0

Provision for Depreciation Account
Dr. Cr.

Date Particulars J.F. Amount Date Particulars J.F. Amount
Rs Rs

2015 2015
April 1 To Machinery 1,30,000 Jan 1 By Balance b/d 5,50,000
Disposal A/c
April 1 To Balance c/d 7,50,000 April 1 By Depreciation A/c 10,000
Dec 31 By Depreciation A/c

(i) 3,20,000
2,60,000
(ii)
60,000

8,80,000 8,80,000

Working Note:
Machine Sold on July 01, 2015
(i Years Opening Balance Depreciati Closing Balance
) on
(In ₹) (In ₹)
(In ₹)
2012 2,00,000 – 40,000 = 1,60,000
2013 1,60,000 – 40,000 = 1,20,000
2014 1,20,000 – 40,000 = 80,000
2015 80,000 – 10,000 = 70,000
Accumulated = 1,30,000
Depreciation

Value on April 01, = ₹
2015 (70,000)
Less: Sale = ₹
75,000
Profit on sale of ₹ 5,000
Machinery

Machinery Disposal Account
Dr. Cr.

Date Particulars J.F. Amount Date Particulars J.F. Amount
Rs
Rs

2015 2015
April 1 To Machinery A/c 2,00,00 April 1 By Provision for 1,30,00

0 Depreciation A/c 0
April To Profit and Loss 5,000 April By Bank A/c 75,000
1 (Profit) A/c 1

2,05,00 2,05,00
0 0

Page : 272 , Block Name : Numerical Problems

Q9 M/s. Excel Computers has a debit balance of Rs 50,000 (original cost Rs
1,20,000) in computers account on April 01, 2010. On July 01, 2010 it purchased
another computer costing Rs 2,50,000. One more computer was purchased on
January 01, 2011 for Rs 30,000. On April 01, 2014 the computer which has
purchased on July 01, 2010 became obsolete and was sold for Rs 20,000. A new
version of the IBM computer was purchased on August 01, 2014 for Rs 80,000.
Show Computers account in the books of Excel Computers for the years ended on
March 31 2011, 2012, 2013, 2014 and 2015. The computer is depreciated @10 p.a.
on straight line method basis.
Answer.

In the books of M/s Excel Computers
Computer Account
Dr. Cr.

Date Particulars J.F. Amount Date Particulars J.F. Amount
Rs Rs

2010 2011
April 1 To Balance b/d (i) 50,000 March By Depreciation A/c
31
July 1 To Bank A/c (ii) 2,50,00 (i) 12,000
0
(ii) 18,750

2011 (iii) 750 31,500
Jan 1 To Bank A/c (iii) 30,000 March By Balance c/d
31
(i) 38,000
(ii)
2,31,250
(iii) 29,250 2,98,50
0

3,30,00 3,30,00
0 0

2011 2012
April 1 To Balance b/d 2,98,50 March By Depreciation A/c
0 31
(i) 12,000
(ii) 25,000
(iii) 3,000 40,000
March By Balance c/d
31
(i) 26,000
(ii)
2,06,250
(iii) 26,250 2,58,50
0

2,98,50 2,98,50
0 0

2012 2013
April 1 To Balance b/d 2,58,50 March By Depreciation A/c
0 31
(i) 12,000 40,000
(ii) 25,000
(iii) 3,000

March By Balance c/d
31
(i) 14,000
(ii)
1,81,250
(iii) 23,250 2,18,50
0

2,58,50 2,58,50
0 0

2013 2014
April 1 To Balance b/d March By Depreciation A/c
31
(i) 14,000 (i) 12,000 40,000
(ii) (ii) 25,000
1,81,250
(iii) 23,250 2,18,50 (iii) 3,000
0
March By Balance c/d
31
(i) 2,000
(ii)
1,56,250
(iii) 20,250 1,78,50
0

2,18,50 2,18,50
0 0

2014 2014
April 1 To Balance c/d April 1 By Bank A/c (ii) 20,000
(i) 2,000 April 1 By Profit and Loss 1,36,25
A/c (Loss) 0
(ii) 1,56,250
(iii) 20,250 1,78,50 2015
0

Aug 1 To Bank A/c (iv) 80,000 March By Depreciation A/c 10,333
31
(i) 2,000
(iii) 3,000
(iv) 5,333
March By Balance c/d
31
(iii) 17,250 91,917
(iv) 74,667

