# Illustrations - Depreciation Notes | Study Crash Course of Accountancy - Class 11 - Commerce

## Commerce: Illustrations - Depreciation Notes | Study Crash Course of Accountancy - Class 11 - Commerce

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4. It takes a very long time to write an asset down to its break-up value, unless a very high rate is used.

Comparison of straight line and written down value method

Illustration 1
A firm bought a machinery for Rs.1,80,000 on 1st April, 2012 and Rs.20,000 is spent on its installation. Its life was estimated
to be of 5 years. Its estimated scrap value at the end of the period was Rs.10,000. Find out the amount of annual
Depreciation and rate of Depreciation and prepare the machinery a/c and depreciation a/c for 4 years.
Solution:
Determination of the amount of Depreciation:
Depreciation =
Cost — Estimated scrap value
Number of years of expected useful life

=
(Rs.1,80,000 + Rs.20,000) — Rs.10,000
5
= 38,000
Rate of Depreciation =
???????????? ???????????????????????? ???????? ???? ?????????? × 100
=
???? .38,000
???? .2,00,000
× 100 = 19% p.a.

Dr. MACHINERY ACCOUNT  Cr.
Date Particulars Rs. Date Particulars Rs.
2012
April 1
April 1

To Bank A/c
To Bank A/c

1,80,000
20,000
2013
Mar.31
Mar.31

By Depreciation A/c
By Balance c/d

38000
1,62,000
2,00,000   2,00,000
2013
Apr.1

To Balance b/d

1,62,000
2014
Mar.31
Mar.31

By Depreciation A/c
By Balance c/d

38,000
1,24,000
1,62,000   1,42,500
2014
Apr.1

To Balance b/d

1,24,000
2015
Mar.31
Mar.31

By Depreciation A/c
By Balance c/d

38,000
86,000
1,24,000   1,24,000
2015
Apr.1

To Balance b/d

86,000
2016
Mar.31
Mar.31

By Depreciation A/c
By Balance c/d

38,000
48,000
86,000   86,000
2016
Apr.1
To Balance b/d 48,000

Page 2

4. It takes a very long time to write an asset down to its break-up value, unless a very high rate is used.

Comparison of straight line and written down value method

Illustration 1
A firm bought a machinery for Rs.1,80,000 on 1st April, 2012 and Rs.20,000 is spent on its installation. Its life was estimated
to be of 5 years. Its estimated scrap value at the end of the period was Rs.10,000. Find out the amount of annual
Depreciation and rate of Depreciation and prepare the machinery a/c and depreciation a/c for 4 years.
Solution:
Determination of the amount of Depreciation:
Depreciation =
Cost — Estimated scrap value
Number of years of expected useful life

=
(Rs.1,80,000 + Rs.20,000) — Rs.10,000
5
= 38,000
Rate of Depreciation =
???????????? ???????????????????????? ???????? ???? ?????????? × 100
=
???? .38,000
???? .2,00,000
× 100 = 19% p.a.

Dr. MACHINERY ACCOUNT  Cr.
Date Particulars Rs. Date Particulars Rs.
2012
April 1
April 1

To Bank A/c
To Bank A/c

1,80,000
20,000
2013
Mar.31
Mar.31

By Depreciation A/c
By Balance c/d

38000
1,62,000
2,00,000   2,00,000
2013
Apr.1

To Balance b/d

1,62,000
2014
Mar.31
Mar.31

By Depreciation A/c
By Balance c/d

38,000
1,24,000
1,62,000   1,42,500
2014
Apr.1

To Balance b/d

1,24,000
2015
Mar.31
Mar.31

By Depreciation A/c
By Balance c/d

38,000
86,000
1,24,000   1,24,000
2015
Apr.1

To Balance b/d

86,000
2016
Mar.31
Mar.31

By Depreciation A/c
By Balance c/d

38,000
48,000
86,000   86,000
2016
Apr.1
To Balance b/d 48,000

Dr. DEPRECIATION ACCOUNT  Cr.
Date Particulars Rs. Date Particulars Rs.
2013
Mar.31

To Machinery A/c

38,000
2013
Mar.31

By Profit and Loss A/c

38,000
2014
Mar.31

To Machinery A/c

38,000
2014
Mar.31

By Profit and Loss A/c

38,000
2015
Mar.31

To Machinery A/c

38,000
2015
Mar.31

By Profit and Loss A/c

38,000
2016
Mar.31

To Machinery A/c

38,000
2016
Mar.31

By Profit and Loss A/c

38,000

Illustration 2
Raman Bros. purchased a machine on 1st October, 2012 at a cost of Rs.1,40,000 and spent Rs.10,000 on its installation.
The firm charges Depreciation at 10% p.a. of the original cost every year. The books are closed on 31st March every year.
Show the Machinery Account and Depreciation Account for three years.

