--------=~-=:_-======-----

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Practical Illus trati ons

1. State with reasons, whether the following statements are True or False
1 --------..---~---~:=:i:
Statements ::------
Reasoning
T/F
• t· n
Deprecta 10 Is charged on value ·of Fixed Assets over th-;-
c ·t I E
useful life. By way of Deprec1.at1on, •
. apt a xpend'1ture is
1. Depreciation is an Amortised Expenditure. amortis ed over the useful life of Depreciable Asset.
Note: The term "Depreciation" is used for i:angible Assets Will
True
be the term "Amortisation" is used for Intangible Assets.
2. Reducing Balance Method of Depreciation is In the early periods, Repairs and ~aintenance Expenses a-;
followed to have a uniform charge for relatively low because the asset ts new. Whereas_ in later
Depreciation and Repairs and Maintenance periods, as the Asset becomes old, _R. & . M . increase
together. True continuously. Under WDV Method, D~prec1at1on 1s h_1gh in thes
~--- ---- ---- ---- 1--_ J~i~ ni~ tia~ l~pe::n~·o~d~a
~nd:,:r:..:e::.du:.::c:..:e=-s~co:...n_ti~nu_o:-u_sl~y-:m-::t-:-h-:e-=-:la::--=te:-r~pe:-r-:1od_s_.__
3. Providing Depreciation ensures sufficient Depreciation ensures sufficient cash for Asset Replacement.
cash for Asset Replacement. However it is also question able whether amount set aside by
True way of Depreciation will always be sufficie~t to replace an
Asset, because of price rise and other economic reasons.
4. Depreciation cannot be provided in case of Depreciation is a charge against Pro~t . and not an
loss, in a Financial Year. appropriation of profit. Therefo~e, ~epr~1at1on has to be
False provided for, even in case of loss ma
Financial Year.
5. Land is also a Depreciable Asset. Land is not a Depreciable Asset because its useful life is n;-
False limited
to few years. ••
6. Depreciation is a .cash Expenditure like False Depreciation is not a cash Expend
iture like other normal
Other Normal Expenses. expenses, as it does not result in any cash outflow.
7. Depreciation is a process of allocation of the Depreciation is allocated so as to charge a fair proportion of
Cost of Fixed Asset. the depreciable amount in each accounting period during the
True expected
useful life of the Asset.
8. Depreciable amount refers to difference Depreciable amount refers to Historical Cost less Salvage
between Historical Cost & Market Value. False Values.
9. Depreciation is a Non cash Expense and True Depreciation
is a Non cash Expense and does not result in any
does not result in any cash Outflow. [N 18] cash Outflow.

fi. •From the following data,~yoii are required to show the Fixed Asset and Depreciation Account.
• Cost of Machine • , 75 Lakhs, Useful Life ~ 7 years.
• Estimated Residual Value =t 5 Lakhs.
• The Company adopts SLM Method of Depreciation.
• . In the middle of the 5th year, the Machine was sold for , 32,00,000. _

Solution: Depreciation under Straight Line Method= (75 - 5) + 7 = f 10 Lakhs per annum.
1. Machinerv A/ c
Date Particulars f Date Particulars f
Year 1 Year 1
Beginning To Bank/ Asset Vendor Ne 75,00,000 End By Depreciation Ne 10,00,000 V
End By balance c/d 65,00,000 V
Total 75,00, 000
Total 75,00,000
Year 2 Year 2
Beginning To balance b/d 65,00,000 End By Depreciation Ne • 10,00,000 /
End By balance c/d 55,00,000
Total 65,00, 000
Total 65,00,000_

6.10
r~ - - - - - - - - - Depreciation
Particulars
pate f Date
v-; - Particulars f
year 3 To balance b/d
Year 3
g
6eginnin ss,00,000 End By Depreciation A/c 10,00,000 V
End By balance c/d 45,00,000 V
Total
ss,00 ,000 Total ss,00 ,000
ar 4 Year4
inning To balance b/d
45,00,000 End By Depreciation A/c 10,00,000 '
End By balance c/d 35,00,000
Total 45,00 ,000 Total 45,00 ,000
ar 5 Year S
inning To balance b/d 35,00,000 Middle By Bank (Sale Proceeds) 32,00,000
End To P&L A./c (Gain on Sale) 2,00, 000 V End By Depreciation (for half yr) 5,00,000
Total 37,00 ,000 Total 37,00 ,000

.
2 Depreciat·10n A/ C
.- Date Particulars f Date Particulars f
c.--Year 1 End To Machinery A/c 10,00,000 Year 1 End By Profit & Loss A/c 10,00,000
-Year 2 End To Machinery A/c 10,00,000 Year 2 End By Profit & Loss A/c 10,00,000
-Year 3 End To Machinery A/c 10,00,000 Year 3 End By Profit & Loss A/c 10,00,000
...-Year 4 End To Machinery A/c 10,00,000 Year 4 End By Profit & Loss A/c 10,00,000
--Year 5 End To Machinery A/c 5,00,000 Year 5 End By Profit & Loss A/c 5,00,000

Residual
on Straight Line assuming 10 years working life and zero
)· A Plant & Machinery costing f 10,00,000 is depreciated . The remai ning useful
inery was revalued upwards by f 40,000
Value, for four years. At the end of the fourth year, the Mach fifth year.
!~e
life was re-assessed at 8 years. Calculate Depreciation for

Solution:
= t 10,00,000
1. Depreciable Value = Original Cost - Residual Value = f 10,00,000 - Nil -,
= t 10,00,000 + 10 years = t 1,00,000
2. Depreciation amount per annum
= t 10,00,000 - (t 1,00,000 x 4 yrs) = f 6,00,000 /
3. Present Book Value (i.e. after four years)
= t 6,00,000 + t 40,000 = f 6,40,000 ✓
4. Revised Book Value (i.e. after Revaluation)
= Given = 8 years
5. Revised Useful Life
= t 6,40,000 + 8 years = t 80,000 ✓
6. Revised Depreciation amount per annum

Asset and Depreciation Account.