2,58,50 2,58,50
0 0

Page : 272 , Block Name : Numerical Problems

Q10 Carriage Transport Company purchased 5 trucks at the cost of Rs 2,00,000
each on April 01, 2011. The company writes off depreciation @ 20% p.a. on original
cost and closes its books on December 31, every year. On October 01, 2013, one of
the trucks is involved in an accident and is completely destroyed. Insurance
company has agreed to pay Rs 70,000 in full settlement of the claim. On the same
date the company purchased a second hand truck for Rs 1,00,000 and spent Rs
20,000 on its overhauling. Prepare truck account and provision for depreciation
account for the three years ended on December 31, 2013. Also give truck account if
truck disposal account is prepared.
Answer.

In the books of Carriage Transport Company
Truck Account
Dr. Cr.

Date Particulars J.F. Amount Date Particulars J.F. Amount
Rs Rs

2011 2011

April 1 To Bank A/c 10,00,000 Dec 31 By Balance c/d 10,00,000

10,00,000 10,00,000

2012 2012
Jan 1 To Balance b/d 10,00,000 Dec 31 By Balance c/d 10,00,000

10,00,000 10,00,000

2013 2013
Jan 1 To Balance b/d 10,00,000 Oct 1 By Truck Disposal 2,00,000
A/c
Oct 1 To Bank A/c 1,20,000 Dec 31 By Balance c/d 9,20,000

11,20,000 11,20,000

Provision for Depreciation Account
Dr. Cr.

Date Particulars J.F. Amount Date Particulars J.F. Amount
Rs Rs

2011 2011
Dec 31 To Balance c/d 1,50,000 Dec 31 By Depreciation A/c 1,50,000

1,50,000 1,50,000

2012 2012
Dec 31 To Balance c/d 3,50,000 Jan 1 By Balance c/d 1,50,000
Dec 31 By Depreciation A/c 2,00,000

3,50,000 3,50,000

2013 2013
Oct 1 To Truck Disposal 1,00,000 Jan 1 By Balance b/d 3,50,000
A/c
Oct 1 To Balance c/d 4,46,000 Oct 1 By Depreciation A/c 30,000
(9 Months)
Dec 31 By Depreciation A/c
(1,60,000 + 6,000) 1,66,000

5,46,000 5,46,000

Truck Disposal Account
Dr. Cr.

Date Particulars J.F. Amount Date Particulars J.F. Amount
Rs Rs

2013 2013
Oct 1 To Truck A/c 2,00,000 Oct 1 By Provision for 1,00,000
Depreciation A/c
Oct 1 By Insurance Co. 70,000
(Insurance Claim)
Oct 1 By Profit and Loss 30,000
A/c (Loss)

2,00,000 2,00,000

Working Note:
Truck involved in accident

Opening Balance Depreciatio Closing
n Balance
Apr.01, 2,00,000 – 30,000 = 1,70,000
2011
Jan.01, 1,70,000 – 40,000 = 1,30,000
2012
Jan.01, 1,30,000 – 30,000 = 1,00,000
2013
Accumulated = 1,00,000
Depreciation

Value on Oct.01, = 1,00,00
2013 0
Less: Insurance = 70,000
Claim
Loss on 30,000
Accident

Page : 273 , Block Name : Numerical Problems

Q11 Saraswati Ltd. purchased a machinery costing Rs 10,00,000 on January 01,
2011. A new machinery was purchased on 01 May, 2012 for Rs 15,00,000 and
another on July 01, 2014 for Rs 12,00,000. A part of the machinery which originally
cost Rs 2,00,000 in 2011 was sold for Rs 75,000 on October 31, 2014. Show the
machinery account, provision for depreciation account and machinery disposal
account from 2011 to 2015 if depreciation is provided at 10% p.a. on original cost
and account are closed on December 31, every year.
Answer.

In the books of Saraswati Ltd.
Machinery Account
Dr. Cr.

