Commerce Academy

(The Only Institute with Chartered Accountant Faculties for +1 & +2 in TRICITY)

+1 Accounts
Concept of Provision for DEPRECIATION
(Booklet 13)

CA Mohit Jajodia
7696903572

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TOPIC 1: SALE OF ASSET
Q26A. On July 1, 2005 Pushpak Ltd. purchased machinery for Rs. 11,40,000 and paid Rs. 60,000 for its overhauling and
installation. Depreciation is provided @ 20% p.a. on original cost method and the books are closed on 31st March every
year. The machine was sold on 31st January, 2008 for a sum of Rs. 3,20,000. You are required to show the Machinery
Account and Provision for Depreciation Account for three years.

Q26B. On July 1, 2005 Pushpak Ltd. purchased machinery for Rs. 5,70,000 and paid Rs. 30,000 for its overhauling and
installation. Depreciation is provided @ 20% p.a. on original cost method and the books are closed on 31st March every
year. The machine was sold on 31st January, 2008 for a sum of Rs.1,60,000. You are required to show the Machinery
Account and Provision for Depreciation Account for three years. [Ans. Loss on sale of machinery Rs. 1, 30,000]

Q27A. A machine was purchased on 1st October, 1998 at a cost of Rs. 6,00,000 and Rs. 40,000 were spent on its installation.
The depreciation is written off at 10% p.a. on the diminishing value method. The books are closed on 31st March every year.
The machine was sold for Rs. 2,60,000 on 1st July 2001. Show the Machinery Account and Provision for Depreciation
Account for three years.

Q27B. A machine was purchased on 1st October, 1998 at a cost of Rs. 3,00,000 and Rs. 20,000 were spent on its installation.
The depreciation is written off at 10% p.a. on the diminishing value method. The books are closed on 31st March every year.
The machine was sold for Rs. 1,30,000 on 1st July 2001. Show the Machinery Account and Provision for Depreciation
Account for three years. [Ans. Loss on sale of machinery Rs. 1, 10,084]

Q28A. On 1st April 2008, a Company purchased 6 machines for Rs. 100,000 each. Depreciation at the rate of 10% p.a. is
charged on Straight Line Method. The accounting year of the company ends on 31st March and the depreciation is credited
to a separate ‘provision for depreciation account’.
On 1st October, 2010, one machine was sold for Rs. 60,000 and on 1st April, 2011 a second machine was sold for Rs. 48,000.
Show the Machinery Account and Provision for Depreciation Account for four years ending 31st March, 2012.

Q28B. On 1st April 2008, a Company purchased 6 machines for Rs. 50,000 each. Depreciation at the rate of 10% p.a. is
charged on Straight Line Method. The accounting year of the company ends on 31st March and the depreciation is credited
to a separate ‘provision for depreciation account’.
On 1st October, 2010, one machine was sold for Rs. 30,000 and on 1st April, 2011 a second machine was sold for Rs. 24,000.
Show the Machinery Account and Provision for Depreciation Account for four years ending 31st March, 2012.

[Ans: - Balance of Machinery A/c on 31st March 2012 Rs. 2,00,000; Balance of Provision for Depreciation a/c Rs80000 Loss
on sale of first machine Rs. 7,500; loss on sale of second machine Rs. 11,000]

Q29A. On 1st July 2006, a ABC Ltd. purchased 4 machines for Rs. 1,60,000 each. the accounting year of the company end on
31st march every year. Depreciation at the rate of 15% p.a. is charged on original cost.
On 1st April, 2008, one machine was sold for Rs. 100,000 and on 1st January, 2010 a second machine was sold for Rs. 80,000.
Another machine with a higher capacity which cost Rs. 4,00,000 was purchased on 1st January, 2010. You are required to
show the Machinery Account, Depreciation Account and Provision for Depreciation Account for four years ending 31st
March, 2010.

Q29B. On 1st July 2006, a ABC Ltd. purchased 4 machines for Rs. 80,000 each. the accounting year of the company end on
31st march every year. Depreciation at the rate of 15% p.a. is charged on original cost.
On 1st April, 2008, one machine was sold for Rs. 50,000 and on 1st January, 2010 a second machine was sold for Rs. 40,000.
Another machine with a higher capacity which cost Rs. 2, 00,000 was purchased on 1st January, 2010. You are required to
show the Machinery Account, Depreciation Account and Provision for Depreciation Account for four years ending 31st
March, 2010.