/4. From the following data, you are required to show the Fixed
ated Residual Value = f 5 Lakhs.
• Cost of Machine = f 75 Lakhs, Useful Life = 7 years. Estim
s the same to Provision for Depreciation Ale.
• The Company adopts SLM Method of Depreciation, and credit
000.
• In the middle of the 5th year, the Machine was sold for f 26,00,
= (75 - 5) + 7 = f 10 Lakhs per annum.
Solution: Depreciation under Straight Line ·Method
1. Machinery A/ c
Date Particulars f
Date Particulars f
Year 1 End By balance c/d 75,00,000
Year 1 Begin To Bank / Asset Vendor 75,00,000
Year 2 End By balance c/d 75,00,000
Year 2 Begin To balance b/d 75,00,000
Year 3 End By balance c/d 75,00,000
Year 3 Begin To balance b/d 75,00,000
Year 4 End By balance c/d 75,00,000
Year 4 Begin To balance b/d 75,00,000
Year 5 End By M/c Disposal A/c - tfr 75,00,000
Year 5 Begin To balance b/d 75,00,000

6.11
 Padhuka's Practical Learning Series Accounting - For CA Foundation

2. Provision for Depreciation A/ c

Date Particulars Date Particulars f
Year 1
End To balance c/d
' Year 1
End By Profit and Loss Ne 10,00,000
10,00,000
Total 10,00,00 0
Total 10,00,00 0
Year 2 Year 2
' End To balance c/d 20,00,000 Beginning By balance b/d 10,00,000
End By Profit and Loss A/c 10,00,000
Total 20,00,00 0 Total 20,00,000
Year 3 Year 3
End To balance c/d ' 30,00,000 Beginning By balance b/d 20,00,000
. End By Profit and Loss A/c 10,00,000
Total 30,00,00 0 Total 30,00,000
Year4 Year 4
End To balance c/d 40,00,000 Beginning By balance b/d 30,00,000
End By Profit and Loss Ne 10,00,000
Total 40,00,000 Total 40,00,00 0
Year 5 Year 5
Beginning By balance b/d 40,00,000
End To M/c Disposal Ne - tfr 45,00,000 / End By P&L Ne (dep for half-yr) 5,00,000
Total 45,00,00 0 Total 45,00,00 0

Date Particulars
.
3Mach"men• D"1sposaI A/ C
t Date Particulars t
Year 5 Year 5
End To Machinery (Cost Tfr) 75,00,00~,, Middle By Bank (Sale Proceeds) 26,00,000
End By Provision for Deprn (tfr) 45,00,000 V
End By P&L Ne (Loss on Sale) 4,00,000,V
Total 75,00,000 Total 75,00,00 0
Note: When asset is sold, the Cost of Asset and Accumulated Depreciation thereon is transferre
d to the Machinery Disposal
tyc, and the net Profit / Loss on sale is transferred to P&L Account.
'·
·-s.~ • From the following data, you are required to· show the Fixed Asset and Depreciation Account for 5
years.
/1 • Cost of Machine =f 5 Lakhs. Assume WDV Method of Depreciation and WDV Rate =16%
·• , At the end of the fifth year, the asset is sold for f 1,80,000. . . .
r
Solution: 1. Computation of Depreciation for each of the first 5 years is given below -
Particulars Yearl Year 2 Year3 Year4 Years
Cost/ Opg WDV 5,00,000 4,20,000 3,52,800 2,96,352 2,48,936
(-)Depreciation 5,00,000 X 16% 4,20,000 X 160/o 3,52,800 X 160/o
= 80,000 2,96,352 x16% 2,48,936 x16%
= 67,200 = 56,448 = 47,416 - 39,830
Cosing WDV 4,20,000 3,52,800 2,96,352 2,48,936 2,09,105
2. Machinerv A/ c
Date Particulars
Year 1
Beginning To Bank/ Asset Vendor Ne 5,00,000
Date
Year 1 ' Particulars

End By Depreciation Ne
t
80,000
End Bv balance c/d
Total 5,00,000 4,20,000
Total 5,00,000
Year 2 Year 2
Beginning To balance b/d 4,20,000 End By Depreciation Ne
End Bv balance c/d 67,200
. Total 4,20,000 3,52,800
Total 4,20,000

6.12
 Depreciation

Particulars Date Particulars t

1ear3
pate
. To balance b/d
'
3,52,8 00
Year 3
End By Depreciation A/c 56,44 8
eeginning 2,96,3 52
Bv balance c/d

---
End
3,52, 800 Total 3,52, 800
Total
Year 4 . .
year4 .. 2,96,3 52 End By Depreciation A/c 47,41 6
eeginning To balance b/d
End By balance c/d 2,48,9 36
2,96, 352 Total 2,96, 352
----
"yearS
Total

2,48,9 36
Year 5
End By Depreciation A/c (full yr)
39,83 0
eeginning To balance b/d 1,80,0 00
v' End By Bank (Sale Proceeds)
End - By P&L A/c (Loss on Sale)
29,10 6
2,48, 936
- Total 2,48, 936 Total
-
3. Depreciation A/c
Particulars t
Particulars t Date
Date 80,00 0
80,00 0 Year 1 End By Profit & Loss A/c
~

Year 1 End To Machinery A/c 67,20 0

67,200 Year 2 End By Profit & Loss A/c
Year 2 End To Machinery A/c 56,44 8
56,448 Year 3 End By Profit & Loss A/c
Year 3 End To Machinery A/c 47,41 6
47,416 Year 4 End By Profit & Loss A/c
Year 4 End To Machinery A/c 39,83 0
39,830 Year 5 End By Profit & Loss A/c
Year 5 End To Machinery A/c
: On 1st July 2020,'
371000 ·on 1st ·January~ 2020 and spent f 3,000 on its overhauling st
i • .A firm purchased an ·old Machinery for f 2020,
2022, the machinery which was purchased on 1 January
another machine was purchased for f 10,000. On 1 July
st
On 1st July, 2023, the machine
costing f 25,000 was purch ased.
was sold fort 28,000 and the same day a new machinery
2020 was sold for f 2,000. Depreciation is charged@ 10% per annum on straight line
f-'-' which was purchased on 1st July,
shing balance method with effect from 1 January, 2021 and
st the
''")} method. The firm changed the method and adopted dimini accou nt for
on 31 st December every year. Prepare Machinery
rate was Increased to 15% per annum. The books are closed ---~ •
fouryearsfrom 1st January,2020. -- - - ~-~ ----

