Question No 37 Chapter No 13

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/cCr.
DateParticulars
J.F.AmountDateParticulars
J.F.Amount
01/04/16To Bank A/c 70,000    
    31/03/17By Balance C/d 70,000
   70,000   70,000
01/04/17To Balance b/d 70,000    
    31/03/18By Balance C/d 70,000
   70,000   70,000

 

Dr.Provision for Depreciation A/cCr.
DateParticulars
J.F.AmountDateParticulars
J.F.Amount
    31/03/17By Depreciation A/c*1 7,000
13/03/17To Balance c/d 7,000    
   7,000   7,000
    01/04/17By Balance b/f 7,000
    31/03/18By Depreciation A/c 7,000
31/03/18To Balance c/d 14,000    
   14,000   14,000

 

Dr.Plant Disposal A/cCr.
DateParticulars
J.F.AmountDateParticulars
J.F.Amount
    31/03/19By Bank A/c 50,000
    31/03/19By Provision for Dep. A/c 14,000
    31/03/19By Profit/Loss A/c 6,000
13/03/17To 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. 1 – Introduction

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

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)

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