[Ans . Balance of Machinery A/c on 31st March 2010 Rs. 3,60,000; Balance of Provision for Depreciation a/c Rs97500. Loss
on sale of first machine Rs.9, 000; gain on sale of second machine Rs. 2,000]

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Q30A. X Ltd. which closes its books of account every year on 31st March, purchased on 1st October, 1998 machinery costing
Rs. 17,60,000. It purchased further machinery on 1st April, 1999 costing Rs. 20,80,000. On 30th June, 2000, the first
machinery was sold for Rs. 10,00,000 and on the same day a fresh machine was installed at a cost of Rs. 12,00,000. On 1st
July, 2001, the second machine purchased on 1st April, 1999 was also sold for Rs.50,000. The company writes off
depreciation at 10% p.a. on straight line method each year. Show the machinery account, depreciation account and
provision for depreciation account for all the four years.

Q30B.X Ltd. which closes its books of account every year on 31st March, purchased on 1st October, 1998 machinery costing
Rs. 4, 40,000. It purchased further machinery on 1st April, 1999 costing Rs. 5, 20,000. On 30th June, 2000, the first machinery
was sold for Rs. 2, 50,000 and on the same day a fresh machine was installed at a cost of Rs. 3, 00,000. On 1st July, 2001, the
second machine purchased on 1st April, 1999 was also sold for Rs. 3, 25,000. The company writes off depreciation at 10%
p.a. on straight line method each year. Show the machinery account, depreciation account and provision for depreciation
account for all the four years.

[Ans. Balance of Machinery A/c on 31st March 2002 Rs. 3, 00,000; Balance of Provision for Depreciation a/c Rs. 52,500; Loss
on sale of first machine Rs. 1, 13,000; loss on sale of second machine Rs. 78,000]

Q31A. A Company purchased second-hand machinery on 1st May, 2009 for Rs. 11,70,000 and immediately spent Rs. 30,000
on its erection. On 1st October, 2010, it purchased another machine for Rs. 8,00,000. On 31st July, 2011, it sold off the first
machine for Rs. 5,00,000 and bought another for Rs. 8,40,000. On 1st November, 2012, the second machine was sold off for
Rs. 6,00,000. Depreciation was provided on the machinery @ 15% p.a. on Equal Instalment Method. Show the machinery
account, depreciation account and provision for depreciation account assuming that the books are closed on 31st March
every year.

Q31B. A Company purchased second-hand machinery on 1st May, 2009 for Rs. 5,85,000 and immediately spent Rs. 15,000
on its erection. On 1st October, 2010, it purchased another machine for Rs. 4,00,000. On 31st July, 2011, it sold off the first
machine for Rs. 2,50,000 and bought another for Rs. 4,20,000. On 1st November, 2012, the second machine was sold off for
Rs. 3,00,000. Depreciation was provided on the machinery @ 15% p.a. on Equal Instalment Method. Show the machinery
account, depreciation account and provision for depreciation account assuming that the books are closed on 31st March
every year.

[Ans. Balance of Machinery A/c on 31st March 2013 Rs. 4, 20,000; Balance of Provision for Depreciation a/c Rs. 1, 05,000;
Loss on sale of first machine Rs. 1, 47,500; gain on sale of second machine Rs. 25,000]

Q32A. X Ltd. purchased a plant on 1st July, 2010 costing Rs. 10,00,000. It purchased another plant on 1st September, 2010
costing Rs. 6,00,000. On 31st December, 2012, the plant purchased on 1/07/2010 got out of order and was sold for Rs.
4,30,000. Another plant was purchased to replace the same for Rs. 12,00,000. Depreciation is to be provided at 20% p.a.
according to Written down Value Method. The accounts are closed every year on 31st March. Show the Plant Account and
Provision for Depreciation Account.