Machinery Account
Date Particulars f
Date Particulars f
By Depreciation (WN 1) 4,500 '
01.01.2020 To Bank (Cost + Overhauling) ~ 40,00
0 31.12.2020
By Balance c/d 45,50 0 •
01.07.2020 To Bank -V 10,00 0 31.12.2020
50,00 0
50,00 0
By Depreciation (45,500x15%) (WN 2) 6,825
01.01.2021 To Balance b/d 45,50 ~ 31.12.2021
31.12.2021 By Balance c/d 38,67 5
45,50 0
45,50 0
-
By Bank A/c (Sale Proceeds) 28,00 0
01.01.2022 To Balance b/d 38,675,. /01.07 .2022
By Depreciation (WN 3) 5,381
01.07.2022 To Bank 25,000 31.12.2022
By Profit & Loss A/c (WN 4) 305
31.12.2022
✓

By Balance c/d 29,989

31.12.2022
- 63,67 5
63,67 5
By Bank 2,000 .,/
29,989 31.12.2023
_01.01.2023 To Balance b/d
By Profit & Loss A/C (WN 5)
4,349 /
31.12.2023 V
By Depreciation (WN 3)
3,984
31.12.2023
19,656 ./
31.12.2023 By Balance c/d
~

29,98 9
~
29,98 9
Working Notes :
Year Depn. for 25,000 (i.e. 10,000 x 10% x .!. ) = 4,500
1. Full Year Depn. for 50,000 (i.e. 40,000 x 10%) + Half 2
Estimate and hence
2• Any changes in Depreciation Method should be accounted for as a Change in an Accounting
depreciated prospectively.

6.13
 Padhuka's Practical Learning Series Accounting For CA Foundation
3 Depree·,a tion camputation for all the vears
Purchase on Purchase on Total
Purchase on
01.01.2020 01.01.2020 01.01.2022
Cost of Machinery on date of 10,000 25,000
40,000
Purchase
Less: Depreciation for 2020 4,000 10,000 X 10% X ½ NA 4,500
✓
- 500
WDVon 31.12.2020 36,000 9,500 NA 45,500
Less: Depreciation for 2021 at 15% ✓ 5,400 1,425 NA 6,825
WDV on 31.12.2021 30,600 8,075 NA 38,675
Depreciation for 2022 at 15% 30,600 X 15% X ½ 8,075 X 15% 25,000 X 15% X ½ 5,381
,./'I 2,295 -1,211 =1,875
WDVon 31.12.2022 WN 1 Sold 6,864 23,125 29,989
Depreciation for 2023 at 15% NA 6,864 X 15% X ½ 23,125 X 15%
- 515 =3,469
WDVon 31.12.2023 NA WN 2 Sold 19,656
Working Note:
1. WDV of Machinery sold as on 01.07.2022 ~ 28,305 - Sale Proceeds~ 28,000 = Loss on Sale t 305
2. WDV of Machinery sold as on 01.07.2023 t 6,349- Sale Proceeds t 2,000 = Loss on Sale t 4,349

Jt ABC Ltd purchased on 01.01.2018 second hand Plant for t30,000 and immediately spent t20,000 in overhauling it. On
01.07.2018, additional Machinery of a Cost of {'25,000 was purchased. On 01.07.2020, the Plant purchased on 01.01.2018
became obsolete and was sold for t10,000. On that date New Machinery was purchased at a Cost of t60,000. Depreciation
was provided for annually on 31 st December at 10% per annum on the Original Cost of the Asset. In 2021, however, the
company changed this method of providing Depreciation and adopted the method of writing off 15% on the Diminishing
Value. Show the Plant & Machinery Account as it would appear in the books of the Company for the Years 2018 to 2023. •

Solution: In the Books of ABC Ltd Plant & Machinerv Account

Date Particulars t Date Particulars ~
01.01.2018 To Bank (Cost + Overhauling) 50,000 31.12.2018 By Depreciation (WN 1) 6,250 V
01.07.2018 To Bank 25,000 31.12.2018 By Balance c/d 68,750 ✓
75,000 75,000
01.01.2019 To Balance b/d 68,750 31.12.2019 By Depreciation (75,000 x 10%) 7,500 V
31.12.2019 By'Balance c/d 61,250 V
68,750 68,750
01.01.2020 To Balance b/d 61,250 01.07~2020
,_ By Bank A/c (Sale Proceeds) 10,000 •I/
01.07.2020 To Bank 60,000 31.12.2020 By Depreciation (WN 2) 8,000
31.12.2020 By Profit & Loss A/c (WN 3) 27,500 LI
31.12.,2020 By Balance c/d 75,750 V
1,21,250
1,21,250
11,363 V
01.01.2021 To Balance b/d 75,750 31.12.2021 By Depn(WN 4) (75,750 x 15%)
31.12.2021 By Balance c/d V
64,387 1
75,750
75,750
01.01.2022 To Balance b/d 64,387 31.12.2022 By Depreciation (64,387 x 15%)
9,658
31.12.2022 By Balance c/d
54,729
64,387
64,387
01.01.2023 To Balance b/d 54,729 31.12.2023 By Depreciation (54,729 x 15%)
8,209 /
46,520 V
31.12.2023 By Balance c/d
54,729
54,729
Working Notes:
1. full Year Depn. for 50,000 (i.e. 50,000 x 10%) + Half Year Depn. for 25,000 (i.e. 25,000 x 10%x ! ) = 6 250
. 2 ,