Date Particulars J.F. Amount Date Particulars J.F. Amount
Rs Rs

2011 2011
Jan 1 To Bank A/c (i) 10,00,00

0
(8,00,000 + Dec 31 By Balance c/d 10,00,00
2,00,000) 0

10,00,00 10,00,00
0 0

2012 2012
Jan 1 To Balance b/d 10,00,00 Dec 31 By Balance c/d 25,00,00
0 0
May 1 To Bank A/c (ii) 15,00,00
0

25,00,00 25,00,00
0 0

2013 2013
Jan 1 To Balance b/d 25,00,00 Dec 31 By Balance c/d 25,00,00
0 0

25,00,00 25,00,00
0 0

2014 2014
Jan 1 To Balance b/d 25,00,00 Oct 31 By Machinery 2,00,000
0 Disposal A/c
July 1 To Bank A/c (ii) 12,00,00 Dec 31 By Balance c/d
0
(i)
8,00,000 (ii)
15,00,000
(iii) 35,00,00
12,00,000 0

37,00,00 37,00,00
0 0

2015 2015
Jan 1 To Balance c/d 35,00,00 Dec 31 By Balance c/d 35,00,00
0 0

35,00,00 35,00,00
0 0

Provision for Depreciation Account
Dr. Cr.

Date Particulars J.F. Amount Date Particulars J.F. Amount
Rs
Rs

2011 2011
Dec 31 To Balance c/d 1,00,000
Dec By Depreciation 1,00,000
31 A/c(i)

1,00,000 1,00,000

2012 2012
Dec 31 To Balance c/d 3,00,000 Jan 1 By Balance c/d 1,00,000
Dec By Depreciation A/c
31
(i) 2,00,000
1,00,000 (ii)
1,00,000
(8
months)

3,00,000 3,00,000

2013 2013
Dec 31 To Balance b/d 5,50,000 Jan 1 By Balance c/d 3,00,000
Dec By Depreciation A/c 2,50,000

31

5,50,000 (i) 5,50,000
1,00,000 (ii)
1,50,000

2014 2014
Oct 31 To Machinery 76,667 Jan 1 By Balance b/d 5,50,000
Disposal A/c
Dec 31 To Balance c/d 7,80,000 Oct 31 By Depreciation A/c 16,667
Dec By Depreciation A/c
31
(i)
80,000 (ii)
1,50,000
(iii) 2,90,000
60,000

8,56,667 8,56,667

2015 2015
Dec 31 To Balance c/d 11,30,00 Jan 1 By Balance c/d 7,80,000
0
Dec By Depreciation A/c
31
(i)
80,000 (ii)
1,50,000
(iii) 3,50,000
1,20,000

11,30,00 11,30,00
0 0

Machinery Disposal Account

Dr. Cr.

Date Particulars J.F. Amount Date Particulars J.F. Amount
Rs Rs

2014 2014
Oct To Machinery A/c 2,00,000 Oct 31 By Depreciation A/c 76,667
31
Oct 31 By Bank A/c 75,000
Oct 31 By Profit and Loss 48,333
A/c (Loss)

2,00,000 2,00,000

Working Note:
Opening Balance Closing
Depreciation
Balance
2011 2,00,000 – 20,000 = 1,80,000
2012 1,80,000 – 20,000 = 1,60,000
2013 1,60,000 – 20,000 = 1,40,000
2014 1,40,000 – 16,667 = 1,23,333
Accumulated
76,667
Depreciation

Value on Oct. 01, 2004 1,23,333
Sale on Oct. 01, 2004 – 75,000
Loss on sale Rs
48,333

Page : 273 , Block Name : Numerical Problems

Q12 On July 01, 2011 Ashwani purchased a machine for Rs 2,00,000 on credit.
Installation expenses Rs 25,000 are paid by cheque. The estimated life is 5 years
and its scrap value after 5 years will be Rs 20,000. Depreciation is to be charged on
straight line basis. Show the journal entry for the year 2011 and prepare necessary
ledger accounts for first three years.
Answer.

In the books of Ashwani
Journal

Debit Credit
Date Particulars L.F. Amount Amount
(In ₹) (In ₹)

2011
July 1 Machinery A/c Dr. 2,25,000
To Creditors for Machinery A/c 2,00,000
To Bank A/c 25,000
(Being Machinery bought on credit and installation
charges paid through cheque)

2011
Dec 31 Depreciation A/c Dr. 20,500
To Machinery A/c 20,500
(Being Depreciation charged on Machinery)

2011
Dec 31 Profit and Loss A/c Dr. 20,500
To Depreciation A/c 20,500
(Being Depreciation transferred to Profit and
Loss Account)

2012
Dec 31 Depreciation A/c Dr. 41,000

To Machinery A/c 41,000
(Being Depreciation charged on Machinery)

2012
Dec 31 Profit and Loss A/c Dr. 41,000
To Depreciation A/c 41,000
(Being Depreciation transferred to Profit and
Loss Account)

