# NCERT Solutions For Class 11 Financial Accounting Part I Chapter 7 Depreciation

## Class 11 Financial Accounting Part I Chapter 7 Depreciation

NCERT Solutions For Class 11 Financial Accounting Part I Chapter 7 Depreciation, Provisions And Reserves in this step-by-step answer guide. In some of State Boards and CBSE schools, students are taught thru NCERT books. As the chapter comes to an end, students are requested few questions in an exercising to evaluate their expertise of the chapter. Students regularly want guidance managing those NCERT Solutions.

It’s most effective natural to get stuck withinside the exercises while solving them so that you can assist students score higher marks, we’ve provided step by step NCERT answers for all exercises of Class eleven Accountancy so you can are looking for assist from them. Students should solve those exercises carefully as questions withinside the final exams are requested from those, so these exercises immediately have an impact on students’ final score. Find all NCERT Solutions for Class eleven Accountancy below and prepare in your tests easily.

## Class 11 Financial Accounting Part I Chapter 7 Depreciation

Page No 270:

Question 1:

What is Depreciation?

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.

A machinery costing Rs 1,00,000 and its useful life is 10 years; so, depreciation is calculated as:

Page No 270:

Question 2:

State briefly the need for providing depreciation.

The needs for providing depreciation are given below.

1. 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.
2. 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.
3. 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.
4. 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.
5. 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.
6. 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.

Page No 270:

Question 3:

What are the causes of depreciation?

1. 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.
2. 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.
3. 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.
4. 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 by  of its gross value. At the end of the 25th year, the value of the lease will be zero.
5. 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.
6. 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 No 270:

Question 4:

Explain basic factors affecting the amount of depreciation.

1. 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.
2. 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.
3. 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.

After 10 years, the furniture will be sold at Rs 10,000. So, depreciation is charged as:

Page No 270:

Question 5:

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

 Basis of Difference Straight Line Method Written Down Value Method Basis for calculation Depreciation is calculated on the original cost of an asset. Depreciation is calculated on the reducing balance, i.e., the book value of an asset. Amount of depreciation Equal amount is charged each year over the effective life of the asset. Diminishing amount of depreciation (on the written down value of asset) is charged each year over the effective life of the asset. Book value of asset Book value of the asset becomes zero at the end of its effective life. Book value of the asset can never be zero. Suitability It is suitable for the assets like patents, copyright, land and buildings, etc., which have lesser possibility of obsolescence and lesser repair charges. It is suitable for assets that needs more repair in the later years like, plant and machinery, car, etc. Effect of depreciation and repair on profit and loss account Unequal effect over the life of the asset, as depreciation remains same over the years but repair cost increases in the later years. Equal effect over the life of the asset, as depreciation cost is high and repairs are less in the initial years but in the latter years the repair costs increase and depreciation cost decreases. Recognition under Income Tax Act It is not recognised under the income tax act. It is recognised under the income tax act.

Page No 270:

Question 6:

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.

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 No 270:

Question 7:

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

The effects of depreciation on Profit and Loss Account are given below.

1. Depreciation increases the debit side of profit and loss account and hence reduces net profit.
2. Depreciation increases the total expenses, leading to an excess of debit over credit balance.

The effects of depreciation on Balance Sheet are given below.

1. It reduces the original cost or book value of the concerned asset.
2. It reduces the overall balance of asset’s column in the balance sheet.

Page No 270:

Question 8:

Distinguish between provision and reserve.

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

Page No 270:

Question 9:

Give four examples each of provision and reserves.

Four examples of provision are given below.

1. Provision for bad and doubtful debts
2. Provision for discount on debtors
3. Provision for depreciation
4. Provision for taxation

Four examples of reserve are given below.

1. General reserve
2. Capital reserve
3. Dividend equalisation reserve
4. Debenture redemption reserve

Page No 270:

Question 10:

Distinguish between revenue reserve and capital reserve.

 Basis of Difference Revenue Reserve Capital Reserve Source It is created out of revenue profit, i.e., revenue earned from normal activities of business operations. It is created out of capital profit, i.e., gain from other than normal activities of business 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 the financial position of the business. It is created for the purpose laid down in the Companies Act.

Page No 270:

Question 11:

Give four examples each of revenue reserve and capital reserves.

1. Four examples of revenue reserve are given below.
2. General Reserve
3. Retained Earnings
4. Dividend Equalisation Reserve
5. Debenture Redemption Reserve
6. Four examples of capital reserve are given below.
7. Issues of shares at premium
8. Profit or issue of shares
9. Sale of fixed assets
10. Profit on redemption of debentures

Page No 270:

Question 12:

Distinguish between general reserve and specific reserve.

 Basis of Difference General Reserve Specific Reserve Meaning When the reserve is created without any specified purpose, the reserve is called general reserve. When reserve is created for some specific purpose, the reserve is 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, etc. Debenture redemption reserve, dividend equalisation reserve, etc.

Page No 270:

Question 13:

Explain the concept of secret reserve.

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 No 270:

Question 1:

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

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.

A machinery that costs Rs 1,00,000 and its useful life of 10 years, its depreciation will be calculated as:

1. 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.
2. 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.
3. 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.
4. 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.
5. 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.
6. 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.

Below are given the causes for depreciation.

1. 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.
2. 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.
3. 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.
4. 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 by  of its gross value. At the end of the 25th year, the value of the lease will be zero.
5. 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.
6. 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 No 270:

Question 2:

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.

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.

Amount of depreciation is calculated as under:

1. It is simple to calculate.
2. Asset can be completely written off, i.e., asset can be depreciated until the net scrap value is zero.
3. Same amount of depreciation is charged every year. Therefore, it helps in easy comparison of Profit and Loss Account for different years.
4. 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

1. Burden of deprecation is more on profit and loss account in the later years, when repair and maintenance costs increase, as asset becomes older.
2. Value of asset becomes zero in the books even if asset is still in usable condition in business.

Uses of Straight Line Method

1. This method is useful where repairs and maintenance expenses on asset are low.
2. It is also useful when an asset is continuously used from one year to another.
3. It is useful when the value of assets, such as patent, copyright, goodwill, etc., becomes zero

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.

Rate of depreciation is calculated as follows:

Where,

R represents rate of depreciation

n represents expected useful life of the asset

s represents the scrap value

c represents the cost of the asset

Advantages of Written Down Value Method

1. 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.
2. 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.
3. This method is accepted by the income tax authorities.
4. 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

1. It is difficult to calculate and is a time consuming process.
2. The value of an asset cannot be zero, thus the asset cannot be completely written off.
3. 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

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

Page No 270:

Question 3:

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

The two methods of recording depreciation are diagrammatically presented below.

