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Read the following hypothetical Case Study and answer the given questions:
Astha Ltd, which closes its books on 31st March every year, purchased on 1st July 2018, machinery costing ₹30,000. It purchased further machinery on 1st January 2019 costing ₹20,000 and on 1st October 2019 costing ₹10,000. On 1st April 2021 one-third of the machinery installed on 1st July 2018 became obsolete and was sold for ₹3,000.
It being given that machinery was depreciated by Diminishing Balance Method at 10% per annum.
________ account is opened when the value of machinery are not decreased in the books of accounts.
- a)Provision for depreciation
- b)Revaluation profit
- c)Revaluation loss
- d)None
Correct answer is option 'A'. Can you explain this answer?
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Read the following hypothetical Case Study and answer the given quest...
Provision for depreciation account is opened when the value of machinery are not decreased in the books of accounts.
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Read the following hypothetical Case Study and answer the given quest...
Answer:
To keep track of the value of machinery and their depreciation, a separate account called "Provision for Depreciation" is opened in the books of accounts.
Depreciation Method:
The company uses the Diminishing Balance Method to calculate depreciation at a rate of 10% per annum.
Calculation of Depreciation:
Depreciation is calculated on the cost of machinery at the beginning of each accounting period. The depreciation for the year is calculated by multiplying the opening balance of the machinery by the rate of depreciation.
The opening balance of machinery on 1st July 2018 is ₹30,000.
Depreciation for the year ending 31st March 2019 = ₹30,000 * 10% = ₹3,000
On 1st January 2019, additional machinery worth ₹20,000 was purchased. Therefore, the opening balance of machinery for the year ending 31st March 2020 is ₹50,000.
Depreciation for the year ending 31st March 2020 = ₹50,000 * 10% = ₹5,000
On 1st October 2019, additional machinery worth ₹10,000 was purchased. Therefore, the opening balance of machinery for the year ending 31st March 2021 is ₹60,000.
Depreciation for the year ending 31st March 2021 = ₹60,000 * 10% = ₹6,000
Sale of Obsolete Machinery:
On 1st April 2021, one-third of the machinery installed on 1st July 2018 became obsolete and was sold for ₹3,000. The amount received from the sale of machinery is not relevant to the opening balance or depreciation calculation. It will be recorded separately.
Opening Balance of Provision for Depreciation:
The opening balance of the Provision for Depreciation account will be zero since no depreciation has been charged before.
Recording Depreciation:
Depreciation is recorded as an expense in the Profit and Loss Account and is also recorded in the Provision for Depreciation account. The machinery account is not directly affected by depreciation.
Conclusion:
The account that is opened when the value of machinery is not decreased in the books of accounts is the Provision for Depreciation account. This account keeps track of the accumulated depreciation on the machinery and is used to calculate the depreciation expense for each accounting period.
To keep track of the value of machinery and their depreciation, a separate account called "Provision for Depreciation" is opened in the books of accounts.
Depreciation Method:
The company uses the Diminishing Balance Method to calculate depreciation at a rate of 10% per annum.
Calculation of Depreciation:
Depreciation is calculated on the cost of machinery at the beginning of each accounting period. The depreciation for the year is calculated by multiplying the opening balance of the machinery by the rate of depreciation.
The opening balance of machinery on 1st July 2018 is ₹30,000.
Depreciation for the year ending 31st March 2019 = ₹30,000 * 10% = ₹3,000
On 1st January 2019, additional machinery worth ₹20,000 was purchased. Therefore, the opening balance of machinery for the year ending 31st March 2020 is ₹50,000.
Depreciation for the year ending 31st March 2020 = ₹50,000 * 10% = ₹5,000
On 1st October 2019, additional machinery worth ₹10,000 was purchased. Therefore, the opening balance of machinery for the year ending 31st March 2021 is ₹60,000.
Depreciation for the year ending 31st March 2021 = ₹60,000 * 10% = ₹6,000
Sale of Obsolete Machinery:
On 1st April 2021, one-third of the machinery installed on 1st July 2018 became obsolete and was sold for ₹3,000. The amount received from the sale of machinery is not relevant to the opening balance or depreciation calculation. It will be recorded separately.
Opening Balance of Provision for Depreciation:
The opening balance of the Provision for Depreciation account will be zero since no depreciation has been charged before.
Recording Depreciation:
Depreciation is recorded as an expense in the Profit and Loss Account and is also recorded in the Provision for Depreciation account. The machinery account is not directly affected by depreciation.
Conclusion:
The account that is opened when the value of machinery is not decreased in the books of accounts is the Provision for Depreciation account. This account keeps track of the accumulated depreciation on the machinery and is used to calculate the depreciation expense for each accounting period.
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Read the following hypothetical Case Study and answer the given questions:Astha Ltd, which closes its books on 31st March every year, purchased on 1st July 2018, machinery costing ₹30,000. It purchased further machinery on 1st January 2019 costing ₹20,000 and on 1st October 2019 costing ₹10,000. On 1st April 2021 one-third of the machinery installed on 1st July 2018 became obsolete and was sold for ₹3,000.It being given that machinery was depreciated by Diminishing Balance Method at 10% per annum.________ account is opened when the value of machinery are not decreased in the books of accounts.a)Provision for depreciationb)Revaluation profitc)Revaluation lossd)NoneCorrect answer is option 'A'. Can you explain this answer?