Solution:
Dr. MACHINERY ACCOUNT  Cr.
Date Particulars Rs. Date Particulars Rs.
2012
Oct.1
Oct.1

To Bank A/c
To Bank A/c
—Installation Expenses

1,40,000
10,000
2013
Mar.31

Mar.31

By Depreciation A/c
(Rs.1,50,000 x 10/100 x 6/12)
By Balance c/d

7,500

1,42,500
1,50,000
2013
Apr.1

To Balance b/d

1,42,500
2014
Mar.31
Mar.31

By Depreciation A/c
By Balance c/d

15,000
1,27,500
1,42,500   1,42,500
2014
Apr.1

To Balance b/d

1,27,500
2015
Mar.31
Mar.31

By Depreciation A/c
By Balance c/d

15,000
1,12,500
1,27,500   1,27,500
2015
Apr.1

To Balance b/d

1,12,500

Dr. DEPRECIATION ACCOUNT  Cr.
Date Particulars Rs. Date Particulars Rs.
2013
Mar.31

To Machinery A/c

7,500
2013
Mar.31

By Profit and Loss A/c

7,500
2014
Mar.31

To Machinery A/c

15,000
2014
Mar.31

By Profit and Loss A/c

15,000
2015
Mar.31

To Machinery A/c

15,000
2015
Mar.31

By Profit and Loss A/c

15,000

Sale of assets
At the time of sale of assets the following steps are to be carried off-
Step 1 -  charge depreciation
Step 2 – by bank ( sale of assets –  bank a/c
To assets
Step 3 – find  profit and loss
For loss – by  P& l a/c (credit side)
For profit – to P & l  a/c  (debit side)

Illustration 3 ( at a loss)
Page 3

4. It takes a very long time to write an asset down to its break-up value, unless a very high rate is used.

Comparison of straight line and written down value method

Illustration 1
A firm bought a machinery for Rs.1,80,000 on 1st April, 2012 and Rs.20,000 is spent on its installation. Its life was estimated
to be of 5 years. Its estimated scrap value at the end of the period was Rs.10,000. Find out the amount of annual
Depreciation and rate of Depreciation and prepare the machinery a/c and depreciation a/c for 4 years.
Solution:
Determination of the amount of Depreciation:
Depreciation =
Cost — Estimated scrap value
Number of years of expected useful life

=
(Rs.1,80,000 + Rs.20,000) — Rs.10,000
5
= 38,000
Rate of Depreciation =
???????????? ???????????????????????? ???????? ???? ?????????? × 100
=
???? .38,000
???? .2,00,000
× 100 = 19% p.a.

Dr. MACHINERY ACCOUNT  Cr.
Date Particulars Rs. Date Particulars Rs.
2012
April 1
April 1

To Bank A/c
To Bank A/c

1,80,000
20,000
2013
Mar.31
Mar.31

By Depreciation A/c
By Balance c/d

38000
1,62,000
2,00,000   2,00,000
2013
Apr.1

To Balance b/d

1,62,000
2014
Mar.31
Mar.31

By Depreciation A/c
By Balance c/d

38,000
1,24,000
1,62,000   1,42,500
2014
Apr.1

To Balance b/d

1,24,000
2015
Mar.31
Mar.31

By Depreciation A/c
By Balance c/d

38,000
86,000
1,24,000   1,24,000
2015
Apr.1

To Balance b/d

86,000
2016
Mar.31
Mar.31

By Depreciation A/c
By Balance c/d

38,000
48,000
86,000   86,000
2016
Apr.1
To Balance b/d 48,000

Dr. DEPRECIATION ACCOUNT  Cr.
Date Particulars Rs. Date Particulars Rs.
2013
Mar.31

To Machinery A/c

38,000
2013
Mar.31

By Profit and Loss A/c

38,000
2014
Mar.31

To Machinery A/c

38,000
2014
Mar.31

By Profit and Loss A/c

38,000
2015
Mar.31

To Machinery A/c

38,000
2015
Mar.31

By Profit and Loss A/c

38,000
2016
Mar.31

To Machinery A/c

38,000
2016
Mar.31

By Profit and Loss A/c

38,000

Illustration 2
Raman Bros. purchased a machine on 1st October, 2012 at a cost of Rs.1,40,000 and spent Rs.10,000 on its installation.
The firm charges Depreciation at 10% p.a. of the original cost every year. The books are closed on 31st March every year.
Show the Machinery Account and Depreciation Account for three years.