1. 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 (Depreciation charged to Assets Account)

Closing of Depreciation Account

 Profit and Loss A/c Dr. To Depreciation A/c (Depreciation transferred to Profit and Loss Account)
1. 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 (Depreciation charged)

Closing of Depreciation Account

 Profit and Loss A/c Dr. To Depreciation A/c (Depreciation account is 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 (Accumulated depreciation transferred to Assets Account)

Page No 271:

Question 4:

Explain determinants of the amount of depreciation.

1. 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.
2. 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.
3. 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 with it’s effective life of 10 years.

After 10 years, furniture will be sold at Rs 10,000. So, depreciation is charged as:

Page No 271:

Question 5:

Name and explain different types of reserves in details.

Reserves− Reserves are created for strengthening the financial positions and future growth. It is created out of profit earned by business.

The broad classification of reserve is diagrammatically presented below.

1. 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.

i. Debenture Redemption Reserve

ii. Investment Fluctuation Reserve

iii. Dividend Equalisation Reserve

iv. Workmen Compensation Fund

1. 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.

i. Premium on issue of shares

ii. Premium on issue of debentures

iii. Profit on redemption of debentures

iv. Profit on sale of fixed assets

v. Profit on reissue of forfeited shares

vi. Profit prior to incorporation

1. 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 No 271:

Question 6:

What are provisions? How are they created? Give accounting treatment in case of provision for doubtful Debts.

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 conservatismviz., 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.

1. Provision for bad and doubtful debts
2. Provision for depreciation
3. Provision for taxation
4. 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 (Provision for doubtful debt made)

Page No 271:

Question 1:

On April 01, 2010, Bajrang Marbles purchased a Machine for Rs 1,80,000 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. (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.

(a)

 Books of Bajrang Marbles Machinery Account Dr. Cr. Date Particulars J.F. Amount(₹) Date Particulars J.F. Amount(₹) 2010 2011 Apr.01 Bank 2,00,000 Mar.31 Depreciation 18,000 (1,80,0000 + 20,000) Balance c/d 1,82,000 2,00,000 2,00,000 2011 2012 Apr.01 Balance b/d 1,82,000 Mar.31 Depreciation 18,000 Mar.31 Balance c/d 1,64,000 1,82,000 1,82,000 2012 2013 Apr.01 Balance b/d 1,64,000 Mar.31 Depreciation 18,000 Mar.31 Balance c/d 1,46,000 1,64,000 1,64,000 2013 2014 Apr.01 Balance b/d 1,46,000 Mar.31 Depreciation 18,000 Mar.31 Balance c/d 1,28,000 1,46,000 1,46,000

Working notes: Calculation of annual depreciation

 Depreciation (p.a.) = (Original cost – Scrap Value ) Estimated Life of Asset (years) = (1,80,000 + 10,000 + 10,000 – 20,000) 10 = ₹ 18,000 per annum

 Depreciation Account Dr. Cr. Date Particulars J.F. Amount(₹) Date Particulars J.F. Amount(₹) 2011 2011 Mar.31 Machinery 18,000 Mar.31 Profit and Loss 18,000 18,000 18,000 2012 2012 Mar.31 Machinery 18,000 Mar.31 Profit and Loss 18,000 18,000 18,000 2013 2013 Mar.31 Machinery 18,000 Mar.31 Profit and Loss 18,000 18,000 18,000 2014 2014 Mar.31 Machinery 18,000 Mar.31 Profit and Loss 18,000 18,000 18,000

(b)

 Machinery Account Dr. Cr. Date Particulars J.F. Amount (₹) Date Particulars J.F. Amount(₹) 2010 2011 Apr.01 Bank 2,00,000 Mar.31 Balance c/d 2,00,000 2,00,000 2,00,000 2011 2012 Apr.01 Balance b/d 2,00,000 Mar.31 Balance c/d 2,00,000 2,00,000 2,00,000 2012 2013 Apr.01 Balance b/d 2,00,000 Mar.31 Balance c/d 2,00,000 2,00,000 2,00,000 2013 2014 Apr.01 Balance b/d 2,00,000 Mar.31 Balance c/d 2,00,000 2,00,000 2,00,000 Provision for Depreciation Account Dr. Cr. Date Particulars J.F. Amount(₹) Date Particulars J.F. Amount(₹) 2011 2011 Mar.31 Balance c/d 18,000 Mar.31 Depreciation 18,000 18,000 18,000 2011 Apr.01 Balance b/d 18,000 2012 2012 Mar.31 Balance c/d 36,000 Mar.31 Depreciation 18,000 36,000 36,000 2012 Apr.01 Balance b/d 36,000 2013 2013 Mar.31 Balance c/d 54,000 Mar.31 Depreciation 18,000 54,000 54,000 2003 Apr.01 Balance b/d 54,000 2014 2014 Mar.31 Balance c/d 72,000 Mar.31 Depreciation 18,000 72,000 72,000

 Depreciation Account Dr. Cr. Date Particulars J.F. AmountRs Date Particulars J.F. AmountRs 2011 2011 Mar.31 Provision for Depreciation 18,000 Mar.31 Profit and Loss 18,000 18,000 18,000 2012 2012 Mar.31 Provision for Depreciation 18,000 Mar.31 Profit and Loss 18,000 18,000 18,000 2013 2013 Mar.31 Provision for Depreciation 18,000 Mar.31 Profit and Loss 18,000 18,000 18,000 2014 2014 Mar.31 Provision for Depreciation 18,000 Mar.31 Profit and Loss 18,000 18,000 18,000

Page No 271:

Question 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.

 Books of Ashok Ltd. Machinery Account Dr. Cr. Date Particulars J.F. AmountRs Date Particulars J.F. AmountRs 2010 2010 Jul.01 Bank 1,20,000 Dec.31 Depreciation 4,500 Dec.31 Balance c/d 1,15,500 1,20,000 1,20,000 2011 2011 Jan.01 Balance b/d 1,15,500 Dec.31 Depreciation 9,000 Dec.31 Balance c/d 1,06,500 1,15,000 1,15,500 2012 2012 Jan.01 Balance b/d 1,06,500 Dec.31 Depreciation 9,000 Dec.31 Balance c/d 97,500 1,06,500 1,06,500 2013 Jan.01 Balance b/d 97,500

 Depreciation Account Dr. Cr. Date Particulars J.F. Amount Rs Date Particulars J.F. AmountRs 2010 2010 Dec.31 Machinery 4,500 Dec.31 Profit and Loss 4,500 4,500 4,500 2011 2011 Dec.31 Machinery 9,000 Dec.31 Profit and Loss 9,000 9,000 9,000 2012 2012 Dec.31 Machinery 9,000 Dec.31 Profit and Loss 9,000 9,000 9,000

Working Note:

Calculation of annual depreciation

 Depreciation (p.a.) = (1,08,000 + 12,000 – 12,000) 12 years = Rs 9,000 per annum

Page No 271:

Question 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 Instalment Method. Accounts are closed on March 31, every year.