6.14
 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - ~ o9ep~r~ec~ia~ti~o~n
-----
2
, FUii Year Depn. for 25,000 (i.e. 25,000x 10%) + Half Year Depn. for 50,000 & 60,000 (i.e. 1,10,000x 10%x ½) =8,000
LOSS on Sale of Plant
3, cost of the Plant on the date of Purchase, i.e. 01.01.2018 f 50,000
1,e51: Depreciation for 2.5 Years i.e. from 01.01.2018 to 01.07.2020 {50,000 x 10% x 2.5Years) f 12,500
WDV of Plant sold as on 01.07.2020 f37,5OO
Less: Sale Proceeds f 10,000
LOSS on Sale f27,5OO
Method should be accounted for as a Change in an Accounting Estimate prospectively.
4, AnY changes in Depreciation

4, •Acompany whose accoun_ting year is the Calendar Year purchased Machineries on 01.04.2021 costing t30,000. It further
{~ purchased a M~chine ~ostmg f20,000 on 01.10.2021 and another Machine costing t10,000 on 01.07.2022. On 01.01.2023,
of the Machlnenes which w~re purchased on 01.04.2021, one Machine costing f10,000 became obsolete and was sold for
'3,000. Show how the Machinery Account would appear for all the three years in the books of the Company after charging
Depreciation a~0% p.a. on Written Down Value Method.

soaut1on: 1. Com utation of De reciation

Machine purchased on - 01.04.2021 01.10.2021 01.07.2022 Total
Cost 30,000 20,000 10,000
L,eSS: 10% Depreciation for Year 2021 9 Months =2,250 3 Months =500 Nil 2,750
Written Down Value 27,750 19,500 10,000
l,esS: 10% Depreciation for Year 2022 1 Year =2,775 1 Year =1,950 6 Months =500 5,225
Written Down Value 24,975 17,550 9,500
&.ess: Machine sold (10,000 out of30,000) 1;3rdof 24,975 =8,325
Written Down Value 16,650 17,550 9,500
&.ess: 10% Depreciation for Year 2023 1 Year = 1,665 1 Year =1,755 1 Year =950 4,370

.
2 Mach"mer A/ C
Date Particulars f Date Particulars ~

01.04.2021 To Bank 30,000..i,,31.12.2021 By Depreciation 2,750 I V

01.10.2021 To Bank 20,00Q,, v31.12.2021 By Balance c/d 47,250 v
Total 50,000 Total 50,000
01.01.2022 To Balance b/d 47,250" ~1.12.2022 By Depreciation 5,225 •
01.07.2022 To Bank 10,00Q; '31.12.2022 By Balance c/d 52,025
Total 57,250 Total 57,250
01.01.2023 To Balance b/d 52,025 01.01.2023 By Bank 3,000 •V
V
By Profit & Loss A/c (Note) 5,325 V
By Depreciation 4,370
By Balance c/d 39,330
Total 52,025 Total 52,025

Note: Loss on Sale of Machinery = WDV on the date of Sale 8,325 Less Sale Proceeds 3,000 = Total f5,325.

1 The Machinery Ale of a Factory showed a balance of f1,90,000 on 01.01.2023. Its Accounts were made up on 31 st
December each year and Depreciation is written off at 10% p.a under the Diminishing Balance Method. On 01.06.2023, New
~ Machinery acquired at a Cost of ?28,000 and Installation Charges incurred in erecting the Machine works out to ~892 on
r the same date. On 01.06.2023, a Machine which had Cost ?6,000 on 01.01.2018 was sold for ~750, another Machine which
had Cost ?600 on 01.01.2019, was scrapped on the same date and it realized nothing. Write up Plant and Machinery
• . Accoun~ allowing the same rate of Depreciation as in the past calculating Depreciation to the nearest multiple of a Rupee.

~ M~~L. ~ ~'-~·
6.15
Padhuka's Practical Learning Series - Accounting For CA Foundation
Solut·I0n: 1. Computation of WDV on t h e date of Sale & Scrap
01.01.2018 01.01.2019
Machine purchased on -
Cost 6,000 -
Less: Depreciation @ 10% for 2018 600 -
W.D.V. on 31.12.2018 5,400 600
Less: Depreciation@ 10% for 2019 540 60
W.D.V. on 31.12.2019 4,860 540
Less: Depreciation @ 10% for 2020 486 54
W.D.Von 31.12.2020 4,374 486
Less: Depreciation@ 10% for 2021 437 49
W.D.Von 31.12.2021 3,937 437
Less: Depreciation @ 10% for 2022 . 394 44
W.D.V on 31.12.2022 3,543 393
Less: Depreciation @ 10% from January to May 5 Months = 148 - 5 Months =16
W.D.Von 01.06.2023 3,395 377

' . • tion i or the Year 2023

2 DeprecIa
t
Particulars
Balance of Machinery on 01.01.2023 1,90,000
Less: W.D.V of Machinery sold & scrapped (3,543 +393) (3,936)
W.D.V of other Machineries on 01.01.2023 1,86,064
Depreciation@ 10% on fl,86,064 for 12 Months 18,606
Depreciation @ 10% on f 28,892 for 7 Months 1,685
Total Depreciation for 2023 20,291

.
3 Plant and Machinery A/c
Date Particulars f Date Particulars t
01.01.2023 To Balance b/d 1,90,000 01.06.2023 By Bank (Sales) 750
i.,01.06.2023 To Bank (28,000 + 892) 28,892 01.06.2023 By Depreciation (on Machine sold) (WN 1) 148
~
01.06.2023 By P & L A/c - Loss on Sale (3,395 - 750) 2,645
01.06.2023 By P & L A/c - Loss on Scrap (WN 1) 377
31.12.2023 By Depreciation (WN 1) 16
31.12.2023 By Depreciation (WN 2) 20,291
31.12.2023. By Balance c/d 1,94,665
Total 2,18,892 Total 2,18,892

1°' A--purchased on 01.01.2020 certain Machinery fort 1,94,000 and ·spent t 6,000 on its erection. On 01.07.2020, additional
Machinery costing t 1,00,000 was purchased. On 01.01.2022, the Machinery purchased on 01.01.2020 having become
obsolete was auctioned for t 1,00,000 and on the same date New Machinery was purchased at a Cost of t 1,50,000.
Depreciation was provided for annually on 31 st December at the rate of 10% per annum on the original cost of the
Machinery. No Depreciation need to be provided when_ a machinery is sold or auctioned, for that part of the year in which a
sale or auction took place. But for the above, depreciation shall be provided on time basis. In 2023 however, A changed·
this method of writing off 15% p.a. on the written down show the Machinery Account for the Calendar Year 2020 to 2023.