Solution:
Dr. MACHINERY ACCOUNT  Cr.
Date Particulars Rs. Date Particulars Rs.
2012
Oct.1
Oct.1

To Bank A/c
To Bank A/c
—Installation Expenses

1,40,000
10,000
2013
Mar.31

Mar.31

By Depreciation A/c
(Rs.1,50,000 x 10/100 x 6/12)
By Balance c/d

7,500

1,42,500
1,50,000
2013
Apr.1

To Balance b/d

1,42,500
2014
Mar.31
Mar.31

By Depreciation A/c
By Balance c/d

15,000
1,27,500
1,42,500   1,42,500
2014
Apr.1

To Balance b/d

1,27,500
2015
Mar.31
Mar.31

By Depreciation A/c
By Balance c/d

15,000
1,12,500
1,27,500   1,27,500
2015
Apr.1

To Balance b/d

1,12,500

Dr. DEPRECIATION ACCOUNT  Cr.
Date Particulars Rs. Date Particulars Rs.
2013
Mar.31

To Machinery A/c

7,500
2013
Mar.31

By Profit and Loss A/c

7,500
2014
Mar.31

To Machinery A/c

15,000
2014
Mar.31

By Profit and Loss A/c

15,000
2015
Mar.31

To Machinery A/c

15,000
2015
Mar.31

By Profit and Loss A/c

15,000

Sale of assets
At the time of sale of assets the following steps are to be carried off-
Step 1 -  charge depreciation
Step 2 – by bank ( sale of assets –  bank a/c
To assets
Step 3 – find  profit and loss
For loss – by  P& l a/c (credit side)
For profit – to P & l  a/c  (debit side)

Illustration 3 ( at a loss)

A firm purchased an old truck for a sum of Rs.2,00,000 on 1st April, 2012. It charged depreciation @ 20% per annum
according to the Straight Line Value Method. The truck was sold on 1st October, 2014 for a sum of Rs.90,000. You are
required to prepare the Truck Account .
Solution:
Working note
Date  Purchase Sale  Depreciation
1/4/12 2,00,000  40,000
1/10/14  90,000

Dr. TRUCK ACCOUNT  Cr.
Date Particulars Rs. Date Particulars Rs.
2012
Apr.1

To Bank A/c

2,00,000
2013
Mar.31
Mar.31

By Depreciation A/c
By Balance c/d

40,000
1,60,000
2,00,000   2,00,000
2013
Apr.1

To Balance b/d

1,60,000

2014
Mar.31
Mar.31

By Depreciation A/c
By Balance c/d

40,000
1,20,000
1,60,000   1,60,000
2013
Apr.1

To Balance b/d

1,20,000
2014
Oct.1

Oct.1

By Depreciation A/c
(6 months)
By Bank a/c
By P & L a/c ( loss)

20,000

90,000
10,000
1,20,000   1,20,000

Illustration 4 ( at a profit)
A firm purchased an old truck for a sum of Rs.2,00,000 on 1st April, 2012. It charged depreciation @ 20% per annum
according to the Written Down Value Method. The truck was sold on 1st October, 2013 for a sum of Rs.1,60,000. You are
required to prepare the Truck Account for the year ending 31st March, 2013 and 2014.
Solution:

Working note
Date  Purchase Sale  Depreciation
1/4/12 2,00,000  40,000
1/10/13  1,10,000

Dr. TRUCK ACCOUNT  Cr.
Date Particulars Rs. Date Particulars Rs.
2012
Apr.1

To Bank A/c

2,00,000
2013
Mar.31
Mar.31

By Depreciation A/c
By Balance c/d

40,000
1,60,000
2,00,000   2,00,000
2013
Apr.1

Oct.1

To Balance b/d

To Profit and Loss A/c
—Gain on Sale

1,60,000

16,000
2013
Oct.1

Oct.1

By Depreciation A/c
(Dep. for 6 months)
By Bank A/c—Sale Proceeds

16,000

1,60,000
1,76,000   1,76,000

When more then one machinery is purchased
Illustration 5
A firm purchased on 1st January, 1999 a second-hand machinery for Rs.36,000 and spent Rs.4,000 on its installation.
On 1st July in the same year, another machinery costing Rs.20,000 was purchased. On 1st July, 2001, machinery brought
on 1st January, 1999 was sold for Rs.12,000 and a new machine purchased for Rs.64,000 on the same date. Depreciation is
Page 4