 Books of Reliance Ltd. Machinery Account Dr. Cr. Date Particulars J.F. AmountRs Date Particulars J.F. AmountRs 2011 2011 Oct.01 Bank 84,000 Dec.31 Balance c/d 84,000 84,000 84,000 2012 2012 Jan.01 Balance b/d 84,000 Dec.31 Balance c/d 84,000 84,000 84,000 2013 2013 Jan.01 Balance b/d 84,000 Dec.31 Balance c/d 84,000 84,000 84,000

 Provision for Depreciation  Account Dr. Cr. Date Particulars J.F. AmountRs Date Particulars J.F. AmountRs 2011 Dec.31 Depreciation 1,316 2011 Dec.31 Balance c/d 1,316 1,316 1,316 2012 Jan.01 Balance b/d 1,316 2012 Dec.31 Depreciation 5,267 Dec.31 Balance c/d 6,583 6,583 6,583 2013 Jan.01 Balance b/d 6,583 2013 Dec.31 Depreciation 5,267 Dec.31 Balance c/d 11,850 11,850 11,850 2014 Jan.01 Balance b/d 11,850

Working Note:

Calculation of annual depreciation

 Depreciation (p.a.) = (56,000 + 28,000 – 6,000 + 1,000) 15 years = Rs 5,267 per annum

Note: As per the solution, the balance of provision for depreciation account, as on March.31, 2015 is Rs 11,850; whereas, as per the book, it is Rs 18,200.

However, if we ignore the scrap value and prepare provision for depreciation for 4 years, the answer would match to that of the book.

Page No 271:

Question 4:

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.

 Books of Berlia Ltd.(a) Machinery Account (Original Cost Method) Dr. Cr. Date Particulars J.F. AmountRs Date Particulars J.F. AmountRs 2015 2015 Jul.01 Bank (i) 85,000 Dec.31 Depreciation 4,250 (5,600 + 24,000 + 5,000) Dec.31 Balance c/d 80,750 85,000 85,000 2016 2016 Jan.01 Balance b/d (i) 80,750 Dec.31 Depreciation Sep.01 Bank (ii) 2,60,000 (i) 8,500, (ii) 8,667 17,167 (2,50,000 + 10,000) Dec.31 Balance c/d 3,23,583 (i) 72,250, (ii) 2,51,333 3,40,750 3,40,750 2017 2017 Jan.01 Balance b/d 3,23,583 Dec.31 Depreciation (i) 72,250, (ii) 2,51,333 (i) 8,500, (ii) 26,000 34,500 Dec.31 Balance c/d (i) 63,750, (ii) 2,25,333 2,89,083 3,23,583 3,23,583 2018 Balance b/d 2018 Jan.01 (i) 63,750, (ii) 2,25,333 2,89,083 Dec.31 Depreciation (i) 8,500, (ii) 26,000 34,500 Dec.31 Balance c/d (i) 55,250, (ii) 1,99,333 2,54,583 2,89,083 2,89,083

 Depreciation Account Dr. Cr. Date Particulars J.F. AmountRs Date Particulars J.F. AmountRs 2015 2015 Dec.31 Machinery 4,250 Dec.31 Profit and Loss 4,250 4,250 4,250 2016 2016 Dec.31 Machinery Dec.31 Profit and Loss 17,167 (i) 8,500 (ii) 8,667 17,167 17,167 17,167 2017 2017 Dec.31 Machinery Dec.31 Profit and Loss 34,500 (i) 8,500 (ii) 26,000 34,500 34,500 34,500 2018 2018 Dec.31 Machinery 34,500 Dec.31 Profit and Loss 34,500 (i) 8,500 (ii) 26,000 34,500 34,500

Working notes: Calculation of annual depreciation

(i) Depreciation (p.a.) on Machinery Purchased on July 01, 2015

 = (56,000 + 24,000 + 5,000) × 10 100 = Rs 8,500 per annum

(ii) Depreciation (p.a.) on Machinery purchased on September 01, 2016.

 = (2,50,000 + 10,000)  × 10 100 = Rs 26,000 per annum

(b)

 Machinery Account (Written Down Value method) Dr. Cr. Date Particulars J.F. Amount Rs Date Particulars J.F. Amount Rs 2015 2015 Jul.01 Bank (i) 85,000 Dec.31 Depreciation 4,250 (5,600 + 24,000 + 5,000) Dec.31 Balance c/d 80,750 85,000 85,000 2016 2016 Jan.01 Balance b/d (i) 80,750 Dec.31 Depreciation Sep.01 Bank (ii) 2,60,000 (i) 8,075, (ii) 8,667 16,742 (2,50,000 + 10,000) Dec.31 Balance c/d (i) 72,675, (ii) 2,51,333 3,24,008 3,40,750 3,40,750 2017 2017 Jan.01 Balance b/d 3,24,008 Dec.31 Depreciation (i) 72,675, (ii) 2,51,333 (i) 7,268, (ii) 25,133 32,401 Dec.31 Balance c/d (i) 65,407, (ii) 2,26,200 2,91,607 3,24,008 3,24,008 2018 Balance b/d 2018 Jan.01 (i) 65,407, (ii) 2,26,200 2,91,607 Dec.31 Depreciation (i) 6,540, (ii) 22,620 29,160 Dec.31 Balance c/d (i) 58,867, (ii) 2,03,580 2,62,447 2,91,607 2,91,607

 Depreciation Account Dr. Cr. Date Particulars J.F. AmountRs Date Particulars J.F. Amount Rs 2015 2015 Dec.31 Machinery 4,250 Dec.31 Profit and Loss 4,250 4,250 4,250 2016 2016 Dec.31 Machinery Dec.31 Profit and Loss 16,742 (i) 8,075, (ii) 8,667 16,742 16,742 16,742 2017 2017 Dec.31 Machinery Dec.31 Profit and Loss 32,401 (i) 7,268, (ii) 25,133 32,401 32,401 32,401 2018 2018 Dec.31 Machinery Dec.31 Profit and Loss 29,160 (i) 6,540, (ii) 22,620 29,160 29,160 29,160

Page No 272:

Question 5:

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, 2015 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.

