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Commerce Exam > Commerce Notes > Accountancy Class 11 > Depreciation - (Part - 6)

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Page No 14.53:

Question 26: Astha Engineering Works purchased a machine on 1st July, 2015 for ₹ 1,80,000 and spent ₹ 20,000 on its installation.

On 1st April, 2016, if purchased another machine for ₹ 2,40,000. On 1st October, 2017, the machine purchased on 1st July, 2015 was sold for ₹ 1,45,000 plus CGST and SGST @ 6% each. On 1st January, 2018, another machine was purchased for ₹ 4,00,000 plus IGST @ 12%.
Prepare the Machinery Account for the years ended 31st March, 2016 to 2018 after charging Depreciation @ 10% p.a. by Diminishing Balance Method. Accounts are closed on 31st March every year.
ANSWER:

Working Note:

(1) Calculation of profit or loss on sale of Machine I:
Depreciation - (Part - 6) | Accountancy Class 11 - Commerce
(2) Journal entry for purchase with GST

Page No 14.53:

Question 27: Following balances appear in the books of M/s. Amrit as on 1st April, 2018:

On 1st April, 2018, they decided to dispose off a machinery for ₹ 8,400 which was purchased on 1st April, 2014 for ₹ 16,000.
You are required to prepare the Machinery Account, Provision for Depreciation Account and Machinery Disposal Account for the year ended 31st March, 2019. Depreciation was charged at 10% p.a on Cost following Straight Line Method.
ANSWER:

Working Note

1. Calculation of profit or loss on Machine Sold:
Depreciation - (Part - 6) | Accountancy Class 11 - Commerce

Page No 14.54:

Question 28: On 1st October, 2011, X Ltd. purchased a machinery for ₹ 2,50,000. A part of machinery which was purchased for ₹ 20,000 on 1st October, 2011 became obsolete and was disposed off on 1st January, 2014 (having a book value ₹ 17,100 on 1st April, 2013) for ₹ 2,000. Depreciation is charged @ 10% annually on written down value. Prepare Machinery Disposal Account and also show your workings. The books being closed on 31st March of every year.
ANSWER:

Page No 14.54:

Question 29: Sharma & Co. whose books are closed on 31st March, purchased a machinery for ₹ 1,50,000 on 1st April, 2016, Additional machinery was acquired for ₹ 50,000 on 1st October, 2016. Certain machinery which was purchased for ₹ 50,000 on 1st October, 2016 was sold for ₹ 40,000 on 30th September, 2018.
Prepare the Machinery Account and Accumulated Depreciation Account for all the years up to the year ended 31st March, 2019. Depreciation is charged @ 10% p.a. on Straight Line Method. Also, show the Machinery Disposal Account.

ANSWER:

Working note
1. Calculation of Profit or Loss on sale of Machine II:
Depreciation - (Part - 6) | Accountancy Class 11 - Commerce

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FAQs on Depreciation - (Part - 6) - Accountancy Class 11 - Commerce

1. What is depreciation in commerce?

Depreciation in commerce refers to the gradual decrease in the value of an asset over time due to wear and tear, obsolescence, or any other factors that may affect its usefulness or marketability.

2. How is depreciation calculated?

Depreciation can be calculated using various methods, such as straight-line depreciation, diminishing balance method, or units of production method. The most common method is the straight-line method, where depreciation is calculated by dividing the cost of the asset by its useful life.

3. What is the importance of depreciation in accounting?

Depreciation is important in accounting as it allows businesses to allocate the cost of an asset over its useful life. By recognizing depreciation expenses, businesses can accurately reflect the decrease in value of their assets and properly match the expenses with the revenue generated by those assets.

4. How does depreciation affect financial statements?

Depreciation affects financial statements by reducing the value of assets on the balance sheet and increasing expenses on the income statement. This reduction in asset value and increase in expenses can impact the profitability and overall financial position of a company.

5. Can depreciation be reversed or reversed?

No, depreciation cannot be reversed or reversed once it has been recorded. Once an asset's value is depreciated, it is considered a permanent reduction in value. However, if an asset is sold or disposed of, any remaining book value can be removed from the balance sheet.

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Document Description: Depreciation - (Part - 6) for Commerce 2024 is part of Accountancy Class 11 preparation. The notes and questions for Depreciation - (Part - 6) have been prepared according to the Commerce exam syllabus. Information about Depreciation - (Part - 6) covers topics like and Depreciation - (Part - 6) Example, for Commerce 2024 Exam. Find important definitions, questions, notes, meanings, examples, exercises and tests below for Depreciation - (Part - 6).

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