4. It takes a very long time to write an asset down to its break-up value, unless a very high rate is used.

Comparison of straight line and written down value method

Illustration 1
A firm bought a machinery for Rs.1,80,000 on 1st April, 2012 and Rs.20,000 is spent on its installation. Its life was estimated
to be of 5 years. Its estimated scrap value at the end of the period was Rs.10,000. Find out the amount of annual
Depreciation and rate of Depreciation and prepare the machinery a/c and depreciation a/c for 4 years.
Solution:
Determination of the amount of Depreciation:
Depreciation =
Cost — Estimated scrap value
Number of years of expected useful life

=
(Rs.1,80,000 + Rs.20,000) — Rs.10,000
5
= 38,000
Rate of Depreciation =
???????????? ???????????????????????? ???????? ???? ?????????? × 100
=
???? .38,000
???? .2,00,000
× 100 = 19% p.a.

Dr. MACHINERY ACCOUNT  Cr.
Date Particulars Rs. Date Particulars Rs.
2012
April 1
April 1

To Bank A/c
To Bank A/c

1,80,000
20,000
2013
Mar.31
Mar.31

By Depreciation A/c
By Balance c/d

38000
1,62,000
2,00,000   2,00,000
2013
Apr.1

To Balance b/d

1,62,000
2014
Mar.31
Mar.31

By Depreciation A/c
By Balance c/d

38,000
1,24,000
1,62,000   1,42,500
2014
Apr.1

To Balance b/d

1,24,000
2015
Mar.31
Mar.31

By Depreciation A/c
By Balance c/d

38,000
86,000
1,24,000   1,24,000
2015
Apr.1

To Balance b/d

86,000
2016
Mar.31
Mar.31

By Depreciation A/c
By Balance c/d

38,000
48,000
86,000   86,000
2016
Apr.1
To Balance b/d 48,000

Dr. DEPRECIATION ACCOUNT  Cr.
Date Particulars Rs. Date Particulars Rs.
2013
Mar.31

To Machinery A/c

38,000
2013
Mar.31

By Profit and Loss A/c

38,000
2014
Mar.31

To Machinery A/c

38,000
2014
Mar.31

By Profit and Loss A/c

38,000
2015
Mar.31

To Machinery A/c

38,000
2015
Mar.31

By Profit and Loss A/c

38,000
2016
Mar.31

To Machinery A/c

38,000
2016
Mar.31

By Profit and Loss A/c

38,000

Illustration 2
Raman Bros. purchased a machine on 1st October, 2012 at a cost of Rs.1,40,000 and spent Rs.10,000 on its installation.
The firm charges Depreciation at 10% p.a. of the original cost every year. The books are closed on 31st March every year.
Show the Machinery Account and Depreciation Account for three years.

Solution:
Dr. MACHINERY ACCOUNT  Cr.
Date Particulars Rs. Date Particulars Rs.
2012
Oct.1
Oct.1

To Bank A/c
To Bank A/c
—Installation Expenses

1,40,000
10,000
2013
Mar.31

Mar.31

By Depreciation A/c
(Rs.1,50,000 x 10/100 x 6/12)
By Balance c/d

7,500

1,42,500
1,50,000
2013
Apr.1

To Balance b/d

1,42,500
2014
Mar.31
Mar.31

By Depreciation A/c
By Balance c/d

15,000
1,27,500
1,42,500   1,42,500
2014
Apr.1

To Balance b/d

1,27,500
2015
Mar.31
Mar.31

By Depreciation A/c
By Balance c/d

15,000
1,12,500
1,27,500   1,27,500
2015
Apr.1

To Balance b/d

1,12,500

Dr. DEPRECIATION ACCOUNT  Cr.
Date Particulars Rs. Date Particulars Rs.
2013
Mar.31

To Machinery A/c

7,500
2013
Mar.31

By Profit and Loss A/c

7,500
2014
Mar.31

To Machinery A/c

15,000
2014
Mar.31

By Profit and Loss A/c

15,000
2015
Mar.31

To Machinery A/c

15,000
2015
Mar.31

By Profit and Loss A/c

15,000

Sale of assets
At the time of sale of assets the following steps are to be carried off-
Step 1 -  charge depreciation
Step 2 – by bank ( sale of assets –  bank a/c
To assets
Step 3 – find  profit and loss
For loss – by  P& l a/c (credit side)
For profit – to P & l  a/c  (debit side)