(a)

 Books of Ganga Ltd.Machinery Account Dr. Cr. Date Particulars J.F. AmountRs Date Particulars J.F. AmountRs 2014 2014 Jan.01 Bank (i) 6,00,000 Dec.31 Depreciation(i) 60,000 (ii) 12,333 72,333 (5,50,000 + 50,000) Dec.31 Balance c/d Sep.01 Bank (ii) 3,70,000 (i) 5,40,000, (ii) 3,57,667 8,97,667 9,70,000 9,70,000 2015 2015 Jan.01 Balance b/d Dec.31 Depreciation (i) 5,40,000, (ii) 3,57,667 8,97,667 (i) 60,000, (ii) 37,000, May.01 Bank (iii) 8,40,000 (iii) 56,000 1,53,000 Dec.31 Balance c/d (i) 4,80,000 (ii) 3,20,667, (iii) 7,84,000 15,84,667 17,37,667 17,37,667 2016 2016 Jan.01 Balance b/d Dec.31 Depreciation (i) 4,80,000, (ii) 3,20,667 (i) 60,000, (ii) 37,000, (iii) 7,84,000 15,84,667 Dec.31 (iii) 84,000 1,81,000 Balance c/d (i) 4,20,000, (ii) 2,83,667, (iii) 7,00,000 14,03,667 15,84,667 15,84,667 2017 2017 Jan.01 Balance b/d Dec.31 Depreciation (i) 4,20,000, (ii) 2,83,667, (i) 60,000, (ii) 37,000, (iii) 7,00,000 14,03,667 (iii) 84,000 1,81,000 Dec.31 Balance c/d (i) 3,60,000, (ii) 2,46,667, (iii) 6,16,000 12,22,667 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.31 Machinery 72,333 Dec.31 Profit and Loss 72,333 72,333 72,333 2015 2015 Dec.31 Machinery 1,53,000 Dec.31 Profit and Loss 1,53,000 1,53,000 1,53,000 2016 2016 Dec.31 Machinery 1,81,000 Dec.31 Profit and Loss 1,81,000 1,81,000 1,81,000 2017 2017 Dec.31 Machinery 1,81,000 Dec.31 Profit and Loss 1,81,000 1,81,000 1,81,000

(b)

 Machinery Account Dr. Cr. Date Particulars J.F. AmountRs Date Particulars J.F. AmountRs 2014 2014 Jan.01 Bank (i) 6,00,000 (5,50,000 + 50,000) Dec.31 Balance c/d Sep.01 Bank (ii) 3,70,000 9,70,000 9,70,000 9,70,000 2015 2015 Jan.01 Balance b/d (i) 6,00,000 (ii) 3,70,000 9,70,000 May.01 Bank (iii) 8,40,000 Dec.31 Balance c/d 18,10,000 18,10,000 18,10,000 2016 2016 Jan.01 Balance b/d Dec.31 Balance c/d 18,10,000 (i) 6,00,000 (ii) 3,70,000 (iii) 8,40,000 18,10,000 18,10,000 18,10,000 2017 2017 Jan.01 Balance b/d Dec.31 Balance c/d 18,10,000 (i) 6,00,000 (ii) 3,70,000 (iii) 8,40,000 18,10,000 18,10,000 18,10,000

 Provision for Depreciation  Account Dr. Cr. Date Particulars J.F. Amount Rs Date Particulars J.F. Amount Rs 2014 2014 Dec.31 Balance c/d 72,333 Dec.31 Depreciation 72,333 72,333 72,333 2015 2015 Jan.01 Balance b/d 72,333 Dec.31 Balance c/d 2,25,333 Dec.31 Depreciation 1,53,000 2,25,333 2,25,333 2016 2016 Jan.01 Balance b/d 2,25,333 Dec.31 Balance c/d 4,06,333 Dec.31 Depreciation 1,81,000 4,06,333 4,06,333 2017 2017 Jan.01 Balance b/d 4,06,333 Dec.31 Balance c/d 5,87,333 Dec.31 Depreciation 1,81,000 5,87,333 5,87,333

Page No 272:

Question 6:

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.

 Books of Azad Ltd. Furniture Account Dr. Cr. Date Particulars J.F. Amount Rs Date Particulars J.F. Amount Rs 2014 2015 Oct.01 Bank (i) 4,50,000 2015 Mar.31 Balance c/d 7,50,000 Mar.01 Bank (ii) 3,00,000 7,50,000 7,50,000 2015 2016 Apr.01 Balance b/d (i) 4,50,000, (ii) 3,00,000 7,50,000 Mar.31 Balance c/d 7,50,000 7,50,000 7,50,000 2016 2016 Apr.01 Balance b/d 7,50,000 July 01 Furniture Disposal 4,50,000 (i) 4,50,000, (ii) 3,50,000 2005 Mar.31 Balance c/d 3,00,000 7,50,000 7,50,000

 Accumulated Depreciation Account Dr. Cr. Date Particulars J.F. Amount Rs Date Particulars J.F. Amount Rs 2015 2015 Mar.31 Balance c/d 37,500 Mar.31 Depreciation (i) 33,750, (ii) 3,750 37,500 37,500 37,500 2016 2015 Mar.31 Balance c/d 1,44,376 Apr.01 Balance b/d 37,500 2016 Mar.31 Depreciation (i) 62,438, (ii) 44,378 1,06,876 1,44,376 1,44,376 2016 2016 July.01 Furniture Disposal 1,09,456 Apr.01 Balance b/d 1,44,376 2017 July.01 Depreciation (i) 13,268 Mar.31 Balance c/d 85,960 2017 Mar.31 Depreciation (ii) 37,772 1,95,416 1,95,416

 Furniture Disposal Account Dr. Cr. Date Particulars J.F. Amount Rs Date Particulars J.F. Amount Rs 2016 2016 Jul.01 Furniture 4,50,000 Jul.01 Accumulated Dep. 1,09,456 Jul.01 Bank 2,25,000 Jul.01 Profit and Loss (Loss) 1,15,544 4,50,000 4,50,000

Working Note:

Furniture (i)

 Years Opening Balance Depreciation Closing 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 months) = 3,40,544 1,09,456 Balance on July 01, 2016 3,40,544 Less: Sale on July 01, 2016 (2,25,000) Loss on sale of furniture 1,15,544

Page No 272:

Question 7:

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.

 Books of M/s. Lokesh Fabrics Machinery Account Dr. Cr. Date Particulars J.F. AmountRs Date Particulars J.F. AmountRs 2011 2012 Apr.01 Bank (i) 1,00,000 Mar.31 Depreciation 15,000 Mar.31 Balance c/d 85,000 1,00,000 1,00,000 2012 2013 Apr.01 Balance b/d 85,000 Mar.31 Depreciation July.01 Bank (ii) 2,50,000 (i) 15,000 + 28,125 43,125 Mar.31 Balance c/d (i) 70,000, (ii) 2,21,875 2,91,875 3,35,000 3,35,000 2013 2014 Apr.01 Balance b/d Mar.31 Depreciation (i) 70,000, (ii) 2,21,875 2,91,875 (i) 15,000, (ii) 37,500 52,500 Mar.31 Balance c/d (i) 55,000, (ii) 1,84,375 2,39,375 2,91,875 2,91,875 2014 2015 Apr.01 Balance b/d Mar.31 Depreciation (i) 5,500, (ii) 1,84,375 2,39,375 (i) 15,000, (ii) 37,500 52,500 Mar.31 Balance c/d (i) 40,000, (ii) 1,46,875 1,86,875 2,39,375 2,39,375 2015 2015 Apr.01 Balance b/d Oct.01 Depreciation 7,500 (i) 40,000, (ii) 1,46,875 1,86,875 Oct.01 Machinery Disposal 32,500 2016 Mar.31 Depreciation (ii) 37,500 Mar.31 Balance c/d 1,09,375 1,86,875 1,86,875

 Machinery Disposal Account Dr. Cr. Date Particulars J.F. AmountRs Date Particulars J.F. Amount Rs 2015 2015 Oct.01 Machinery 32,500 Oct.01 Bank 25,000 Oct.01 Profit and Loss 7,500 32,500 32,500

Page No 272:

Question 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.