2013
Dec 31 Depreciation A/c Dr. 41,000
To Machinery A/c 41,000
(Being Depreciation charged on Machinery)
2013
Dec Profit and Loss A/c Dr. 41,000
31
To Depreciation A/c 41,000
(Being Depreciation transferred to Profit and
Loss Account)

In the books of Ashwani
Journal

Debit Credit
Date Particulars L.F. Amount Amount
(In ₹) (In ₹)

2011
July 1 Machinery A/c Dr. 2,25,000
To Creditors for Machinery A/c 2,00,000
To Bank A/c 25,000

(Being Machinery bought on credit and installation
charges paid through cheque)

2011
Dec 31 Depreciation A/c Dr. 20,500
To Machinery A/c 20,500
(Being Depreciation charged on Machinery)

2011
Dec 31 Profit and Loss A/c Dr. 20,500
To Depreciation A/c 20,500
(Being Depreciation transferred to Profit and
Loss Account)

2012
Dec 31 Depreciation A/c Dr. 41,000
To Machinery A/c 41,000
(Being Depreciation charged on Machinery)

2012
Dec 31 Profit and Loss A/c Dr. 41,000
To Depreciation A/c 41,000
(Being Depreciation transferred to Profit and
Loss Account)

2013
Dec 31 Depreciation A/c Dr. 41,000
To Machinery A/c 41,000
(Being Depreciation charged on Machinery)
2013
Dec Profit and Loss A/c Dr. 41,000

31
To Depreciation A/c 41,000
(Being Depreciation transferred to Profit and
Loss Account)

Ledger account
Machinery Account
Dr. Cr.

Date Particulars J.F. Amount Date Particulars J.F. Amount
Rs Rs

2011 2011
July 1 To Creditors for 2,00,000 Dec 31 By Depreciation A/c 20,500
Machinery A/c
July 1 To Bank A/c 25,000 Dec 31 By Balance c/d 2,04,500

2,25,000 2,25,000

2012 2012
Jan 1 To Balance b/d 2,04,500 Dec 31 By Depreciation A/c 41,000
Dec 31 By Balance c/d 1,63,500

2,04,500 2,04,500

2013 2013
Jan 1 To Balance c/d 1,63,500 Dec 31 By Depreciation A/c 41,000
Dec 31 By Balance c/d 1,22,500

1,63,500 1,63,500

Working Note:
Calculation of annual depreciation
Annual Depreciation
=(2,00,000 + 25,000 – 20,000)/5
= ₹ 41,000

Page : 273 , Block Name : Numerical Problems

Q13 On October 01, 2010, a Truck was purchased for Rs 8,00,000 by Laxmi
Transport Ltd. Depreciation was provided at 15% p.a. on the diminishing balance
basis on this truck. On December 31, 2013 this Truck was sold for Rs 5,00,000.
Accounts are closed on 31st March every year. Prepare a Truck Account for the four
years.
Answer.

In the books of Laxmi Transport Ltd.
Truck Account
Dr. Cr.

Date Particulars J.F. Amount Date Particulars J.F. Amount
Rs Rs

2010 2011
Oct 1 To Bank A/c 8,00,000 March By Depreciation A/c 60,000
31
March By Balance c/d 7,40,000
31

8,00,000 8,00,000

2011 2012
April 1 To Balance b/d 7,40,000 March By Depreciation A/c 1,11,000
31
March By Balance c/d 6,29,000

31

7,40,000 7,40,000

2012 2013
April 1 To Balance b/d 6,29,000 March By Depreciation A/c 94,350
31
March By Balance c/d 5,34,650
31

6,29,000 6,29,000

2013 2013
April 1 To Balance b/d 5,34,650 Dec 31 By Depreciation A/c 60,148
(9 months)
Dec To Profit and Loss 25,498 Dec 31 By Bank A/c 5,00,000
31 A/c (Profit)

5,60,148 5,60,148

Page : 273 , Block Name : Numerical Problems

Q14 Kapil Ltd. purchased a machinery on July 01, 2011 for Rs 3,50,000. It purchased
two additional machines, on April 01, 2012 costing Rs 1,50,000 and on October 01,
2012 costing Rs 1,00,000. Depreciation is provided @10% p.a. on straight line basis.
On January 01, 2013, first machinery become useless due to technical changes. This
machinery was sold for Rs 1,00,000, prepare machinery account for 4 years on the
basis of calendar year.
Answer.