Illustration 3 ( at a loss)

A firm purchased an old truck for a sum of Rs.2,00,000 on 1st April, 2012. It charged depreciation @ 20% per annum
according to the Straight Line Value Method. The truck was sold on 1st October, 2014 for a sum of Rs.90,000. You are
required to prepare the Truck Account .
Solution:
Working note
Date  Purchase Sale  Depreciation
1/4/12 2,00,000  40,000
1/10/14  90,000

Dr. TRUCK ACCOUNT  Cr.
Date Particulars Rs. Date Particulars Rs.
2012
Apr.1

To Bank A/c

2,00,000
2013
Mar.31
Mar.31

By Depreciation A/c
By Balance c/d

40,000
1,60,000
2,00,000   2,00,000
2013
Apr.1

To Balance b/d

1,60,000

2014
Mar.31
Mar.31

By Depreciation A/c
By Balance c/d

40,000
1,20,000
1,60,000   1,60,000
2013
Apr.1

To Balance b/d

1,20,000
2014
Oct.1

Oct.1

By Depreciation A/c
(6 months)
By Bank a/c
By P & L a/c ( loss)

20,000

90,000
10,000
1,20,000   1,20,000

Illustration 4 ( at a profit)
A firm purchased an old truck for a sum of Rs.2,00,000 on 1st April, 2012. It charged depreciation @ 20% per annum
according to the Written Down Value Method. The truck was sold on 1st October, 2013 for a sum of Rs.1,60,000. You are
required to prepare the Truck Account for the year ending 31st March, 2013 and 2014.
Solution:

Working note
Date  Purchase Sale  Depreciation
1/4/12 2,00,000  40,000
1/10/13  1,10,000

Dr. TRUCK ACCOUNT  Cr.
Date Particulars Rs. Date Particulars Rs.
2012
Apr.1

To Bank A/c

2,00,000
2013
Mar.31
Mar.31

By Depreciation A/c
By Balance c/d

40,000
1,60,000
2,00,000   2,00,000
2013
Apr.1

Oct.1

To Balance b/d

To Profit and Loss A/c
—Gain on Sale

1,60,000

16,000
2013
Oct.1

Oct.1

By Depreciation A/c
(Dep. for 6 months)
By Bank A/c—Sale Proceeds

16,000

1,60,000
1,76,000   1,76,000

When more then one machinery is purchased
Illustration 5
A firm purchased on 1st January, 1999 a second-hand machinery for Rs.36,000 and spent Rs.4,000 on its installation.
On 1st July in the same year, another machinery costing Rs.20,000 was purchased. On 1st July, 2001, machinery brought
on 1st January, 1999 was sold for Rs.12,000 and a new machine purchased for Rs.64,000 on the same date. Depreciation is

provided annually on 31st December @ 10% p.a. on the Written Down Value Method. Show the Machinery Account from
1999 to 2001.

Solution:
Working note
Date  Purchase Sale  Depreciation
1/1/99 40,000  4,000
1/7/99 20,000  2,000 *
1/7/01  12000 (1)
1/07/01 64,000  64,00 *

Dr. MACHINERY ACCOUNT  Cr.
Date Particulars Rs. Date Particulars Rs.
1999
Jan.1

Jul.1

To Bank A/c (Mach. I)
(Rs.36,000 + Rs.4,000)
To Bank A/c (Mach. II)

40,000

20,000
1999
Dec.31

Dec.31

By Depreciation A/c:
Mach. I  4,000
Mach. II   1,000
By Balance c/d:
Mach. I
(Rs.40,000 – Rs.4,000)
Mach. II
(Rs.20,000 – Rs.1,000)

5,000

36,000

19,000
60,000   60,000
2000
Jan.1

To Balance b/d:
Mach. I
Mach. II

36,000
19,000

2000
Dec.31

Dec.31

By Depreciation A/c:
Mach. I  3,600
Mach. II   1,900
By Balance c/d:
Mach. I
(Rs.36,000 – Rs.3,600)
Mach. II
(Rs.19,000 – Rs.1,900)

5,500

32,400

17,100
55,000   55,000
2000
Jan.1

Jul.1

To Balance b/d:
Mach. I
Mach. II
To Bank A/c (Mach. III)