Solution: .
1 Mach"mer,, Account
Date Particulars Amount Date Particulars Amount
01.01.2020 To Bank A/c (Purchase Price ) 1,94,000 31.12.2020 By Depreciation A/c (WN 1) 25,000
To Bank A/c (Erection) 6,000 31.12.2020 By Balance c/d
01.01.2020 2,75,000
To Bank A/c (Purchase Price) 1,00,000
01.07.2020
3,00,000
. ,
. 3,00,000

6.16

◄
 Depreciation

...-- Particulars
oate Amount Date Particulars Amount
...--- To Balance b/d
01.01.2021 2,75,000 31.12.2021 By Depreciation Ne 30,000

-
31.12.2021 By Balance c/d 2,45,000
2,75,000 2,75,000

01.01.2022 To Balance b/d 2,45,000 01.01.2022 By Bank A/c (Sale) 1,00,000

01.07.2022 To BankA/c 1,50,000 01.01.2022 By P&L A/c Loss 60,000
31.12.2022 By Depreciation Ne 17,500
31.12.2022 By Balance c/d 2,17,500

- 3,95,000 3,95,000
~01.01.2023 To Balance b/d 2,17,500 01.01.2023 By Deprn. (15% x 2,17,500) 32,625
31.12.2023 By Balance c/d 1,84,875
2,17,500 2,17,500

Working Notes:

1. Calculation of De reciation 10% r annum on the Ori inal Cost

Machinery purchased on - 01.01.202 01.07.202 01.07.202

Cost 1,94,000 + 6,000 = 2,00,000 1,00,000 1,50,000

Depreciation for Year 2020 12 Months = 20,000 6 Months = 5,000
Depreciation for Year 2021 12 Months = 20,000 12 Months = 10,000
Depreciation for Year 2022 12 Months = 10,000 6 Months = 7,500

2. Loss on Sale of Machine

Particulars Amount

Original Cost (including Erection Charges) 2,00,000

Less: Total Depreciation (on machinery I) 40,000
WDV on the date of Sale 1,60,000
Less: Sale Proceeds 1,00,000

Loss on Sale of Machinery .. 60,000

'11. X purchased a machinery on 1st January 2022 for f 4,80,000 and spent f 20,000 on its installation. On July 1, 2022 another
• machinery costing f 2,00,000 was purchased. On 1st July, 2023 the machinery purchased on 1 January, 2022 having
st

become scrapped and was sold for f 2,90,000 and on the same date fresh machinery was purchased for f 5,00,000.
Depreciation is provided annually on 31 st December at the rate of 10% p.a. on written down value. Prepare Machinery
•/ ,. account for the years 2022 and 2023.

Solution· . 1. Machinerv Account

Date Particulars Amount
Date Particulars Amount
01.01.2022 To Bank Ne (Purchase Price ) 4,80,000 31.12.2022 By Depreciation Ne (WN 1) 60,000
01.01.2022 To Bank Ne (Erection) 20,000 31.12.2022 By Balance c/d 6,40,000
01.07.2022 To Bank A/c (Purchase Price) 2,00,000
7,00,000 7,00,000

01.01.2023 To Balance b/d 6,40,000 01.07.2023 By Bank A/c (Sale) 2,90,000

01.07.2023 To Bank Ne 5,00,000 31.12.2023 By P&L A/c (Loss) 1,37,500
31.12.2023 By Depreciation Ne 66,500
31.12.2023 By Balance c/d 6,46,000
11,40,000 11,40,000
~

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Padhuka's Practical Learning Series Accounting For CA Foundation
Working Notes . 1. Computation of De!Preciation
Machine purchased on - 01.07,202~ 01.07.2023 Total
01.01.2022
Cost 4,80,000 + 20,000 =5,00,000 2,00,000 5,00,000
Less: Depreciation for 2022 12 Months - 50,000 6 Months = 10,000 NA 60,000
WOY 4,50,000 1,90,000 NA 6,40,000
Less: Depreciation for 2023 6 Months = 22,500 12 Months = 19,000 6 Months= 25,000 66,500
Written Down Value NA 1,71,000 4,75,000 6,46,000

2 Loss on Sale of Machinerv

Particulars Amount
Original Cost (including Erection Charges) 5,00,000
Less: Total Depreciation (on machinery I= 50,000+ 22500) 72,500
WOY on the date of Sale 4,27,500
Less: Sale Proceeds 2,90,000
Loss on Sale of Machinery 1,37,500

4 A firm purchased second hand machinery on January 1, for t 3,00,000, subsequent to which t 60,000 and t 40,000 were
spent on its repairs and installation, respectively. On July 1, another machinery was purchased fort 2,60,000. On July 1,
year 3 the first machinery having become outdated was auctioned for t 3,20,000 and on the same date, another machinery
was purchased for t 2,50,000. On July 1, year 4, the second machinery was also sold off and it fetched t 2,30,000.
·Depreciation was provided on machinery@ 10% on the original cost annually on December 31, under the straight line
method. Prepare the following accounts in the books of the Company: (i) Machinery A/c and (ii) Machinery Disposal Ale.

Dr. Machinery Account Cr.