In the books of Kapil Ltd.
Machinery Account
Dr. Cr.

Date Particulars J.F. Amount Date Particulars J.F. Amount
Rs Rs

2011 2011
July 1 To Bank A/c (i) 3,50,00 Dec By Depreciation A/c (6 17,500
0 31 months)
Dec By Balance c/d 3,32,500
31

3,50,00 3,50,000
0

2012 2012
Jan 1 To Balance c/d 3,32,50 Dec By Depreciation A/c
0 31
April To Bank A/c(ii) 1,50,00 (i) 35,000
1 0
(ii) 11,250 (9
months)
Oct 1 To Bank A/c (iii) 1,00,00 (iii) 2,500 (3 48,750
0 months)
Dec By Balance c/d
31
(i) 2,97,500
(ii) 1,38,750
(iii) 97,500 5,33,750

5,82,50 5,82,500
0

2013 2013
Jan 1 Jan 1 By Bank A/c(i) 1,00,000
To balance b/d 5,33,75 Jan 1 By Profit and Loss A/c 1,97,500
0 (Loss)
Dec By Depreciation A/c

31
(ii) 15,000 25,000
(iii) 10,000
Dec By Balance c/d
31
(ii) 1,23,750 2,11,250
(iii) 87,500

5,33,75 4,33,750
0

2014 2014
Jan 1 To Balance c/d 2,11,25 Dec By Depreciation A/c
0 31
(ii) 15,000 25,000
(iii) 10,000
Dec By Balance c/d
31
(ii) 1,08,750 1,86,250
(iii) 77,500

2,11,25 2,11,250
0

2015
Jan 1 To Balance b/d 1,86,25
0

Page : 273 , Block Name : Numerical Problems

Q15 On January 01, 2011, Satkar Transport Ltd, purchased 3 buses for Rs 10,00,000
each. On July 01, 2013, one bus was involved in an accident and was completely
destroyed and Rs 7,00,000 were received from the Insurance Company in full
settlement. Depreciation is writen off @15% p.a. on diminishing balance method.

Prepare bus account from 2011 to 2014. Books are closed on December 31 every
year.
Answer.

In the books of Satkar Transport Ltd.
Bus Account
Dr. Cr.

Date Particulars J.F. Amount Date Particulars J.F. Amount
Rs Rs

2011 2011
Jan 1 To Bank A/c 30,00,00 Dec 31 By Depreciation A/c 4,50,000
0
Dec 31 By Balance c/d 25,50,000

30,00,00 30,00,000
0

2012 2012
Jan 1 To Balance b/d 25,50,00 Dec 31 By Depreciation A/c 3,82,500
0
Dec 31 By Balance c/d 21,67,500

25,50,00 25,50,000
0

2013 2013
Jan 1 To Balance b/d 21,67,50 July 1 By Depreciation A/c 54,187
0 (6 months)
July 1 To Profit and Loss 31,687 July 1 By Insurance Co. 7,00,000
A/c (Profit) (Insurance claim)
Dec 31 By Depreciation A/c 2,16,750
Dec 31 By Balance c/d 12,28,250

21,99,18 21,99,187

7

2014 2014
Jan 1 To Balance c/d 12,28,25 Dec 31 By Depreciation A/c 1,84,237
0
Dec 31 By Balance c/d 10,44,013

12,28,25 12,28,250
0

Page : 274 , Block Name : Numerical Problems

Q16 On October 01, 2011 Juneja Transport Company purchased 2 Trucks for Rs
10,00,000 each. On July 01, 2013, One Truck was involved in an accident and was
completely destroyed and Rs 6,00,000 were received from the insurance company
in full settlement. On December 31, 2013 another truck was involved in an accident
and destroyed partially, which was not insured. It was sold off for Rs 1,50,000. On
January 31, 2014 company purchased a fresh truck for Rs 12,00,000. Depreciation is
to be provided at 10% p.a. on the written down value every year. The books are
closed every year on March 31. Give the truck account from 2011 to 2014.
Answer.

In the books of Juneja Transport Company
Truck Account
Dr. Cr.