32,400
17,100
64,000
2001
Jul.1

Dec.31

By Depreciation A/c: (Mach.I)
By Bank A/c
By Profit and Loss A/c (Loss)
Rs.(32,400 -1,620 -12,000)
By Depreciation A/c:
Mach. II  1,710
Mach. III  3,200
By Balance c/d:
Mach. II
(Rs.17,100 – Rs.1,710)
Mach. III
(Rs.64,000 – Rs.3,200)

1,620
12,000
18,780

4,910

15,390

60,800
1,13,500   1,13,500
2002
Jan.1

To Balance b/d:
(Mach. II)
(Mach. III)

15,390
60,800

When a part of machinery is sold
Illustration 5
On 1
st
July 2011, Ashoka  Ltd. purchased machinery worth Rs. 40,000. On 1
st
Rs. 10,000. On 30
th
June 2014, half of the machinery purchased on 1
st
July 2011, is sold for Rs. 8,200. The company writes
off depreciation @10% p.a. on the original cost. The Accounts are closed every year on 31
st
December. Prepare the
Machinery Account for 3 years.
Page 5

4. It takes a very long time to write an asset down to its break-up value, unless a very high rate is used.

Comparison of straight line and written down value method

Illustration 1
A firm bought a machinery for Rs.1,80,000 on 1st April, 2012 and Rs.20,000 is spent on its installation. Its life was estimated
to be of 5 years. Its estimated scrap value at the end of the period was Rs.10,000. Find out the amount of annual
Depreciation and rate of Depreciation and prepare the machinery a/c and depreciation a/c for 4 years.
Solution:
Determination of the amount of Depreciation:
Depreciation =
Cost — Estimated scrap value
Number of years of expected useful life

=
(Rs.1,80,000 + Rs.20,000) — Rs.10,000
5
= 38,000
Rate of Depreciation =
???????????? ???????????????????????? ???????? ???? ?????????? × 100
=
???? .38,000
???? .2,00,000
× 100 = 19% p.a.

Dr. MACHINERY ACCOUNT  Cr.
Date Particulars Rs. Date Particulars Rs.
2012
April 1
April 1

To Bank A/c
To Bank A/c

1,80,000
20,000
2013
Mar.31
Mar.31

By Depreciation A/c
By Balance c/d

38000
1,62,000
2,00,000   2,00,000
2013
Apr.1

To Balance b/d

1,62,000
2014
Mar.31
Mar.31

By Depreciation A/c
By Balance c/d

38,000
1,24,000
1,62,000   1,42,500
2014
Apr.1

To Balance b/d

1,24,000
2015
Mar.31
Mar.31

By Depreciation A/c
By Balance c/d

38,000
86,000
1,24,000   1,24,000
2015
Apr.1

To Balance b/d

86,000
2016
Mar.31
Mar.31

By Depreciation A/c
By Balance c/d

38,000
48,000
86,000   86,000
2016
Apr.1
To Balance b/d 48,000

Dr. DEPRECIATION ACCOUNT  Cr.
Date Particulars Rs. Date Particulars Rs.
2013
Mar.31

To Machinery A/c

38,000
2013
Mar.31

By Profit and Loss A/c

38,000
2014
Mar.31

To Machinery A/c

38,000
2014
Mar.31

By Profit and Loss A/c

38,000
2015
Mar.31

To Machinery A/c

38,000
2015
Mar.31

By Profit and Loss A/c

38,000
2016
Mar.31

To Machinery A/c

38,000
2016
Mar.31

By Profit and Loss A/c

38,000

Illustration 2
Raman Bros. purchased a machine on 1st October, 2012 at a cost of Rs.1,40,000 and spent Rs.10,000 on its installation.
The firm charges Depreciation at 10% p.a. of the original cost every year. The books are closed on 31st March every year.
Show the Machinery Account and Depreciation Account for three years.

Solution:
Dr. MACHINERY ACCOUNT  Cr.
Date Particulars Rs. Date Particulars Rs.
2012
Oct.1
Oct.1

To Bank A/c
To Bank A/c
—Installation Expenses

1,40,000
10,000
2013
Mar.31

Mar.31

By Depreciation A/c
(Rs.1,50,000 x 10/100 x 6/12)
By Balance c/d

7,500

1,42,500
1,50,000
2013
Apr.1

To Balance b/d

1,42,500
2014
Mar.31
Mar.31

By Depreciation A/c
By Balance c/d

15,000
1,27,500
1,42,500   1,42,500
2014
Apr.1

To Balance b/d

1,27,500
2015
Mar.31
Mar.31

By Depreciation A/c
By Balance c/d

15,000
1,12,500
1,27,500   1,27,500
2015
Apr.1

To Balance b/d

1,12,500

Dr. DEPRECIATION ACCOUNT  Cr.
Date Particulars Rs. Date Particulars Rs.
2013
Mar.31

