Question No 37 Chapter No 13
Creation of Provision for Depreciation Account
37. A company purchased a second-hand plant for Rs 60,000. it immediately spends Rs 10,000 on overhauling. The plant was put to use on April 1, 2016. After having it used for two years, it was sold for Rs 50,000
You are required to Prepare plant Account and provision for depreciation account, when depreciation is charged at the rate of 10% p.a. on straight-line method and book are closed on 31st March every year.
The solution of Question No 37 Chapter No 13:-
| Dr. | Surgical Equipment A/c | Cr. | |||||
| Date | Particulars |
J.F. | Amount | Date | Particulars |
J.F. | Amount |
| 01/04/16 | To Bank A/c | 70,000 | |||||
| 31/03/17 | By Balance C/d | 70,000 | |||||
| 70,000 | 70,000 | ||||||
| 01/04/17 | To Balance b/d | 70,000 | |||||
| 31/03/18 | By Balance C/d | 70,000 | |||||
| 70,000 | 70,000 | ||||||
| Dr. | Provision for Depreciation A/c | Cr. | |||||
| Date | Particulars |
J.F. | Amount | Date | Particulars |
J.F. | Amount |
| 31/03/17 | By Depreciation A/c*1 | 7,000 | |||||
| 13/03/17 | To Balance c/d | 7,000 | |||||
| 7,000 | 7,000 | ||||||
| 01/04/17 | By Balance b/f | 7,000 | |||||
| 31/03/18 | By Depreciation A/c | 7,000 | |||||
| 31/03/18 | To Balance c/d | 14,000 | |||||
| 14,000 | 14,000 | ||||||
| Dr. | Plant Disposal A/c | Cr. | |||||
| Date | Particulars |
J.F. | Amount | Date | Particulars |
J.F. | Amount |
| 31/03/19 | By Bank A/c | 50,000 | |||||
| 31/03/19 | By Provision for Dep. A/c | 14,000 | |||||
| 31/03/19 | By Profit/Loss A/c | 6,000 | |||||
| 13/03/17 | To Bank A/c | 70,000 | |||||
| 70,000 | 70,000 | ||||||
Working note:-
*1:- Calculation of the amount of Depreciation on furniture for the year 2016-17
Machinery purchased on 1st Apr 2016
Depreciation = Value of Asset X Rate of Depreciation X Period
Value of Asset = 70,000
Rate of Depreciation = 10%
Period = from 01/04/2016 to 31/03/2017 i.e.12 months
(from the date of purchase/Beginning balance to the end of the financial year)
= 70,000 X 10/100 X 12/ 12
Depreciation = 7,000
Total Depreciation for the year = 7,000
Depreciation | Meaning | Methods | Examples
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Also, Check out the solved question of all Chapters: –
Chapter No. 2 – Theory Base of Accounting
Chapter No. 3 – Vouchers and transactions
Chapter No. 4 – Journal
Chapter No. 5 – Ledger
Chapter No. 6 – Cash Book
Chapter No. 7 – Other Subsidiary Books
Chapter No. 8 – Journal Proper
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Chapter No. 9 – Trial Balance
Chapter No. 10 – Bank Reconciliation Statement
Chapter No. 11 – Depreciation
Chapter No. 12 – Provisions and Reserves
Chapter No. 13 – Bills of Exchange
Chapter No. 14 – Rectification of Errors
Chapter No. 15 – Financial Statements – (Without Adjustments)
Chapter No. 16 – Financial Statements – (With Adjustments)