Date Particulars J.F. Amount Date Particulars J.F. Amount
Rs Rs

2011 2012
Oct 1 To Bank A/c 20,00,000 March By Depreciation 1,00,000
31 A/c
March By Balance c/d 19,00,000
31

20,00,000 20,00,000

2012 2013
April 1 To Balance b/d 19,00,000 March By Depreciation 1,90,000
31 A/c
March By Balance c/d 17,10,000
31

19,00,000 19,00,000

2013 2013
April 1 To Balance b/d 17,10,000 July 1 By Depreciation 21,375
A/c(3 Month on one
Truck)
July 1 By Bank A/c 6,00,000
(Insurance Claim)
2014 July 1 By Profit and Loss 2,33,625
A/c (loss)
Jan 31 To Bank A/c 12,00,000
Dec 31 By Depreciation 64,125
A/c(9 Month on II
Truck)
Dec 31 By Bank A/c 1,50,000
Dec 31 By Profit and Loss 6,40,875
A/c (Loss)
2014
March By Depreciation 20,000
31 A/c (2 Months)
March By Balance c/d 11,80,000
31

29,10,000 29,10,000

Working notes
Truck – 1
Opening – Depreciation = Closing
Balance Balance
Oct.01, 10,00,000 – 50,000 (6 Months) = 9,50,000
2011
Apr.01, 9,50,000 – 95,000 = 8,55,000
2012
Apr.01, 8,55,000 – 21,375 (3 Months) = 8,33,625
2013

Value on July 01, 2013 = 8,33,625
Insurance Claim = – 6,00,000
Loss on Truck – 1 = Rs
2,33,625
Truck – 2
Opening – Depreciation = Closing
Balance Balance
Oct.01, 10,00,000 – 50,000 (6 Months) = 9,50,000
2012
Apr.01, 9,50,000 – 95,000 = 8,55,000
2012
Apr.01, 8,55,000 – 64,125 (9 Months) = 7,90,875
2013

Value on Dec.31, 2013 = 7,90,875
Sale of Truck = – 1,50,000
Loss on Truck – 2 = Rs
6,40,875
Page : 274 , Block Name : Numerical Problems

Q17 A Noida based Construction Company owns 5 cranes and the value of this asset
in its books on April 01, 2017 is Rs 40,00,000. On October 01, 2017 it sold one of its
cranes whose value was Rs 5,00,000 on April 01, 2017 at a 10% profit. On the same
day it purchased 2 cranes for Rs 4,50,000 each. Prepare cranes account. It closes
the books on December 31 and provides for depreciation on 10% written down
value.
Answer.

Cranes Account
Dr. Cr.

Date Particulars J.F Amount Date Particulars J.F. Amount
.
Rs Rs

2017 2017
April To Machinery A/c 40,00,00 Oct 1 By Depreciation A/c 25,000
1 (35,00,000 + 0
5,00,000)
Oct 1 To Profit and Loss 47,500 Oct 1 By Bank A/c 5,22,500
A/c (Profit)
Oct 1 To Bank A/c 9,00,000 Dec By Depreciation A/c
31
10 9
35,00,00 =
10 ×1
0× 2,62,500
0 2
10 6 2,85,000
9,00,000 =
× 10 ×1 22,500
0 2
Dec By Balance c/d
31
32,37,500 + 8,77,500 41,15,00
0

49,47,50 49,47,50
0 0

Page : 274 , Block Name : Numerical Problems

Q18 Shri Krishan Manufacturing Company purchased 10 machines for Rs 75,000
each on July 01, 2014. On October 01, 2016, one of the machines got destroyed by
fire and an insurance claim of Rs 45,000 was admitted by the company. On the
same date another machine is purchased by the company for Rs 1,25,000.
The company writes off 15% p.a. depreciation on written down value basis. The
company maintains the calendar year as its financial year. Prepare the machinery
account from 2014 to 2017.
Answer.

In the books of Shri Krishna Manufacturing Company
Machinery Account
Dr. Cr.

Date Particulars J.F. Amount Date Particulars J.F. Amount
Rs Rs

2014 2014
July 1 To Bank A/c 7,50,000 Dec 31 By Depreciation A/c 56,250
Dec 31 By Balance c/d 6,93,750

7,50,000 7,50,000

2015 2015
Jan 1 To Balance b/d 6,93,750 Dec 31 By Depreciation A/c 1,04,063
Dec 31 By Balance c/d 5,89,687

6,93,750 6,93,750

2016 2016
Jan 1 To Balance b/d 5,89,687 Oct 1 By Depreciation A/c 6,634
(9 months

for one machine)
Oct 1 To Bank A/c 1,25,000 Oct 1 By Insurance Co. 45,000
Oct 1 By Profit and Loss 7,335
A/c (Loss)
Dec 31 By Depreciation A/c
(i) 79,608 84,296
(ii) 4,688
Dec 31 By Balance c/d
(i) 5,71,422
4,51,110
(ii)
1,20,312