Date Particulars t Date Particulars {
Year 1 Jan To Bank Ne (A) - Cost 3,00,000 Year 1 Dec By Depreciation (A) 40,000
- Repairs 60,000 By Balance c/d (A) 3,60,000
- Installation 40,000
Total 4,00,000 Total 4,00,000
Year 2 Jan To Balance b/d 3,60,000 Year 2 Dec By Depreciation
(A) 40,000
(B) 13,000 53,000
Year 2 July To Bank Ne (B) 2,60,000 By Balance b/d
(A) 3,20,000
(B) 2,47,000 5,67,000
Total 6,20,000 Total 6,20,000
Year 3 Jan To Balance b/d 5,67,000 July By Machinery Disposal a/c (A) 3,00,000
July To Bank Ne (C) 2,50,000 By Depreciation Ne
(A) 20,000
(8) 26,000
(C) 12,500 58,500
By Balance c/d
(B) 2,21,000
(C) 2,37,500 4,58,500
Total 8,17,000
Total 8,17,000
Year 4 Jan To Balance b/d 4,58,500 July By Machinery Disposal A/c (8)
By Depreciation Ne
(8) 13,000
(C) 25,000 38,000
By Balance c/d 2,12,500
Total 4,58,500
Total 4,58,500

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 Depreciation

Machine osal Account

oate Particulars Date Particulars t
vear 3 July To Machinery Ne (A) 3,00,000 July By Bank Ne 3,20,000

To Profit Loss Ne (Profit) 20,000

Total 3,20,00 0 Total 3,20,00 0

vear 4 July To Machinery Ne (B) 2,08,000 July By Bank Ne 2,30,000

To P & L Ne (Profit) 22,000

Total 2,30,00 0 Total 2,30,00 0

and equipment for t 7,00,000. They

13. Mis Anshul & Co commenced business on January 1, when they pu·rchased plant
ing balance basis and over the years, their
adopted a policy of charging depreciation at 15% per annum on diminish
5 - f 2,00,000 . On Jan 1 Year 5 it was decided to
purchases of plant have been Jan 1 Year 2 - f 1,50,000 and Jan 1 Year
this date remainin g useful life was assessed as 6
change the method and rate of depreciation to straight line basis. On
value and 10 years for the asset purchased on Jan 1
years for all the assets purchased before Jan 1 Year 5 with no scrap
nt Account for the year 5.
Year 5. Calculate the depreciation to be adjusted in the Plant and Equipme
Depreciation on written down value basis
Year 2 Years Total
Purchased on Year1
Cost 7,00,000
1,05,000
Year 1 Depreciation (1,05,000)
Cost/ WDV 5,95,000 1,50,000
(22,500) 1,11,750
Year 2 Depreciation (89,250)
W.D.V. 5,05,750 1,27,500
(19,125) 94,988
Year 3 Depreciation (75,863)
W.D.V. 4,29,887 1,08,375
(64,483) (16,256) 80,739
Year4 Depreciation
3,65,404 92,119 2,00,000
W.D.V.
(60,900) (15,353) (20,000) 96,253
Year 5 Depreciation
3,04,50 4 76,766 1,80,00 0 5,61,27 0
WOY

Plant and E ui ment Account ,

4,57,523 Year 5 By Depreciation 96,253

Year To balance (3,65,404 + 92,119)
2,00,000 Dec. 31 By Balance c/d 5,61,270
Jan. 1 To Bank
6,57,52 3 6,57,52 3

To Balance b/d 5,61,270

Year 6

14. Calculate Depreciation for Year 4 -

working life and Nil residual value,
A. A Machine costing f 6,00,000 is depreciated on straight line basis, assuming 10 years
reassess ed at 5 years.
for three years. The estimate of remaining useful life after third year was
g 10 year working life and zero residual value for 3
B. Machine B costing , 12,00,000 is_ depreciated straight-line assumin
remaining useful life was reassess ed at 9 years.
years. At Year 3 end, it was revalued upwards by , 60,000 the

Particulars case A CaseB

1. Cost f 6,00,000 t 12,00,000

2. Depreciation p.a. , 6,00,000 I 10 = f 60,000 t 12,00,000 / 10 = t 1,20,000

3. Depreciation for 3 years = (2) x 3 yrs t 1,80,000 t 3,60,000

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Padhuka·'s Practical learning Series Accounting For CA Foundation

Particulars Case A Case B

4. WDV before revaluation= (1) - (3) t 4,20,000 t 8,40,000
5. WDV after revaluation , 4,20,000 t 8,40,000 + 60,000 = t 9,00,000
6. Remaining life 5 years 9 years
7. Depreciation for Year 4 = (5) + (6) , 84,000 t 1,00,000

15. A finn's PPE Ale at December 31 and Depreciation Provision Ale broken down bv vear of purchase are as follows: - (f)
Year of Purchase Year1 Year7 '
Year8 Year9 Year16 Year17
PPE at cost 2,00,000 3,00,000 10,00,000 7,00,000 5,00,000 3,00,000
Depreciation Provision 2,00,000 3,00,000 9,50,000 5,95,000 75,000 15,000
. . Is at the rate of 10% per annum on cost. It is the Company's
Deprec1at1on policy to assume that all purchases, sales or disposal
of plant occurred on June 30 in the relevant year for the purpose of calculating depreciation, Irrespective of the precise date on
which these events occurred. During the Year 18, the following transactions took place:
1. Purchase of plant and machinery amounted to~ 15,00,000
2. Plant that had been bought in Year 7 for f 170,000 was scrapped.
3. Plant that had been bought in Year 8 fort 90,000 was sold for f 5,000.
4. Plant that had been bought in Year 9 fort 2,40,000 was sold fort 15,000.
Calculate the provision for depreciation of plant and machinery for the year ended December 31. In calculating this provision
you should bear In mind that it is the company's policy to show any profit or loss on the sale or disposal of plant as a
completely separate item in the Profit and Loss Account. You are also required to prepare the following ledger accounts during
Year 18. (i) ~lant and machinery at cost, (Ii) Depreciation provision, (iii) Sales or disposal of plant and machinery.