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Read the following hypothetical Case Study and answer the given questions:Astha Ltd, which closes its books on 31st March every year, purchased on 1st July 2018, machinery costing ₹30,000. It purchased further machinery on 1st January 2019 costing ₹20,000 and on 1st October 2019 costing ₹10,000. On 1st April 2021 one-third of the machinery installed on 1st July 2018 became obsolete and was sold for ₹3,000.It being given that machinery was depreciated by Diminishing Balance Method at 10% per annum.________ account is opened when the value of machinery are not decreased in the books of accounts.a)Provision for depreciationb)Revaluation profitc)Revaluation lossd)NoneCorrect answer is option 'A'. Can you explain this answer? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about Read the following hypothetical Case Study and answer the given questions:Astha Ltd, which closes its books on 31st March every year, purchased on 1st July 2018, machinery costing ₹30,000. It purchased further machinery on 1st January 2019 costing ₹20,000 and on 1st October 2019 costing ₹10,000. On 1st April 2021 one-third of the machinery installed on 1st July 2018 became obsolete and was sold for ₹3,000.It being given that machinery was depreciated by Diminishing Balance Method at 10% per annum.________ account is opened when the value of machinery are not decreased in the books of accounts.a)Provision for depreciationb)Revaluation profitc)Revaluation lossd)NoneCorrect answer is option 'A'. Can you explain this answer? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Read the following hypothetical Case Study and answer the given questions:Astha Ltd, which closes its books on 31st March every year, purchased on 1st July 2018, machinery costing ₹30,000. It purchased further machinery on 1st January 2019 costing ₹20,000 and on 1st October 2019 costing ₹10,000. On 1st April 2021 one-third of the machinery installed on 1st July 2018 became obsolete and was sold for ₹3,000.It being given that machinery was depreciated by Diminishing Balance Method at 10% per annum.________ account is opened when the value of machinery are not decreased in the books of accounts.a)Provision for depreciationb)Revaluation profitc)Revaluation lossd)NoneCorrect answer is option 'A'. Can you explain this answer?.
Read the following hypothetical Case Study and answer the given questions:Astha Ltd, which closes its books on 31st March every year, purchased on 1st July 2018, machinery costing ₹30,000. It purchased further machinery on 1st January 2019 costing ₹20,000 and on 1st October 2019 costing ₹10,000. On 1st April 2021 one-third of the machinery installed on 1st July 2018 became obsolete and was sold for ₹3,000.It being given that machinery was depreciated by Diminishing Balance Method at 10% per annum.________ account is opened when the value of machinery are not decreased in the books of accounts.a)Provision for depreciationb)Revaluation profitc)Revaluation lossd)NoneCorrect answer is option 'A'. Can you explain this answer? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about Read the following hypothetical Case Study and answer the given questions:Astha Ltd, which closes its books on 31st March every year, purchased on 1st July 2018, machinery costing ₹30,000. It purchased further machinery on 1st January 2019 costing ₹20,000 and on 1st October 2019 costing ₹10,000. On 1st April 2021 one-third of the machinery installed on 1st July 2018 became obsolete and was sold for ₹3,000.It being given that machinery was depreciated by Diminishing Balance Method at 10% per annum.________ account is opened when the value of machinery are not decreased in the books of accounts.a)Provision for depreciationb)Revaluation profitc)Revaluation lossd)NoneCorrect answer is option 'A'. Can you explain this answer? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Read the following hypothetical Case Study and answer the given questions:Astha Ltd, which closes its books on 31st March every year, purchased on 1st July 2018, machinery costing ₹30,000. It purchased further machinery on 1st January 2019 costing ₹20,000 and on 1st October 2019 costing ₹10,000. On 1st April 2021 one-third of the machinery installed on 1st July 2018 became obsolete and was sold for ₹3,000.It being given that machinery was depreciated by Diminishing Balance Method at 10% per annum.________ account is opened when the value of machinery are not decreased in the books of accounts.a)Provision for depreciationb)Revaluation profitc)Revaluation lossd)NoneCorrect answer is option 'A'. Can you explain this answer?.
Solutions for Read the following hypothetical Case Study and answer the given questions:Astha Ltd, which closes its books on 31st March every year, purchased on 1st July 2018, machinery costing ₹30,000. It purchased further machinery on 1st January 2019 costing ₹20,000 and on 1st October 2019 costing ₹10,000. On 1st April 2021 one-third of the machinery installed on 1st July 2018 became obsolete and was sold for ₹3,000.It being given that machinery was depreciated by Diminishing Balance Method at 10% per annum.________ account is opened when the value of machinery are not decreased in the books of accounts.a)Provision for depreciationb)Revaluation profitc)Revaluation lossd)NoneCorrect answer is option 'A'. Can you explain this answer? in English & in Hindi are available as part of our courses for Commerce.
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