7,14,687 7,14,687

2017 2017
Jan 1 To Balance b/d 5,71,42 Dec 31 By Depreciation A/c
2
(i) 67,667 85,714
(ii) 18,047
Dec 31 By Balance c/d
(i) 4,85,708
3,83,443
(ii)
1,02,265

5,71,422 5,71,422

Working Note:
Machine Costing Rs 75,000 sold on Oct.01, 2002

Opening – Depreciation = Closing Balance
Balance
Jul.01, 2014 75,000 – 5,625 = 69,375
(6 months)
Jan.01, 2015 69,375 – 10,406 = 58,969
Jan.01, 2016 58,969 – 6,634 = 52,335
(9 months)

Value on Oct.01, 52,335
2016
Insurance Claim – 45,000
Loss Rs 7,335
Page : 274 , Block Name : Numerical Problems

Q19 On January 01, 2014, a Limited Company purchased machinery for Rs
20,00,000. Depreciation is provided @15% p.a. on diminishing balance method. On
March 01, 2016, one fourth of machinery was damaged by fire and Rs 40,000 were
received from the insurance company in full settlement. On September 01, 2016
another machinery was purchased by the company for Rs 15,00,000.
Write up the machinery account from 2016 to 2017. Books are closed on December
31, every year.
Answer.

Machinery Account
Dr. Cr.

Date Particulars J.F. Amount Date Particulars J.F. Amount
Rs Rs

2016 2016
Jan 1 To Balance b/d (i) 14,45,000 March By Depreciation A/c 9,031
1 (1/4 Machine
(10,83,750 +
3,61,250) for 2 Months)
Sep 1 To Bank A/c (ii) 15,00,000 March By Bank A/c 40,000
1

March By Profit and Loss 3,12,219
1 A/c
Dec 31 By Depreciation A/c
(i)
(i) 2,37,563
1,62,563
(3/4th of
machine)
(ii) 75,000
Dec 31 By Balance c/d
(i) 23,46,18
9,21,187 7
(ii)
14,25,000

29,45,000 29,45,00
0

2017 2017
Jan 1 Balance b/d 23,46,18 Dec 31 By Depreciation A/c
7
(i) 3,51,927
1,38,177
(ii)
2,13,750
Dec By Balance c/d
31
(i) 19,94,26
7,83,009 0
(ii)
12,11,250

23,46,187 23,46,18
7

Working Note:
Machine (i)
Years January Depreciati = Closing
01 on Balance
(15% p.a.)
2014 20,00,00 – 3,00,000 = 17,00,000
0
2015 17,00,00 – 2,55,000 = 14,45,000
0
2016 14,45,00
0

1/4th of Machine (i)
Years Opening Depreciation = Closing
Balance Balance
(15% p.a.)
2014 5,00,000 – 75,000 = 4,25,000
2015 4,25,000 – 63,750 = 3,61,250
2016 3,61,250 – 9,031 (2 = 3,52,219
months)

Value on 1 Mar. 2016 = 3,52,219
Insurance Claim = 40,000
Loss Rs 3,12,219
Page : 274 , Block Name : Numerical Problems

Q20 A Plant was purchased on 1st July, 2015 at a cost of Rs 3,00,000 and Rs 50,000
were spent on its installation. The depreciation is written off at 15% p.a. on the
straight line method. The plant was sold for Rs 1,50,000 on October 01, 2017 and
on the same date a new Plant was installed at the cost of Rs 4,00,000 including
purchasing value. The accounts are closed on December 31 every year.
Show the machinery account and provision for depreciation account for 3 years

Answer.

Plant Account
Dr. Cr.

Date Particulars J.F. Amount Date Particulars J.F. Amount
Rs Rs

2015 2015
July 1 To Bank A/c 3,50,000 Dec 31 By Balance c/d 3,50,000

3,50,000 3,50,000

2016 2016
Jan 1 To Balance b/d 3,50,000
Dec 31 By Balance c/d 3,50,000

3,50,000 3,50,000

2017 2017
Jan 1 To Balance b/d 3,50,000 Oct 1 By Provision for 1,18,125
Depreciation A/c
Oct 1 To Bank A/c 4,00,000 Oct 1 By Bank A/c 1,50,000
Oct 1 By Profit and Loss 81,875
A/c
Dec 31 By Balance c/d 4,00,000

7,50,000 7,50,000

Provision for Depreciation Account
Dr. Cr.