To Machinery A/c

7,500
2013
Mar.31

By Profit and Loss A/c

7,500
2014
Mar.31

To Machinery A/c

15,000
2014
Mar.31

By Profit and Loss A/c

15,000
2015
Mar.31

To Machinery A/c

15,000
2015
Mar.31

By Profit and Loss A/c

15,000

Sale of assets
At the time of sale of assets the following steps are to be carried off-
Step 1 -  charge depreciation
Step 2 – by bank ( sale of assets –  bank a/c
To assets
Step 3 – find  profit and loss
For loss – by  P& l a/c (credit side)
For profit – to P & l  a/c  (debit side)

Illustration 3 ( at a loss)

A firm purchased an old truck for a sum of Rs.2,00,000 on 1st April, 2012. It charged depreciation @ 20% per annum
according to the Straight Line Value Method. The truck was sold on 1st October, 2014 for a sum of Rs.90,000. You are
required to prepare the Truck Account .
Solution:
Working note
Date  Purchase Sale  Depreciation
1/4/12 2,00,000  40,000
1/10/14  90,000

Dr. TRUCK ACCOUNT  Cr.
Date Particulars Rs. Date Particulars Rs.
2012
Apr.1

To Bank A/c

2,00,000
2013
Mar.31
Mar.31

By Depreciation A/c
By Balance c/d

40,000
1,60,000
2,00,000   2,00,000
2013
Apr.1

To Balance b/d

1,60,000

2014
Mar.31
Mar.31

By Depreciation A/c
By Balance c/d

40,000
1,20,000
1,60,000   1,60,000
2013
Apr.1

To Balance b/d

1,20,000
2014
Oct.1

Oct.1

By Depreciation A/c
(6 months)
By Bank a/c
By P & L a/c ( loss)

20,000

90,000
10,000
1,20,000   1,20,000

Illustration 4 ( at a profit)
A firm purchased an old truck for a sum of Rs.2,00,000 on 1st April, 2012. It charged depreciation @ 20% per annum
according to the Written Down Value Method. The truck was sold on 1st October, 2013 for a sum of Rs.1,60,000. You are
required to prepare the Truck Account for the year ending 31st March, 2013 and 2014.
Solution:

Working note
Date  Purchase Sale  Depreciation
1/4/12 2,00,000  40,000
1/10/13  1,10,000

Dr. TRUCK ACCOUNT  Cr.
Date Particulars Rs. Date Particulars Rs.
2012
Apr.1

To Bank A/c

2,00,000
2013
Mar.31
Mar.31

By Depreciation A/c
By Balance c/d

40,000
1,60,000
2,00,000   2,00,000
2013
Apr.1

Oct.1

To Balance b/d

To Profit and Loss A/c
—Gain on Sale

1,60,000

16,000
2013
Oct.1

Oct.1

By Depreciation A/c
(Dep. for 6 months)
By Bank A/c—Sale Proceeds

16,000

1,60,000
1,76,000   1,76,000

When more then one machinery is purchased
Illustration 5
A firm purchased on 1st January, 1999 a second-hand machinery for Rs.36,000 and spent Rs.4,000 on its installation.
On 1st July in the same year, another machinery costing Rs.20,000 was purchased. On 1st July, 2001, machinery brought
on 1st January, 1999 was sold for Rs.12,000 and a new machine purchased for Rs.64,000 on the same date. Depreciation is

provided annually on 31st December @ 10% p.a. on the Written Down Value Method. Show the Machinery Account from
1999 to 2001.

Solution:
Working note
Date  Purchase Sale  Depreciation
1/1/99 40,000  4,000
1/7/99 20,000  2,000 *
1/7/01  12000 (1)
1/07/01 64,000  64,00 *

Dr. MACHINERY ACCOUNT  Cr.
Date Particulars Rs. Date Particulars Rs.
1999
Jan.1

Jul.1

To Bank A/c (Mach. I)
(Rs.36,000 + Rs.4,000)
To Bank A/c (Mach. II)

40,000

20,000
1999
Dec.31

Dec.31

By Depreciation A/c:
Mach. I  4,000
Mach. II   1,000
By Balance c/d:
Mach. I
(Rs.40,000 – Rs.4,000)
Mach. II
(Rs.20,000 – Rs.1,000)

