JG International School

Name: Date:
Subject: Class:

Depreciation

Q. 1 On 1st April, 2000, a firm purchased a machinery for Rs. 2,00,000. On 1st October, 2000,
additional machinery costing Rs. 1,00,000 was purchased. On 1st October, 2001 the machinery
purchased on 1st April 2000 was sold for Rs. 90,000. On 1st October, 2002, new machinery was
purchased for Rs. 2,50,000 while the machinery purchased on 1st October, 2000 was sold for Rs.
85,000 on the same day. The firm provides depreciation on its machinery @ 10% per annum on
original cost. It closes its books of accounts on 31st march every year. Show machinery account
for three accounting year ending 31st March, 2003.

Q. 2 The Ganges Transport Company purchases 5 truck at Rs. 10,00,000 each on July, 1, 1997.
On January 1, 2000 one of the trucks is involved in an accident and is completely destroyed. A
sum of Rs.4,00,000 is received from the insures in full settlement. On the same date, another
truck is purchased by the company for Rs.12,00,000. The company writes off 20% on the
original cost per annum and closes its books every year on 31 st March. Give the Motor Trucks
Account for two year ending 31st March, 2001.

Q. 3 ABC Ltd. Purchased machinery for Rs. 2,00,000 including a boiler worth Rs. 20,000. The
Machinery Account had been credited for depreciation on the Reducing Installment System for
the past four years at the rate of 10%. During the fifth year, i.e., the present year, the boiler
became useless on account of damage to some of its vital parts and the damaged boiler is sold for
Rs. 4,000. Write up the Machinery Account.

Q. 4 A limited company purchased on 1st January, 1998 a second hand plant for Rs. 12,000 and
immediately spent Rs. 8,000 on its overhauling. On 1 st July in the same year additional plant
costing Rs. 10,000 is purchased. On 1st July, 2000 the plant purchased on 1 st January, 1998
having become obsolete is sold for Rs. 4,000 and on the same date fresh plant is purchased at
cost of Rs. 24,000.Depreciation is provided @ 10% per annum on original cost on 31 st December
every year.

Q. 5 Mr. Gurdeep Singh purchased a second hand machinery on 1-2-2001 for Rs. 50,000; paid
Rs. 11,000 for its over hauling and Rs. 5,000 for its installation which was completed by 31-3-
2001. The company provides depreciation on its machinery at 15% on diminishing balance
method from the date it was put to use and close its books on 31 st December every year. On 1-1-
2002, repair work was carried out on the machine and Rs. 5,000 were paid for the same. The
machine was sold on 31-10-2003, for a sum of Rs. 11,000 and an amount of Rs. 1,000 was paid
as dismantling charges. Prepare machinery account from 2001 to 2003.
Q. 6 Gurdeep Ltd. Which closes its books of account every year on 31 st March, purchased on 1st
October, 1998 machinery costing Rs. 4,40,000. It purchased further machinery on 1 st April, 1999
costing Rs. 5,20,000. On 30th June, 2000, the first machinery was sold for Rs. 2,50,000 and and
on the same date a fresh machine was installed at a cost of Rs. 3,00,000. On 1 st 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 the straight line method each year. Show the Machinery A/c,
Depreciation A/c and Provision for Depreciation A/c for all the four years. Ans. Loss of 1st
Machinery Rs. 1,13,000; Loss of 2nd Machinery Rs. 78,000

Q. 7 A company purchased second-hand machinery on 1 st February, 1998 for Rs. 5,85,000 and
immediately spent Rs. 15,000 on its erection. On 1 st July, 1999, it purchased another machine for
Rs. 4,00,000. On 30th April, 2000, it sold off the first machine for Rs. 2,50,000 and bought
another for Rs. 4,20,000. On 1st August, 2001, the second machine was also sold off for Rs
3,00,000. Depreciation was provided on the machinery @15% p.a. on equal installment method.
Show the Machinery Account, Depreciation Account and Provision for Depreciation Account
assuming that the books are closed on 31st December every year. Ans. Loss on 1st Machinery
Rs. 1,47,500; Profit on 2nd Machinery Rs. 25,000

Q. 8 Gyan Ltd. Purchased a plant on 1st plant on 1st April, 1999 costing Rs. 5,00,000. It
purchased another plant on 1st June, 1999 costing Rs. 3,00,000. On 30th September 2001, the
plant purchased on 1st April, 1999 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 31 st
December. Show the Plant Account and Provision for Depreciation Account. Loss on
Machinery Rs. 74,000

Theory questions

Q1) What do you mean by depreciation? What are the causes?

Q2) Is it necessary to provide depreciation when there is loss in a business?

Q3) Compare the 2 methods of depreciation?

Q4) why is depreciation treated as an expense?

Q5) Give importance of depreciation

Q6) Give an example of an asset which is not usually depreciated?