Date Particulars J.F. Amount Date Particulars J.F. Amount
Rs Rs

2015 2015
Dec To Balance c/d 26,250 Dec 31 By Depreciation A/c 26,250
31

26,250 26,250

2016 2016
Dec To Balance b/d 78,750 Jan 1 By Balance c/d 26,250
31
Dec 31 By Depreciation A/c 52,500

78,750 78,750

2017 2017
Oct 1 To Plant A/c 1,18,12 Jan 1 By Balance b/d 78,750
5
Dec To Balance c/d 15,000 Oct 1 By Depreciation A/c 39,375
31 (i) (9 months)
Dec 31 By Depreciation A/c 15,000
(ii) (3 months)

1,33,12 1,33,125
5

Page : 275 , Block Name : Numerical Problems

Q21 An extract of Trial balance from the books of Tahiliani and Sons Enterprises on
Marc 31 2017 is given below:
Name of the Account Debit Credit
Amoun Amoun
t t

Rs Rs
Sundry debtors 50,000
Bad debts 6,000
Provision for doubtful 4,000
debts
Additional Information:
Bad Debts proved bad; however, not recorded amounted to Rs 2,000.
Provision is to be maintained at 8% of debtors
Give necessary accounting entries for writing off the bad debts and creating the
provision for doubtful debts account. Also, show the necessary accounts.
Answer.
Journal

Debit Credit
Date Particulars L.F. Amount Amount
Rs Rs

Bad Debt A/c Dr. 2,000
To Debtors A/c 2,000
(Further bad debt charged from Debtors Account)

Provision for Doubtful Debt A/c Dr. 8,000
To Bad Debt A/c 8,000
(Amount of bad debt transferred to
Provision for Doubtful Debt Account)
Profit and Loss A/c Dr. 7,840
To Provision for Doubtful Debt A/c 7,840
(Amount of Provision for Doubtful Debt
transferred
to Profit and Loss Account)

Bad Debt Account

Dr. Cr.

Date Particulars J.F. Amount Date Particulars J.F. Amount
Rs Rs

2017 2017
March To Balance b/d 6,000 March By Provision for
31 31 Doubtful
March To Debtors A/c 2,000 Debt A/c 8,000
31

8,000 8,000

Debtors Account
Dr. Cr.

Date Particulars J.F. Amount Date Particulars J.F. Amount
Rs Rs

2017 2017
March 31 To Balance b/d 50,000 March By Bad Debts A/c 2,000
31
March By Balance c/d 48,000
31

50,000 50,000

Provision for Doubtful Debts Account
Dr. Cr.

Date Particulars J.F. Amount Date Particulars J.F. Amount
Rs Rs

2017 2017

31 To Bad Debt A/c 8,000 April 1 By Balance b/d 4,000
March (6,000 + 2,000)
31 To Balance c/d 3,840 March By Profit and Loss 7,840
March 31 A/c

11,840 11,840

Page : 275 , Block Name : Numerical Problems

Q22 The following information is extracted from the Trial Balance of M/s Nisha
Traders on 31 March 2017.
Sundry Debtors 80,500
Bad Debts 1,000
Provision for Bad 5,000
Debts
Additional Information
Bad Debts Rs 500
Provision is to be maintained at 2% of Debtors
Prepare bad debts account, Provision for bad debts account and profit and loss
account.
Answer.

Bad Debts A/c
Dr. Cr.

Date Particulars J.F. Amount Date Particulars J.F. Amount
Rs Rs

2017 2017
March To Balance b/d 1,000 March By Provision for 1,500
31 31 Bad Debts A/c

March To Debtors A/c 500
31

1,500 1,500

Provision for Bad debt Account
Dr. Cr.

Date Particulars J.F. Amount Date Particulars J.F. Amount
Rs Rs

2017 2017
March To Bad Debt A/c 1,500 March By Balance b/d 5,000
31 31
March To Profit and Loss 1,900
31 A/c
March To Balance c/d 1,600
31

5,000 5,000

Profit and Loss Account
Dr. Cr.

Date Particulars J.F. Amount Date Particulars J.F. Amount
Rs Rs

2017
March By Provision for 1,900
31 Bad Debts A/c

Page : 275 , Block Name : Numerical Problems