 Machinery Account Dr. Cr. Date Particulars J.F. AmountRs Date Particulars J.F. AmountRs 2015 2015 Jan.01 Balance b/d 15,00,000 Apr.01 Machinery Disposal 2,00,000 (13,00,000 + 2,00,000) Jul.01 Bank 6,00,000 Dec.31 Balance c/d 19,00,000 21,00,000 21,00,000

 Provision for Depreciation Account Dr. Cr. Date Particulars J.F. Amount Rs Date Particulars J.F. Amount Rs 2015 2015 Apr.01 Machinery Disposal 1,30,000 Jan.01 Balance b/d 5,50,000 Apr.01 Balance c/d 7,50,000 Apr.01 Depreciation 10,000 Dec.31 Depreciation (i) 2,60,000, (ii) 60,000 3,20,000 8,80,000 8,80,000

Working Note:

Machine Sold on July 01, 2015

 (i) Years Opening Balance Depreciation Closing Balance 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 Depreciation = 1,30,000 Value on April 01, 2015 = (70,000) Less: Sale = 75,000 Profit on sale of Machinery 5,000

 Machinery Disposal Account Dr. Cr. Date Particulars J.F. Amount Rs Date Particulars J.F. Amount Rs 2015 2015 Apr.01 Machinery 2,00,000 Apr.01 Provision for Depreciation 1,30,000 Apr.01 Profit and Loss (Profit) 5,000 Apr.01 Bank 75,000 2,05,000 2,05,000

Page No 272:

Question 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 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.

 Books of M/s Excel Computers Computer Account Dr. Cr. Date Particulars J.F. AmountRs Date Particulars J.F. Amount Rs 2010 2011 Apr.01 Balance b/d (i) 50,000 Mar.31 Depreciation Jul.01 Bank (ii) 2,50,000 (i) 12,000, (ii) 18,750, 2011 (iii) 750 31,500 Jan.01 Bank (iii) 30,000 Mar.31 Balance c/d (i) 38,000, (ii) 2,31,250, (iii) 29,250 2,98,500 3,30,000 3,30,000 2011 2012 Apr.01 Balance b/d Mar.31 Depreciation (i) 38,000, (ii) 2,31,250, (i) 12,000 (ii) 25,000, (iii) 29,250 2,98,500 (iii) 3,000 40,000 Mar.31 Balance c/d (i) 26,000 (ii) 2,06,250, (iii) 26,250 2,58,500 2,98,500 2,98,500 2012 2013 Apr.01 Balance b/d Mar.31 Depreciation (i) 26,000 (ii) 2,06,250, (i) 12,000, (ii) 25,000, 40,000 (iii) 26,250 2,58,500 Mar.31 (iii) 3,000 Balance c/d (i) 14,000, (ii) 1,81,250, (iii) 23,250 2,18,500 2,58,500 2,58,500 2013 2014 Apr.01 Balance b/d Mar.31 Depreciation (i) 14,000, (ii) 1,81,250, (i) 12,000, (ii) 25,000, 40,000 (iii) 23,250 2,18,500 (iii) 3,000 Mar.31 Balance c/d (i) 2,000, (ii) 1,56,250, (iii) 20,250 1,78,500 2,18,500 2,18,500 2014 2014 Apr.01 Balance c/d Apr.01 Bank (ii) 20,000 (i) 2,000, (ii) 1,56,250, Apr.01 Profit and Loss (Loss) 1,36,250 (iii) 20,250 1,78,500 2015 Aug.01 Bank (iv) 80,000 Mar.31 Depreciation 10,333 (i) 2,000, (iii) 3,000, (iv) 5,333 Mar.31 Balance c/d (iii) 17,250, (iv) 74,667 91,917 2,58,500 2,58,500

Note: As per the solution, the closing balance, as on 31st March, 2005 is Rs 91,917; however, as per the book it is Rs 83,917.

Page No 272:

Question 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 April 30, 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.

 Books of Saraswati Ltd.Machinery Account Dr. Cr. Date Particulars J.F. Amount(₹) Date Particulars J.F. Amount(₹) 2011 2011 Jan.01 Bank (i) 10,00,000 (8,00,000 + 2,00,000) Dec.31 Balance c/d 10,00,000 10,00,000 10,00,000 2012 2012 Jan.01 Balance b/d 10,00,000 Dec.31 Balance c/d 25,00,000 May.01 Bank (ii) 15,00,000 25,00,000 25,00,000 2013 2013 Jan.01 Balance b/d 25,00,000 Dec.31 Balance c/d 25,00,000 25,00,000 25,00,000 2014 2014 Jan.01 Balance b/d 25,00,000 Apr. 30 Machinery Disposal 2,00,000 Jul.01 Bank (ii) 12,00,000 Dec.31 Balance c/d (i) 8,00,000 (ii) 15,00,000 (iii) 12,00,000 35,00,000 37,00,000 37,00,000 2015 2015 Jan.01 Balance c/d 35,00,000 Dec.31 Balance c/d 35,00,000 35,00,000 35,00,000

 Provision for Depreciation Account Dr. Cr. Date Particulars J.F. Amount (₹) Date Particulars J.F. Amount (₹) 2011 2011 Dec.31 Balance c/d 1,00,000 Dec.31 Depreciation (i) 1,00,000 1,00,000 1,00,000 2012 2012 Dec.31 Balance c/d 3,00,000 Jan.01 Balance c/d 1,00,000 Dec.31 Depreciation (i) 1,00,000 (ii) 1,00,000 2,00,000 (8 months) 3,00,000 3,00,000 2013 2013 Dec.31 Balance b/d 5,50,000 Jan.01 Balance c/d 3,00,000 Dec.31 Depreciation 2,50,000 5,50,000 (i) 1,00,000 (ii) 1,50,000, 5,50,000 2014 2014 Apr. 30 Machinery Disposal 66,667 Jan.01 Balance b/d 5,50,000 Dec.31 Balance c/d 7,80,000 Apr. 30 Depreciation 6,667 Dec.31 Depreciation (i) 80,000, (ii) 1,50,000, (iii) 60,000 2,90,000 8,46,667 8,46,667 2015 2015 Dec.31 Balance c/d 11,30,000 Jan.01 Balance c/d 7,80,000 Dec.31 Depreciation (i) 80,000, (ii) 1,50,000, (iii) 1,20,000 3,50,000 11,30,000 11,30,000

