NCERT Solution (Part - 2) - Depreciation, Provisions and Reserves

# NCERT Solution (Part - 2) - Depreciation, Provisions and Reserves | Accountancy Class 11 - Commerce PDF Download

Page Number : 283
Numerical questions :
Question 1 : On April 01, 2010, Bajrang Marbles purchased a Machine for Rs 2,80,000 and spent Rs  10,000 on its carriage and Rs 10,000 on its installation. It is estimated that its working life is 10 years and after 10 years its scrap value will be Rs 20,000.

(a) Prepare Machine account and Depreciation account for the first four years by providing depreciation on straight line method. Accounts are closed on March 31st every year.
(b) Prepare Machine account, Depreciation account and Provision for depreciation account (or accumulated deaccount) for the first four years by providing depreciation using straight line method accounts are closed on year.
Answer : Books of Bajrang Marbles
(a)

Note: As per solution, the closing balance of machinery account at the end of fourth year is Rs 1,88,000; whereas, the answer given in the book is Rs 1,28,000 However, if we would have taken purchase price of machine Rs 1,80,000 instead of Rs 2,80,000 then the closing balance would have been be Rs 1,28,000
Working notes: Calculation of annual depreciation

(b)

Note: As per solution, the closing balance of Provision for Depreciation Account at the end of fourth year is Rs 1,12,000; whereas, the answer given in the book is Rs 72,000
However, if we would have taken purchase price of machine Rs 1,80,000 instead of Rs 2,80,000 then the closing balance would have been be Rs 72,000

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 machrepare 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 areclosed on December 31st, every year.

Working Note:

Calculation of annual depreciation

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 December 31, every year.

Working Note:
Calculation of annual depreciation

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.

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 2018, if  depreciation is provided on machinery @10% p.a. on written down value method annually  on December 31.

Working notes: Calculation of annual depreciation
(i) Depreciation (p.a.) on Machinery Purchased on July 01, 2015

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

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, 2016 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.

Question 6 :  Azad Ltd. purchased furniture on October 01, 2015 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.

Working Note:

Furniture (i)

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.

Page No 285:
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.

Working Note:
Machine Sold on July 01, 2015

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.

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.

Question 10 :  Carriage Transport Company purchased 5 trucks at the cost of Rs 2,00,000 each on April  01, 2001. The company writes off depreciation @ 20% p.a. on original cost and closes its  books on December 31, every year. On October 01, 2003, 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, 2003. Also  give truck account if truck disposal account is prepared.

Working Note:

Truck involved in accident

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 October 31, 2014. Show the machinery account, provision for depreciation account and machinery disposal account from 2011 to 2015 if depreciation is provided at 10% p.a. on original cost and account are closed on December 31, every year.

Note: As per the solution, the balance of Machinery Disposal Account transferred to Profit and Loss Account is Rs 48,333; however, as per the book the answer is Rs 58,333.

Page No 286:
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 2001 and prepare necessary ledger accounts for first three  years.

Working Note:
Calculation of annual depreciation

The document NCERT Solution (Part - 2) - Depreciation, Provisions and Reserves | Accountancy Class 11 - Commerce is a part of the Commerce Course Accountancy Class 11.
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## Accountancy Class 11

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## FAQs on NCERT Solution (Part - 2) - Depreciation, Provisions and Reserves - Accountancy Class 11 - Commerce

 1. What is depreciation?
Ans. Depreciation is a process of allocating the cost of a tangible asset over its useful life. It is a non-cash expense that reflects the reduction in an asset's value due to wear and tear, obsolescence, or any other factor that causes its value to decrease over time.
 2. What are provisions and reserves?
Ans. Provisions and reserves are two types of funds that companies set aside to cover future expenses or losses. Provisions are created for specific expenses that are likely to occur in the future, such as warranties or legal obligations. Reserves, on the other hand, are created for general or unknown future expenses or losses, such as bad debts or economic downturns.
 3. Why is depreciation important for financial statements?
Ans. Depreciation is important for financial statements because it helps to accurately reflect a company's financial position. By spreading the cost of an asset over its useful life, depreciation reduces the value of the asset on the balance sheet and increases the expense on the income statement. This, in turn, lowers the company's taxable income and improves its cash flow.
 4. What is the difference between a provision and a reserve?
Ans. The main difference between a provision and a reserve is that a provision is created for a specific expense that is likely to occur in the future, while a reserve is created for general or unknown future expenses or losses. Provisions are usually created when there is a legal or contractual obligation to do so, while reserves are created at the discretion of the company's management.
 5. What is the purpose of creating a reserve fund?
Ans. The purpose of creating a reserve fund is to provide a buffer against future losses or expenses that the company may incur. By setting aside a portion of its profits into a reserve fund, a company can ensure that it has the resources to weather any unforeseen events or economic downturns. Reserve funds can also be used to fund future growth initiatives or to distribute dividends to shareholders.

## Accountancy Class 11

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