Q32B.X Ltd. purchased a plant on 1st July, 2010 costing Rs. 5, 00,000. It purchased another plant on 1st September, 2010
costing Rs. 3, 00,000. On 31st December, 2012, the plant purchased on 1/07/2010 got out of order and was sold for Rs. 2,
15,000. Another plant was purchased to replace the same for Rs. 6, 00,000. Depreciation is to be provided at 20% p.a.
according to Written down Value Method. The accounts are closed every year on 31st March. Show the Plant Account and
Provision for Depreciation Account.

[Ans. Balance of Plant A/c on 31st March 2013 Rs. 9, 00,000; Balance of Provision for Depreciation a/c Rs. 1, 60,400; Loss on
sale of plant Rs. 74,000]

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TOPIC 2: SALE OF PART OF ASSET
Q33A. On 1st August, 2010, Hindustan Toys Ltd. purchased a plant for Rs. 24,00,000. The firm writes off depreciation at
10% p.a. on the diminishing balance and the books are closed on 31st March every year. On 1st July, 2012, a part of this
plant of which original cost was Rs. 3,60,000 was sold for Rs. 2,00,000 and on the same date a new plant was purchased for
Rs. 8,00,000. Show the Plant Account and Provision for Depreciation Account for three years ending 31st March, 2013.

Q33B. On 1st August, 2010, Hindustan Toys Ltd. purchased a plant for Rs. 12, 00,000. The firm writes off depreciation at
10% p.a. on the diminishing balance and the books are closed on 31st March every year. On 1st July, 2012, a part of this
plant of which original cost was Rs. 1, 80,000 was sold for Rs. 1, 00,000 and on the same date a new plant was purchased
for Rs. 4, 00,000. Show the Plant Account and Provision for Depreciation Account for three years ending 31st March, 2013.

[Ans. Balance of Plant A/c on 31st March 2013 Rs. 14, 20,000; Balance of Provision for Depreciation a/c Rs. 2, 78,880. Loss
on sale of plant Rs. 47,420]

Q34A. On 1st April 1999, Bangalore Silk Ltd. purchased machinery for Rs. 40,00,000. It provides depreciation at 10% p.a. on
the written down value method and closes its books on 31st March every year. On 1st July 2001, a part of the machinery
purchased on 1/04/1999 for Rs. 8,00,000 was sold for Rs. 6,40,000. On 1st November, 2001, new machinery was purchased
for Rs. 9,60,000. You are required to prepare machinery account, depreciation account and provision for depreciation
account for the three years ending 31st March, 2002.

Q34B. On 1st April 1999, Bangalore Silk Ltd. purchased machinery for Rs. 20,00,000. It provides depreciation at 10% p.a. on
the written down value method and closes its books on 31st March every year. On 1st July 2001, a part of the machinery
purchased on 1/04/1999 for Rs. 4,00,000 was sold for Rs. 3,20,000. On 1st November, 2001, new machinery was purchased
for Rs. 4,80,000. You are required to prepare machinery account, depreciation account and provision for depreciation
account for the three years ending 31st March, 2002.

[Ans. Balance of Machinery A/c on 31st March 2002 Rs. 20,80,000; Balance of Provision for Depreciation a/c Rs. 4,53,600;
gain on sale of machinery Rs. 4,100]

Q35A. Binny Textiles Ltd. which depreciates its machinery at 20% p.a. on diminishing balance method purchased a machine
for Rs. 12,00,000 on 1st October, 2010. It closes its books on 31st March every year. On 1st January, 2012 it purchased
another machine for Rs. 3,00,000. On 1st December, 2012, one-third of the first machine was sold for Rs. 1,60,000. Show
the Machinery Account and Provision for Depreciation Account for the relevant years.

Q35B. Binny Textiles Ltd. which depreciates its machinery at 20% p.a. on diminishing balance method purchased a machine
for Rs. 6,00,000 on 1st October, 2010. It closes its books on 31st March every year. On 1st January, 2012 it purchased another
machine for Rs. 1,50,000. On 1st December, 2012, one-third of the first machine was sold for Rs. 80,000. Show the
Machinery Account and Provision for Depreciation Account for the relevant years.