 Machinery Disposal Account Dr. Cr. Date Particulars J.F. Amount(₹) Date Particulars J.F. Amount(₹) 2014 2014 Apr. 30 Machinery 2,00,000 Apr. 30 Provision for Depreciation 66,667 Apr. 30 Bank 75,000 Apr. 30 Profit and Loss (Loss) 58,333 2,00,000 2,00,000

Working Note:

 Opening Balance Depreciation Closing 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 – 6,667 = 1,33,333 Accumulated Depreciation 66,667

 Value on Apr. 30, 2014 1,33,333 Sale on   Apr. 30, 2014 – 75,000 Loss on sale ₹ 58,333

Page No 273:

Question 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.

 Books of Carriage Transport Company Truck Account Dr. Cr. Date Particulars J.F. AmountRs Date Particulars J.F. AmountRs 2011 2011 Apr.01 Bank 10,00,000 Dec.31 Balance c/d 10,00,000 10,00,000 10,00,000 2012 2012 Jan.01 Balance b/d 10,00,000 Dec.31 Balance c/d 10,00,000 10,00,000 10,00,000 2013 2013 Jan.01 Balance b/d 10,00,000 Oct.01 Truck Disposal 2,00,000 Oct.01 Bank 1,20,000 Dec.31 Balance c/d 9,20,000 11,20,000 11,20,000

 Provision for Depreciation Account Dr. Cr. Date Particulars J.F. AmountRs Date Particulars J.F. AmountRs 2011 2011 Dec.31 Balance c/d 1,50,000 Dec.31 Depreciation 1,50,000 1,50,000 1,50,000 2012 2012 Dec.31 Balance c/d 3,50,000 Jan.01 Balance c/d 1,50,000 Dec.31 Depreciation 2,00,000 3,50,000 3,50,000 2013 2013 Oct.01 Truck Disposal 1,00,000 Jan.01 Balance b/d 3,50,000 Oct.01 Balance c/d 4,46,000 Oct.01 Depreciation (9 Months) 30,000 Dec.31 Depreciation (1,60,000 + 6,000) 1,66,000 5,46,000 5,46,000

 Truck Disposal Account Dr. Cr. Date Particulars J.F. Amount Rs Date Particulars J.F. Amount Rs 2013 2013 Oct.01 Truck 2,00,000 Oct.01 Provision for Depreciation 1,00,000 Oct.01 Insurance Co. (Insurance Claim) 70,000 Oct.01 Profit and Loss (Loss) 30,000 2,00,000 2,00,000

Working Note:

Truck involved in accident

 Opening Balance Depreciation Closing Balance Apr.01, 2011 2,00,000 – 30,000 = 1,70,000 Jan.01, 2012 1,70,000 – 40,000 = 1,30,000 Jan.01, 2013 1,30,000 – 30,000 = 1,00,000 Accumulated Depreciation = 1,00,000 Value on Oct.01, 2013 = 1,00,000 Less: Insurance Claim = 70,000 Loss on Accident 30,000

Page No 273:

Question 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.

 Books of AshwaniJournal Date Particulars L.F. Debit Amount Rs Credit Amount Rs 2011 Jul.01 Machinery A/c Dr. 2,25,000 To Creditors for Machinery A/c 2,00,000 To Bank A/c 25,000 (Machinery bought on credit and Rs 25,000 paid for installation through cheque) 2011 Dec.31 Depreciation A/c Dr. 20,500 To Machinery A/c 20,500 (Depreciation charged on Machinery) 2011 Dec.31 Profit and Loss A/c Dr. 20,500 To Depreciation A/c 20,500 (Depreciation transferred to Profit and Loss Account) 2012 Dec.31 Depreciation A/c Dr. 41,000 To Machinery A/c 41,000 (Depreciation charged on Machinery) 2012 Dec.31 Profit and Loss A/c Dr. 41,000 To Depreciation A/c 41,000 (Depreciation transferred to Profit and Loss Account) 2013 Dec.31 Depreciation A/c Dr. 41,000 To Machinery A/c 41,000 (Depreciation charged on Machinery) 2013 Dec.31 Profit and Loss A/c Dr. 41,000 To Depreciation A/c 41,000 (Depreciation transferred to Profit and Loss Account)

 LedgerMachinery Account Dr. Cr. Date Particulars J.F. Amount Rs Date Particulars J.F. Amount Rs 2011 2011 Jul.01 Creditors for Machinery 2,00,000 Dec.31 Depreciation 20,500 Jul.01 Bank 25,000 Dec.31 Balance c/d 2,04,500 2,25,000 2,25,000 2012 2012 Jan.01 Balance b/d 2,04,500 Dec.31 Depreciation 41,000 Dec.31 Balance c/d 1,63,500 2,04,500 2,04,500 2013 2013 Jan.01 Balance c/d 1,63,500 Dec.31 Depreciation 41,000 Dec.31 Balance c/d 1,22,500 1,63,500 1,63,500

Working Note:

Calculation of annual depreciation

 Depreciation (p.a.) = (2,00,000 + 25,000 – 20,000) 5 = Rs 41,000 per annum

Page No 273:

Question 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

 Books of Laxmi Transport Ltd.Truck Account Dr. Cr. Date Particulars J.F. AmountRs Date Particulars J.F. AmountRs 2010 2011 Oct.01 Bank 8,00,000 Mar.31 Depreciation 60,000 Mar.31 Balance c/d 7,40,000 8,00,000 8,00,000 2011 2012 Apr.01 Balance b/d 7,40,000 Mar.31 Depreciation 1,11,000 Mar.31 Balance c/d 6,29,000 7,40,000 7,40,000 2012 2013 Apr.01 Balance b/d 6,29,000 Mar.31 Depreciation 94,350 Mar.31 Balance c/d 5,34,650 6,29,000 6,29,000 2013 2013 Apr.01 Balance b/d 5,34,650 Dec.31 Depreciation (9 months) 60,148 Dec.31 Profit and Loss (Profit) 25,498 Dec.31 Bank 5,00,000 5,60,148 5,60,148

Note: As per the solution, the profit on the sale of truck, as on December 31, 2013 is Rs 25,498; however, the answer given in the book is Rs 58,237.

Page No 273:

Question 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.

