Accountancy

WOW
Book
(Feel the magic of debit and credit)

Class 11 th

Written by:-

Gourav Chauhan

Concept : Bad debts and Bad debts recovered

Scene 1
Good sold to Ram on credit ₹10,000
Scene 2
Ram became insolvent and only 60 paisa in a rupee can be
recovered from him

Scene 3
Ram paid ₹3,000
Part A : Practical chapters

Chapter : Accounting equation

Chapter : Journal

Chapter : Subsidiary Books

Chapter : Ledger

Chapter : Trial balance

Chapter : GST

Chapter : Financial Statements of sole proprietorship

Chapter : Accounting from incomplete records

Chapter : Bank reconciliation statements

Chapter : Depreciation

Chapter : Rectification of errors

Part B: Theory chapters

Chapter

Module 1: Theory Chapters

Chapter Introduction to accounting Pages
Chapter Basic accounting terms Pages
Chapter Theory base of accounting Pages
Chapter AS, Ind AS and IFRS
Chapter Bases of accounting Pages
Chapter Accounting procedures-rules of debit and credit Pages
Chapter Vouchers Pages
Chapter Provisions and reserves
Chapter Capital and Revenue

Part B: Practical Chapters-Accounting Process

Chapter Journal (without GST) Pages
Chapter Subsidiary books-1: Cash book Pages
Chapter Other Subsidiary Books (Without GST) Pages
Chapter Ledger (without GST) Pages
Chapter Trial Balance (without GST) Pages
Chapter Financial statements (without GST) Pages
Chapter Adjustments in Financial statements (without GST)
Chapter Accounts from Incomplete records-single entry system Pages

Part C : Practical Chapters-special topics

Chapter Accounting Equation Pages
Chapter Bank reconciliation statement
Chapter Depreciation
Chapter Rectification of Errors
Chapter GST
Chapter 5: Accounting Equation/Balance sheet Equation

Part A Theory
Part B Concept building with examples
Part C Practical questions-Classwork
Part D Practical questions-Homework
Part E MCQs, Fill in the blanks, True/False etc.
Chapter 24 Depreciation

Contents:-
1. Concept Building with examples
2. Practical questions

Concept building with examples

Methods of Charging depreciation

Straight Line method Written down value method

A. Without creating provision for A. Without creating provision for
depreciation account depreciation account
B. With creating provision for B. With creating provision for
depreciation account depreciation account
I. With asset disposal account I. With asset disposal account
II. Without asset disposal II. Without asset disposal account
account
 Straight Line Method
Example 1 (Basic question----Asset purchased and depreciation charged)
M/s Singhania and Bros. purchased a machinery for Rs. 5,00,000 on April, 01st 2014, and
spent
Rs. 50,000 for its installation. The salvage value of the plant after its useful life of 10 years
is estimated to be Rs. 10,000.
A. Record journal entries for first three years.
B. Plant Account and Depreciation Account for first three years given that the depreciation
is charged using straight line method if the books of account close on March 31st every year.

Example 2(Basic question----Asset purchased and depreciation charged)

M/s Mehra and Sons acquired a machine for Rs. 1,80,000 on October 01 st, 2014, and spent
Rs 20,000 for its installation. The firm writes-off depreciation at the rate of 10% on original
cost every year.
A. Record necessary journal entries
B. Prepare Ledger-Machinery Account and Depreciation Account for first three years
Book of accounts closes on March 31st every year.

Example 5
On January 01 2014, Khosla Transport Co. purchased five trucks for Rs. 20,000 each.
Depreciation has been provided at the rate of 10% p.a. using straight line method. On
January 01, 2015, one truck was sold for Rs. 15,000. On July 01, 2016, another truck
(purchased for Rs. 20,000 on Jan 01,2014) was sold for Rs. 18,000. A new truck costing Rs.
30,000 was purchased on October 01, 2016.
You are required to prepare Trucks account, Depreciation account for the years ended on
December 2014, 2015 and 2016 assuming that the firm closes its accounts in December
every year.

Example 3
M/s. Dalmia Textile Mills purchased machinery on April 01, 2014 for Rs. 2,00,000 on
credit from M/s Ahuja and sons and spent Rs. 10,000 for its installation. Depreciation is
provided @10% p.a. on written down value basis. Prepare Machinery Account for the first
three years. Books are closed on March 31, every year.

Example 4
M/s Sahani Enterprises acquired a printing machine for Rs. 40,000 on July 01, 2014 and
spent Rs. 5,000 on its transport and installation. Another machine for Rs. 35,000 was
purchased on January 01, 2016. Depreciation is charged at the rate of 20% on written
down value. Prepare Printing Machine account.

Example 6
On April 01, 2014, following balances appeared in the books of M/s Kanishka Traders:
Furniture account Rs. 50,000, Provision for depreciation on furniture Rs. 22,000. On
October 01, 2014 a part of furniture purchased for Rupees 20,000 in April 01, 2010 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 March 31, 2015.

On Jan 01, 2010 Jain & Sons purchased a second hand plant costing Rs. 2,00,000 and
spent Rs. 10,000 on its overhauling. It also spent Rs. 5,000 on transportation and
installation of the plant. It was decided to provide for depreciation @ of 20% on written
down value. The plant was destroyed by fire on July 31, 2013 and an insurance claim of
Rs. 50,000 was admitted by the insurance company. Prepare plant account, accumulated
depreciation account and plant disposal account assuming that the company closes its
books on December 31, every year.