Calculation of Provision for Depreciation of PPE for the year ended December 31 en
Plant purchased in: t t
'
1 Nil
7 Nil
8 50,000
9 1/2 year at 10% on f 2,40,000 12,000
1 year at 10% on t 4,60,000 46,000 58,000
16 10% on t 5,00,000 50,000
17 10% on t 3,00,000 . 30,000
18 1/2 year at 10% on t 15,00,000 75,000
2,63,000

PPE A/c for Year 18

Particulars f Particulars t
To Balance b/d 30,00,000 By Disposals account:
To BankNc 15,00,000 Scrapped 1,70,000
Sold 3,30,000
By Balance c/d 40,00,000
Total 45,00,000 Total 45,00,000

Depreciation Provision Account (for Year 18) -

Particulars f Particulars t
To Disposal Account: By Balance b/d 21,35,000
Scrapped - Year 7 assets 1,70,000 By Profit and loss Account 2,63,000
Sold -Year 8 assets 90,000
Sold -Year 9 assets 2,16,000 4,76,000
To Balance c/d 19,22,000
-
Total 23,98,000 Total 23,98,000

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 Depreciation

Sale or dis sal of PPE Account for Year 18

PE
Particulars
'
Particulars
By Provision for Depreciation 4,76,000'
pped 1,70,000 By Cash-Sales Proceeds 20,000
3,30,000 By Loss on sales 4,000
d
Total 5,00,000 Total 5,00,00 0

inery purchased on
• On 01.04.2021, Shubra Ltd. purchased a machinery for, 12,00,000. On 01.10.2023, a part of the-mach
y at a cost of f 1,58,000 was purchase d and installed on
01.04.2021 for , 80,000 was sold for f 45,000 and a new machiner
10% p.a. depreciat ion on the written down value of the
the same date. The company has adopted the method of providing
years ended 31.03.202 2 to 31.03.202 1 assuming that (a) Provision
machinery. Show the necessary ledger accounts for the
for Depreciation Account Is not maintained (b) Provision for Deprecia tion Account is maintaine d.

When 'Provision for Depreciation Account' is not maintained.

Machinery Account

01.04.2021
Date Particulars
To BankA/c
Date
12,00,000' 31.03.2022
Particulars
By Depreciation A/c 1,20,000 '
By Balance c/d 10,80,000

Total 12,00,0 00 Total 12,00,00 0

10,80,000 31.03.2023 By Depreciation A/c 1,08,000
To balance b/d
By Balance c/d 9,72,000

Total 10,80,00 0 Total 10,80,00 0

9,72,000 01.10.2023 By bankA/c 45,000
To Balance b/d
1,58,000 01.10.2023 By Profit & Loss A/c 16,560
To BankA/c
01.10.2023 By Depreciation A/c 3,240
31.03.2023 By Depreciation (7,900+9 0,720) 98,620
31.03.2023 By balance (8,16,480 + 1,50,100) 9,66,580

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

Total

When 'Provision for Depreciation Account' is maintained

Machinery Account (at original cost)

01.04.2021
Date Particulars
To BankA/c
l

12,00,000' Date
31.03.2022
Particulars
By Balance c/d 12,00,000 '
31.03.2022 By Balance c/d 12,00,000
01.04.2022 To Balance b/d 12,00,000
01.10.2023 By Machinery Disposal A/c 80,000
01.04.2023 To Balance b/d 12,00,000
31.03.2021 By Balance c/d 12,78,000
01.10.2023 To BankA/c 1,58,000

Provision for Depreciation Account

31.03.2022
Date Particulars
To Balance c/d '
1,20,000
Date
31.03.2022
Particulars
By Depreciation A/c '
1,20,000

1,20,000 Total 1,20,00 0

Total
2,28,000 1.04.2022 By Balance b/d 1,20,000
31.03.2023 To Balance c/d
31.03.2023 By Depreciation A/c 1,08,000
~

Total 2,28,000 Total 2,28,000

~

Afc 18,440 01.04.2023 By Balance b/d 2,28,000

01.10.2023 To Machinery Disposal
3,11,420 01.10.2023 By Depreciation A/c 3,240
31.03.2021 To Balance c/d
' 31.03.2021 By Depreciation A/c 98,620
'---
i 3,29,860
......__ Total 3,29,860 Total

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Padhuka's Practical Learning Series Accounting For CA Foundation

Date Particulars
M ac h"inery D"1sposa I Account
f Date Particulars -
~
01.10.2022 To Machinery Disposal Ne 80,000 01.10.2023 By Provision for Depn. Ne 18,440
By Bank A/c 45,000
By Profit and Loss N c 16,560
Total 80,000 Total 80,000
-
Working Notes· .
Profit/Loss on Sale of Machinery f Depreciation for Current Year f
Original Cost 80,000 On Old Machines off 9,07,200
Less: Depreciation @ 10% WDV p.a. for 2 ½ years 18,440 for 1 year (10% WDV) 90,720
Book Value as on date of Sale 61,560 On New Machine of ~ 1,58,000
Less: Sale proceeds 45,000 for½ year 7,900
Loss on Sale 16,560 Total 98,620

17. LG company purchased 10 trucks at~ 45,00,000 each on 01.04.2020. On 01.10.2022, one of the trucks is involved
in an
accident and is completely destroyed and f 27,00,000 is received from the insurance in full settlement. On the same
date
another truck is purchased by the company for the sum of ~ 50,00,000. It write off 20% on the original cost per annum.
The
company observe the calendar year as its financial year. Give the Motor Truck Ale for two year ending 31.12.2023.

.
1 Profit on settlemen t of truck
Particulars Amount
Original cost as on 1.4.2020 45,00,000
Less: Depreciation for 2020 (6,75,000)
WDV at the end of Year 1 8,25,000
Less: Depreciation for 2021 (9,00,000)
WDV at the end of Year 2
29,25,000
Less: Depreciation for 2022 (9 months)
(6,75,000)
WDV at the time of disposal
22,50,000
Less: Amount received from Insurance company
(27,00,000)
Profit on disposal
4,50,000

2. Truck A/c
Date Particulars Amount Date Particular s Amount
01.01.2022 To balance b/d 2,92,50,000 01.10.2022 By bank A/c 27,00,000
01.10.2022 To Profit & Loss N c 4,50,000 01.10.2022 By Depn. on lost assets 6,75,000
01.10.2022 To BankNc 50,00,000 01.10.2022 By Depreciation Ne 83,50,000
Total 3,47,00,0 00
Total 3,47,00,00 0
01.01.2023 To balance b/d 2,29,75,000 31.12.2023 By Depreciation N c 91,00,000
31.12.2023 By balance c/d
Total 1,38, 75,000
2,29,75,0 00
Total 2,29,75,00 0
18. A Machinery costing t 20,00,000 is depreciated on straight line assumin 10 . . .
four years. At the end of the fourth year, the machinery was revalued u w~ d years working hfe and ml salvage value for
Machinery was also reassessed as 8 years at the end of the fourth PC r s by t B0,000. The remaining useful life of the
year. alculate the depreciation for 5th Year.
Particulars
Depreciation per year for first 4 years Computat ion Result
WDV of the Machinery at end of 4 year ~ 20,00,000/ 10 t 2,00,000
Revalued Amount i.e. New Depreciable Amount shall be t 20,00,000 - (t 2,00,000 X 4) ~ 12,00,000
Depreciation for 5th Year with reassessed life 8 years t 12,00,000 + t 8,000 t 12,80,000
t 12,80,000/ 8 t 1,60,000.