 Books of Kapil Ltd. Machinery Account Dr. Cr. Date Particulars J.F. AmountRs Date Particulars J.F. AmountRs 2011 2011 Jul.01 Bank (i) 3,50,000 Dec.31 Depreciation (6 months) 17,500 Dec.31 Balance c/d 3,32,500 3,50,000 3,50,000 2012 2012 Jan.01 Balance c/d 3,32,500 Dec.31 Depreciation Apr.01 Bank (ii) 1,50,000 (i) 35,000 (ii) 11,250 (9 months), Oct.01 Bank (iii) 1,00,000 (iii) 2,500 (3 months) 48,750 Dec.31 Balance c/d (i) 2,97,500, (ii) 1,38,750, (iii) 97,500 5,33,750 5,82,500 5,82,500 2013 2013 Jan.01 (i) 2,97,500, (ii) 1,38,750, Jan.01 Bank (i) 1,00,000 (iii) 97,500 5,33,750 Jan.01 Profit and Loss (Loss) 1,97,500 Dec.31 Depreciation (ii) 15,000 (iii) 10,000 25,000 Dec.31 Balance c/d (ii) 1,23,750, (iii) 87,500 2,11,250 5,33,750 4,33,750 2014 2014 Jan.01 Balance c/d 2,11,250 Dec.31 Depreciation (ii) 1,23,750, (iii) 87,500 Dec.31 (ii) 15,000, (iii) 10,000 25,000 Balance c/d (ii) 1,08,750, (iii) 77,500 1,86,250 2,11,250 2,11,250 2015 Jan.01 Balance b/d 1,86,250

Page No 274:

Question 15:

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.

 Books of Satkar Transport Ltd.Bus Account Dr. Cr. Date Particulars J.F. Amount Rs Date Particulars J.F. Amount Rs 2011 2011 Jan.01 Bank 30,00,000 Dec.31 Depreciation 4,50,000 Dec.31 Balance c/d 25,50,000 30,00,000 30,00,000 2012 2012 Jan.01 Balance b/d 25,50,000 Dec.31 Depreciation 3,82,500 Dec.31 Balance c/d 21,67,500 25,50,000 25,50,000 2013 2013 Jan.01 Balance b/d 21,67,500 July.01 Depreciation (6 months) 54,187 July.01 Profit and Loss (Profit) 31,687 July.01 Insurance Co. (Insurance claim) 7,00,000 Dec.31 Depreciation 2,16,750 Dec.31 Balance c/d 12,28,250 21,99,187 21,99,187 2014 2014 Jan.01 Balance c/d 12,28,250 Dec.31 Depreciation 1,84,237 Dec.31 Balance c/d 10,44,013 12,28,250 12,28,250

Page No 274:

Question 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.

 Books of Juneja Transport Company Truck Account Dr. Cr. Date Particulars J.F. Amount Rs Date Particulars J.F. Amount Rs 2011 2012 Oct.01 Bank 20,00,000 Mar.31 Depreciation 1,00,000 Mar.31 Balance c/d 19,00,000 20,00,000 20,00,000 2012 2013 Apr.01 Balance b/d 19,00,000 Mar.31 Depreciation 1,90,000 Mar.31 Balance c/d 17,10,000 19,00,000 19,00,000 2013 2013 Apr.01 Balance b/d 17,10,000 Jul.01 Depreciation (3 Month on one Truck) 21,375 Jul.01 Bank (Insurance Claim) 6,00,000 2014 Jul.01 Profit and Loss (loss) 2,33,625 Jan.31 Bank 12,00,000 Dec.31 Depreciation (9 Month on II Truck) 64,125 Dec.31 Bank 1,50,000 Dec.31 Profit and Loss (Loss) 6,40,875 2014 Mar.31 Depreciation (2 Months) 20,000 Mar.31 Balance c/d 11,80,000 29,10,000 29,10,000

Note: As per solution, loss on truck one is as Rs 2,33,625; however, as per NCERT book, loss is of Rs 3,26,250.

Truck – 1

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

 Value on July 01, 2013 = 8,33,625 Insurance Claim = –  6,00,000 Loss on Truck – 1 = Rs 2,33,625

Truck – 2

 Opening Balance – Depreciation = Closing Balance Oct.01, 2012 10,00,000 – 50,000 (6 Months) = 9,50,000 Apr.01, 2012 9,50,000 – 95,000 = 8,55,000 Apr.01, 2013 8,55,000 – 64,125 (9 Months) = 7,90,875

 Value on Dec.31, 2013 = 7,90,875 Sale of Truck = –  1,50,000 Loss on Truck – 2 = Rs 6,40,875

Page No 274:

Question 17:

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.

 Cranes Account Dr. Cr. Date Particulars J.F. AmountRs Date Particulars J.F. AmountRs 2017 2017 Apr.01 Machinery (35,00,000 + 5,00,000) 40,00,000 Oct.01 Depreciation 25,000 Oct.01 Profit and Loss (Profit) 47,500 Oct.01 Bank 5,22,500 Oct.01 Bank 9,00,000 Dec.31 Depreciation 35,00,000 × 10 × 9 = 2,62,500 100 12 9,00,000 × 10 × 6 = 22,500 2,85,000 100 12 Dec.31 Balance c/d 32,37,500 + 8,77,500 41,15,000 49,47,500 49,47,500

Page No 274:

Question 18:

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.

 Books of Shri Krishna Manufacturing CompanyMachinery Account Dr. Cr. Date Particulars J.F. AmountRs Date Particulars J.F. AmountRs 2014 2014 Jul.01 Bank 7,50,000 Dec.31 Depreciation 56,250 Dec.31 Balance c/d 6,93,750 7,50,000 7,50,000 2015 2015 Jan.01 Balance b/d 6,93,750 Dec.31 Depreciation 1,04,063 Dec.31 Balance c/d 5,89,687 6,93,750 6,93,750 2016 2016 Jan.01 Balance b/d 5,89,687 Oct.01 Depreciation (9 months 6,634 for one machine) Oct.01 Bank 1,25,000 Oct.01 Insurance Co. 45,000 Oct.01 Profit and Loss (Loss) 7,335 Dec.31 Depreciation (i) 79,608, (ii) 4,688 84,296 Dec.31 Balance c/d (i) 4,51,110, (ii) 1,20,312 5,71,422 7,14,687 7,14,687 2017 2017 Jan.01 Balance b/d Dec.31 Depreciation (i) 4,51,110, (ii) 1,20,312 5,71,422 (i) 67,667, (ii) 18,047 85,714 Dec.31 Balance c/d (i) 3,83,443, (ii) 1,02,265 4,85,708 5,71,422 5,71,422

Working Note:

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

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

 Value on Oct.01, 2016 52,335 Insurance Claim – 45,000 Loss Rs 7,335

Page No 274:

Question 19:

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.