M/s Digital Studio bought a machine for Rs. 8,00,000 on April 01, 2012. Depreciation
was provided on straight-line basis at the rate of 20% on original cost. On April 01,2014
a substantial modification was made in the machine to make it more efficient at a cost of
Rs. 80,000. This amount is to be depreciated @ 20% on straight line basis. Routine
maintenance expenses during the year 2013-14 were Rs. 2,000.
Draw up the Machine account, Provision for depreciation account and charge to profit
and loss account in respect of the accounting year ended on March 31,2015.
2015

Illustration 11
M/s Nishit printing press bought a printing machine for Rs. 6, 80,000 on April 01, 2012.
Depreciation was provided on straight line basis at the rate of 20% on original cost. On
April 01, 2014 a modification was made in the machine to increase its technical reliability
for Rs 70,000. On the same date, an important component of the machine was replaced for
2015 Rs. 20,000 due to excessive wear and tear. Routine maintenance expenses during the year
are Rs. 5,000
Prepare machinery account, provision for depreciation account. Show the working notes
accordingly for the year ending March 31, 2015.

1. 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 straight line method. Accounts are
closed on March 31st every year.

2. 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.
(Ans: Balance of Machine account as on 1.01.2013 Rs.97,500).

3. 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
installment Method. Accounts are closed
on December 31, every year.
(Ans: Balance of provision for depreciation account as on 1.01.14 Rs.18,200).

4. Berlia Ltd. Purchased a second hand machine for Rs. 56,000 on July 01,
2011 and spent Rs. 24,000 on its repair and installation and Rs. 5,000 for its
carriage. On September 01, 2012, 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 2011 to 2014.

5. Ganga Ltd. purchased a machinery on January 01, 2011 for Rs. 5,50,000 and
spent Rs. 50,000 on its installation. On September 01, 2011 it purchased
another machine for Rs. 3,70,000. On May 01, 2012 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 2011, 2012,
2013 and 2014.

Azad Ltd. purchased furniture on October 01, 2012 for Rs. 4,50,000. On
March 01, 2013 it purchased another furniture for Rs. 3,00,000. On July 01,
2014 it sold off the first furniture purchased in 2012 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 31,2013,
March 31,2014 and March 31,2015. Also give the above two accounts if
furniture disposal account is opened.
(Ans. Loss on sale of furniture Rs.1,14,915,
Balance of provision for depreciation account as on 31.03.15 Rs. 85,959.)

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.
(Ans. Loss on sale of Machine account Rs.7,500.
Balance of machine account as on 1.04.15 Rs.1,09,375).

8. The following balances appear in the books of Crystal Ltd, on Jan 01, 2015
Rs.
Machinery account on 15,00,000
Provision for depreciation account 5,50,000
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.
(Ans. Profit on sale of Machine Rs. 5,000.
Balance of machine account as on 31.03.15 Rs. 19,00,000.
Balance of Provision for depreciation account as on 31.03.15 Rs. 4,80,000).
9. 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 obselete 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.
(Ans: Loss on sale of computer Rs. 1,36,250.
Balance of computers account as on 31.03.15 Rs. 80,583).

10. 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.
(Ans: Loss of settlement of Truck Insurance Rs.30,000.
Balance of Provision for depreciation A/c as on 31.12.13 Rs.4,46,000.
Balance of Trucks account as on 31.12.13 Rs.9,20,000).

11. 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.
(Ans: Loss on sale of Machine Rs.58,333.
Balance of Provision for dep. A/c as on 31.12.15 Rs. 11,30,000.
Balance of Machine A/c as on 31.12.15 Rs. 35,00,000).

12. 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.
(Ans: Balance of Machine A/c as on 31.12.13 Rs.1,22,500).
13. 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.
(Ans: Profit on Sale of Truck Rs.55,548).
14. 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.
(Ans: Loss on sale of machine Rs. 1,97,500.
Balance of Machine account as on 1.01.05 Rs. 1,86,250).

16. 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.
(Ans: Loss on Ist Truck Insurance claim Rs. 1,41,000.
Loss on IInd Truck Rs. 5,53,000.
Balance of Truck account as on 31.03.14 Rs. 11,80,000).

17. A Noida based Construction Company owns 5 cranes and the value of this
asset in its books on April 01, 2011 is Rs. 40,00,000. On October 01, 2011 it
sold one of its cranes whose value was Rs. 5,00,000 on April 01, 2011 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.
(Ans: Profit on sale of crane Rs. 47,500.
Balance of Cranes account as on 31.12.11 Rs. 41,15000).

18. Shri Krishan Manufacturing Company purchased 10 machines for Rs. 75,000
each on July 01, 2010. On October 01, 2012, 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 2010 to 2013.

(Ans: Loss on settle of insurance claim Rs. 7,735.

Balance of Machine account as on 31.12.13 Rs. 6,30,393).

19. On January 01, 2010, a Limited Company purchased machinery for

Rs. 20,00,000. Depreciation is provided @15% p.a. on diminishing balance
method. On March 01, 2012, one fourth of machinery was damaged by fire
and Rs. 40,000 were received from the insurance company in full settlement.
On September 01, 2012 another machinery was purchased by the company
for Rs. 15,00,000.
Write up the machinery account from 2012 to 2013. Books are closed on December 31, every year.
(Ans: Loss on settle of insurance claim Rs. 12,219.
Balance of Machine account as on 01.01.14 Rs. 19,94,260).

20. A Plant was purchased on 1st July, 2010 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, 2012 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.
(Ans: Loss on sale of Plant Rs. 81,875.
Balance of Machine account as on 01.01.13 Rs. 15,000.
Balance of Provision for Depreciation account as on 01.01.03 Rs. 15,000.).

SLM method-when provision for depreciation account is not

maintained

Q1
SLM method- when provision for depreciation account is maintained
WDV method-when provision for depreciation account is not
maintained
WDV method-when provision for depreciation account is maintained
Asset disposal account-when provision for depreciation account is not
maintained

Asset disposal account-when provision for depreciation account is not

maintained