[Ans. Balance of Machinery A/c on 31st March 2013 Rs. 5, 50,000; Balance of Provision for Depreciation a/c Rs. 2,05,600;
loss on sale of machinery Rs. 44,800]

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TOPIC 3: OPENING BALANCE QUESTIONS
Q36A. The following balances appear in the books of Y Ltd.:

Machinery A/c as on 1-4-2001 Rs. 16,00,000

Provision for Depreciation A/c as on 1-4-2001 Rs. 6,20,000

On 1-7-2001, a machinery which was purchased on 1-4-1998 for Rs. 2,40,000 was sold for Rs. 100,000 and on the same day
another machinery was purchased for Rs. 6,40,000. The firm has been charging depreciation at 15% p.a. on original cost
method and closes its books on 31st March every year. Show the Machinery Account and Provision for Depreciation
Account for the year ending 31st March, 2002.

Q36B. The following balances appear in the books of Y Ltd.:

Machinery A/c as on 1-4-2001 Rs. 8,00,000

Provision for Depreciation A/c as on 1-4-2001 Rs. 3,10,000

On 1-7-2001, a machinery which was purchased on 1-4-1998 for Rs. 1,20,000 was sold for Rs. 50,000 and on the same day
another machinery was purchased for Rs. 3,20,000. The firm has been charging depreciation at 15% p.a. on original cost
method and closes its books on 31st March every year. Show the Machinery Account and Provision for Depreciation
Account for the year ending 31st March, 2002.

[Ans. Balance of Machinery A/c on 31st March 2002 Rs. 10, 00,000; Balance of Provision for Depreciation a/c Rs. 3, 94,000;
loss on sale of machinery Rs. 11,500]

Q37A. On 1st April, 2010, following balances appeared in the books of M/s Krishna Traders:

Furniture Account Rs. 100,000

Provision for Depreciation on Furniture Account Rs. 44,000

On 1st October, 2010 a part of furniture purchased for Rs. 40,000 on 1st April, 2006 was sold for Rs. 10,000. On the same
date a new furniture costing Rs. 50,000 was purchased. The depreciation was provided @ 10% p.a. on original cost of the
asset and no depreciation was charged on the asset in the year of sale. Prepare Furniture Account and Provision for
Depreciation Account for the year ending 31st March, 2011.

Q37B. On 1st April, 2010, following balances appeared in the books of M/s Krishna Traders:

Furniture Account Rs. 50,000

Provision for Depreciation on Furniture Account Rs. 22,000

On 1st October, 2010 a part of furniture purchased for Rs. 20,000 on 1st April, 2006 was sold for Rs. 5,000. On the same date
a new furniture costing Rs. 25,000 was purchased. The depreciation was provided @ 10% p.a. on original cost of the asset
and no depreciation was charged on the asset in the year of sale. Prepare Furniture Account and Provision for Depreciation
Account for the year ending 31st March, 2011.

[Ans. Balance of Furniture A/c on 31st March 2011 Rs. 55,000; Balance of Provision for Depreciation a/c Rs. 18,250; loss on
sale of furniture Rs. 7,000]

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Q38A. Books of Mumbai Chemicals Ltd. showed the following balances on 1st April, 2012:

Machinery A/c Rs. 20, 00,000

Provision for Depreciation A/c Rs. 8,10,000

On 1st April, 2012, a machine which had a cost of Rs. 4,00,000 on 1st October, 2009 was sold for Rs. 1,60,000. The firm
writes off depreciation @ 10 p.a. under the reducing balance method and its accounts are made up to 31st March every
year. You are required to prepare the Machinery Account and Provision for Depreciation Account for the year ending 31st
March, 2013.

Q38B. Books of Mumbai Chemicals Ltd. showed the following balances on 1st April, 2012:

Machinery A/c Rs. 10, 00,000

Provision for Depreciation A/c Rs. 4, 05,000

On 1st April, 2012, a machine which had a cost of Rs. 2, 00,000 on 1st October, 2009 was sold for Rs. 80,000. The firm writes
off depreciation @ 10 p.a. under the reducing balance method and its accounts are made up to 31st March every year. You
are required to prepare the Machinery Account and Provision for Depreciation Account for the year ending 31st March,
2013.

[Ans. Balance of Machinery A/c on 31st March 2013 Rs. 8, 00,000; Balance of Provision for Depreciation a/c Rs. 4, 03,010;
loss on sale of machinery Rs. 73,900]

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