 Machinery Account Dr. Cr. Date Particulars J.F. AmountRs Date Particulars J.F. AmountRs 2016 2016 Jan.01 Balance b/d (i)(10,83,750 + 3,61,250) 14,45,000 Mar.01 Depreciation (1/4 Machinefor 2 Months) 9,031 Sep.01 Bank (ii) 15,00,000 Mar.01 Bank 40,000 Mar.01 Profit and Loss 3,12,219 Dec.31 Depreciation (i) (i) 1,62,563 (3/4th of  machine),(ii) 75,000 2,37,563 Dec.31 Balance c/d (i) 9,21,187, (ii) 14,25,000 23,46,187 29,45,000 29,45,000 2017 2017 Jan.01 Balance b/d Dec.31 Depreciation (i) 9,21,187, (ii) 14,25,000 23,46,187 Dec.31 (i) 1,38,177, (ii) 2,13,750 3,51,927 Balance c/d (i) 7,83,009, (ii) 12,11,250 19,94,260 23,46,187 23,46,187

Working Note:

Machine (i)

 Years January 01 Depreciation(15% p.a.) = Closing Balance 2014 20,00,000 – 3,00,000 = 17,00,000 2015 17,00,000 – 2,55,000 = 14,45,000 2016 14,45,000

1/4th of Machine (i)

 Years Opening Balance Depreciation (15% p.a.) = Closing Balance 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 months) = 3,52,219

 Value on 1 Mar. 2016 = 3,52,219 Insurance Claim = 40,000 Loss Rs 3,12,219

Page No 275:

Question 20:

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

 Plant Account Dr. Cr. Date Particulars J.F. AmountRs Date Particulars J.F. AmountRs 2015 2015 July.01 Bank 3,50,000 Dec.31 Balance c/d 3,50,000 3,50,000 3,50,000 2016 2016 Jan.01 Balance b/d 3,50,000 Dec.31 Balance c/d 3,50,000 3,50,000 3,50,000 2017 2017 Jan.01 Balance b/d 3,50,000 Oct.01 Provision for Depreciation 1,18,125 Oct.01 Bank 4,00,000 Oct.01 Bank 1,50,000 Oct.01 Profit and Loss 81,875 Dec.31 Balance c/d 4,00,000 7,50,000 7,50,000

 Provision for Depreciation Account Dr. Cr. Date Particulars J.F. AmountRs Date Particulars J.F. AmountRs 2015 2015 Dec.31 Balance c/d 26,250 Dec.31 Depreciation 26,250 26,250 26,250 2016 2016 Dec.31 Balance b/d 78,750 Jan.01 Balance c/d 26,250 Dec.31 Depreciation 52,500 78,750 78,750 2017 2017 Oct.01 Plant 1,18,125 Jan.01 Balance b/d 78,750 Dec.31 Balance c/d 15,000 Oct.01 Depreciation (i) (9 months) 39,375 Dec.31 Depreciation (ii) (3 months) 15,000 1,33,125 1,33,125

Page No 275:

Question 21:

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 AmountRs Credit AmountRs Sundry debtors 50,000 Bad debts 6,000 Provision for doubtful debts 4,000

•          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.

 Date Particulars L.F. Debit Amount Rs Credit Amount 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 toProvision 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 Rs Date Particulars J.F. Amount Rs 2017 2017 Mar.31 Balance b/d 6,000 Mar.31 Provision for Doubtful Mar.31 Debtors 2,000 Debt 8,000 8,000 8,000

 Debtors Account Dr. Cr. Date Particulars J.F. Amount Rs Date Particulars J.F. Amount Rs 2017 2017 Mar.31 Balance b/d 50,000 Mar.31 Bad Debt 2,000 Mar.31 Balance c/d 48,000 50,000 50,000

 Provision for Doubtful Debts Account Dr. Cr. Date Particulars J.F. Amount Rs Date Particulars J.F. Amount Rs 2017 2017 31 Mar. Bad Debt (6,000 + 2,000) 8,000 Apr.01 Balance b/d 4,000 31 Mar. Balance c/d 3,840 Mar.31 Profit and Loss 7,840 11,840 11,840

Page No 275:

Question 22:

The following information is extracted from the Trial Balance of M/s Nisha Traders on 31 March 2017.

Provision is to be maintained at 2% of Debtors

Prepare bad debts account, Provision for bad debts account and profit and loss account.

 Bad Debt Account Dr. Cr. Date Particulars J.F. AmountRs Date Particulars J.F. AmountRs 2017 2017 Mar.31 Balance b/d 1,000 Mar.31 Provision for Bad Debts 1,500 Mar.31 Debtors 500 1,500 1,500

 Provision for Bad debt Account Dr. Cr. Date Particulars J.F. AmountRs Date Particulars J.F. AmountRs 2017 2017 Mar.31 Bad Debt 1,500 Mar.31 Balance b/d 5,000 Mar.31 Profit and Loss 1,900 Mar.31 Balance c/d 1,600 5,000 5,000

 Profit and Loss Account Dr. Cr. Date Particulars J.F. AmountRs Date Particulars J.F. Amount Rs 2017 Mar.31 Provision for Bad Debts 1,900

Benefits of NCERT Solutions

NCERT’s Class 11 solution contains extremely important points, and for each chapter, each concept has been simplified to make it easier to remember and increase your chances of achieving excellent exam results. Exam Preparation References Here are some tips on how these solutions can help you prepare for the exam.

1. This helps students solve many of the problems in each chapter and encourages them to make their concepts more meaningful.
2. NCERT Solutions for Class 11 solutions encourage you to update your knowledge and refine your concepts so that you can get good results in the exam.
4. Most of the questions in the exam are formulated in a similar way to NCERT textbooks. Therefore, students should review the solutions in each chapter in order to better understand the topic.
5. It is free of cost.

Tips & Strategies for Class 11 Exam Preparation

1. Plan your course and syllabus and make time for revision
2. Please refer to the NCERT solution available on the cbsestudyguru website to clarify your concepts every time you prepare for the exam.
3. Use the cbsestudyguru learning app to start learning to successfully pass the exam. Provide complete teaching materials, including resolved and unresolved tasks.
4. It is important to clear all your doubts before the exam with your teachers or Alex (an Al study Bot).
5. When you read or study a chapter, write down algorithm formulas, theorems, etc., and review them quickly before the exam.
6. Practice an ample number of question papers to make your concepts stronger.
7. Take rest and a proper meal.  Don’t stress too much.

Why opt for cbsestudyguru NCERT Solutions for Class 11 ?

• cbsestudyguru provide NCERT Solutions for all subjects at your fingertips.
• These solutions are designed by subject matter experts and provide solutions to every NCERT textbook questions.
• cbsestudyguru especially focuses on making learning interactive, effective and for all classes.
• We provide free NCERT Solutions for class 11 and all other classes.