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 Depreciation

19, Amazing Group had Property, Plant & Equipment (PP&E) with a book value off 35,00,000 on December 31. The balance in
; Revaluation Surplus on that date was f 3,00,000. As part of their practice of revaluing the assets on yearly basis, another
'. revaluation was carried out on December 31. Evaluate the Impact of Revaluation if the Fair Value as a result of Revaluation
... done on December 31 was (a) f 37,00,000 (b) f 33,00,000 and (c) f 31,00,000. Also, give the journal entries.

principle: Since this is a downward revaluation and the group had a balance in revaluation surplus (i.e. there was an
upward movement earlier), hence this will result in a reduction or a debit to Revaluation Surplus to the extent of balance
therein and any excess shall be debited to Profit & Loss A/c.
Treatment
Since this is an upward revaluation and the group had a balance in revaluation surplus (i.e. there was an upward
movement earlier), hence this will result in an additional credit of f 2,00,000 to Revaluation Surplus and hence the
A total Revaluation Surplus balance shall increase to f 5,00,000.
PPE A/c Dr. 2,00,000
To Revaluation Surplus A/c 2,00,000
In this case, there is a reduction in fair value of f 2,00,000 (35,00,000 - 33,00,000).and hence the entire amount shall
be debited to Revaluation Surplus. So, the total Revaluation Surplus balance shall decrease to f 1,00,000.
B
Revaluation Surplus A/c Dr. 2,00,000
To PPE A/c 2,00,000
In this case, there is a reduction in fair value of f 4,00,000 (35,00,000 - 31,00,000) and hence the Revaluation
Surplus A/c shall be debited by f 3,00,000 and the balance f 1,00,000 shall be debited to Profit & Loss A/c. Hence,
the total Revaluation Surplus balance shall become Nil.
C Dr. 3,00,000
Revaluation Surplus A/c
P&L A/c Dr. 1,00,000
To PPE A/c 4,00,000

20. On 01.04.2020, a firm purchased a machinery for f 2,00,000. On 01.10.2020 In the same accounting year, additional
. machinery costing f 1,00,000 was purchased. On 01.10.2021, the machinery purchased on 01.04.2020, having become
obsolete was sold off for f 90,000. On 01.10.2022, new machinery was purchased for f 2,50,000 while the machinery
purchased on 01.10.2020, was sold for f 85,000 on the same day. The firm provides depreciation on its Machinery@ 10%
per annum on original cost on March 31 every year. Show Machinery Account, Provision for Depreciation Account and
~ _.. Depreciation Account for the period of three accounting years ending 31.03.2023. _ _ ~~- ___ • __

1. Machinery A/c
Date Particulars f Date Particulars f
01.04.2020 To BankA/c 2,00,000 31.03.2021 By Balance c/d 3,00,000
01.10.2020 To BankA/c 1,00,000
Total 3,00,000 Total 3,00,000
01.04.2021 To Balance b/d 3,00,000 01.10.2021 By BankA/c 90,000
01.10.2021 By Provision for Depreciation A/c 30,000
01.10.2021 By Profit and Loss A/c 80,000
31.03.2022 By Balance c/d 1,00,000

Total 3,00,000 Total 3,00,000

01.04.2022 To Balance b/d 1,00,000 01.10.2022 By Bank A/c 85,000
01.10.2022 To Bank A/C 2,50,000 01.10.2022 By Provision for Depreciation A/c 20,000
01.10.2022 To Profit and Loss A/c 5,000 31.03.2023 By Balance c/d 2,50,000
Total 3,55,000 Total 3,55,000

2. Depreciation A/ c
Date Particulars t Date Particulars
31.03.2021 To Provision for Depreciation A/c 25,000 31.03.2021 By Profit and Loss A/c 25,000
Total 25,000 Total 25,000

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Padhuka's Practical Learning Series - Accounting For CA Foundation

Date Particulars Date Particulars f

01.10.2021 To Provision for Depreciation A/c '

10,000 31.03.2022 By Profit and Loss A/c 20,000

31.03.2022 To Provision for Depreciation A/c 10,000

Total 20,000
Total 20,000
31.03.2023 By Profit and Loss A/c 17,500
01.10.2022 To Provision for Depreciation A/c 5,000
31.03.2023 To Provision for Depreciation A/c 12,500
17,500 Total 17,500
Total

3. Provision for Depreciation A/ c

Date Particulars f
Date
31.03.2021
Particulars
To Balance c/d '
25,000 31.03.2021 By Depreciation A/c 25,000
(f 20,000+f 5,000)

Total 25,000 Total 25,000

01.12.2021 To Machinery A/c 30,000 01.04.2021 By Balance b/d 25,000

(f 20,000 + ~ 10,000) 01.10.2021 By Depreciation A/c 10,000

31.03.2022 To Balance c/d 15,000 31.03.2022 By Depreciation A/c 10,000

Total 45,000 Total 45,000

01.10.2022 To Machinery A/c 20,000 01.04.2022 By Balance b/d 15,000
(f 5,000+~ 10,000+~ 5,000) 01.10.2022 By Depreciation A/c 5,000
31.03.2023 To Balance c/d 12,500 31.03.2023 By Depreciation Ne 12,500
Total 32,500 Total 32,500

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