5,000

36,000

19,000
60,000   60,000
2000
Jan.1

To Balance b/d:
Mach. I
Mach. II

36,000
19,000

2000
Dec.31

Dec.31

By Depreciation A/c:
Mach. I  3,600
Mach. II   1,900
By Balance c/d:
Mach. I
(Rs.36,000 – Rs.3,600)
Mach. II
(Rs.19,000 – Rs.1,900)

5,500

32,400

17,100
55,000   55,000
2000
Jan.1

Jul.1

To Balance b/d:
Mach. I
Mach. II
To Bank A/c (Mach. III)

32,400
17,100
64,000
2001
Jul.1

Dec.31

By Depreciation A/c: (Mach.I)
By Bank A/c
By Profit and Loss A/c (Loss)
Rs.(32,400 -1,620 -12,000)
By Depreciation A/c:
Mach. II  1,710
Mach. III  3,200
By Balance c/d:
Mach. II
(Rs.17,100 – Rs.1,710)
Mach. III
(Rs.64,000 – Rs.3,200)

1,620
12,000
18,780

4,910

15,390

60,800
1,13,500   1,13,500
2002
Jan.1

To Balance b/d:
(Mach. II)
(Mach. III)

15,390
60,800

When a part of machinery is sold
Illustration 5
On 1
st
July 2011, Ashoka  Ltd. purchased machinery worth Rs. 40,000. On 1
st
Rs. 10,000. On 30
th
June 2014, half of the machinery purchased on 1
st
July 2011, is sold for Rs. 8,200. The company writes
off depreciation @10% p.a. on the original cost. The Accounts are closed every year on 31
st
December. Prepare the
Machinery Account for 3 years.

Solution:
Working note

Dr. MACHINERY ACCOUNT  Cr.
Date Particulars Amt. (Rs.) Date Particulars Amt, (Rs.)
01.07.11 To Bank A/c 1 (a)
1 (b)
20,000
20,000
31.12.11 By Depreciation A/c 1 (a)
1 (b)
(20,000 x 6/12 x 10/100)
1,000
1,000
By Balance c/d          1 (a)
1 (b)
19,000
19,000
40,000   40,000
01.01.12 To Balance b/d  1 (a)
1 (b)
19,000
19,000.
31.12.12 By Depreciation A/c 1 (a)
1 (b)

2,000
2,000
31.12.12 By Balance c/d          1 (a)
1 (b)

17,000
17,000
38,000   38,000
01.01.13 To Balance b/d           1 (a)
1 (b)

17,000
17,000
31.12.13 By Depreciation A/c 1 (a)
1 (b)
2
2,000
2,000
500
01.07.13 To Bank A/c                  2 10,000 31.12.13 By Balance c/d          1 (a)
1 (b)
2
15,000
15,000
9,500
44,000   44,000
01.01.14 To Balance b/d          1 (a)
1 (b)
2
15,000
15,000
9,500
30.06.14 By Depreciation A/c     1 (a)
By Bank A/c
By Profit and Loss A/c (Loss)
1,000
8,200
5,800
31.12.14 By Depreciation A/c     1 (b)
2
2,000
1,000
31.12.14 By Balance c/d            1 (b)
2
13,000
8,500
39,500   39,500
01.01.15 To Balance b/d           1 (b)
2
13,000
8,500

Illustration 6
Star Ltd. purchased 10 trucks at Rs. 5,40,000 each on 1
st
July, 2011. On 1
st
January, 2014, one of the truck is involved in an
accident and is completely destroyed, A sum of Rs. 3,24,000 is received from the Insurance Company in full settlement. On
the same date, another truck is purchased by the company for a sum of Rs. 6,00,000. The company writes off depreciation
@ 20% p.a. on the written down value method  and closes its books every year on 31
st
March. Give the Trucks Account for
3 years ending 31
st
March, 2014.
Solution:
Working note

Dr. Truck account  Cr.
Date  Purchase Sale  Depreciation
1/7/11 20,000  2,000 *
1/7/11 20,000  2,000 *
1/7/13 10,000  1,000 *
30/06/14  8,200
Date  Purchase Sale  Depreciation
1/7/11 5,40,000  1,08,000 *
1/7/11 5,40,000 * 9 = 48,60,000  9,72,000
1/1/14  3,24,000
1/1/14 6,00,000  1,20,000
```
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## Crash Course of Accountancy - Class 11

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