Question No 38 Chapter No 13
Creation of Provision for Depreciation Account
38. Ravi Kumar purchased machinery for Rs 2,00,000 on 1st April 2016. he spent Rs 40,000 on its installation. He purchased another machine for Rs 60,000 on 1st October 2017 and sold on 31st December 2018, one-half of the machinery purchased on 1st April 2016 for Rs 75,000.
Prepare Machinery Account and Provision for depreciation Account for 3 years when depreciation is charged 10% p.a. on reducing balance method and books are closed on 31st March every year.
The solution of Question No 38 Chapter No 13:-
| Dr. | Machinery A/c | Cr. | |||||
| Date | Particulars |
J.F. | Amount | Date | Particulars |
J.F. | Amount |
| 01/04/16 | To Bank A/c | 2,40,000 | |||||
| 31/03/17 | By Balance C/d | 2,40,000 | |||||
| 2,40,000 | 2,40,000 | ||||||
| 01/04/17 | To Balance b/d | 2,40,000 | |||||
| 01/10/17 | To Bank A/c | 60,000 | 31/03/18 | By Balance C/d | 3,00,000 | ||
| 3,00,000 | 3,00,000 | ||||||
| 01/04/18 | To Balance b/f | 3,00,000 | 01/04/18 | By Bank A/c | 75,000 | ||
| 01/04/18 | By Provision for Dep. | 30,090 | |||||
| 01/04/18 | By Profit/loss | 14,910 | |||||
| 31/03/19 | By Balance C/d | 1,80,000 | |||||
| 3,00,000 | 3,00,000 | ||||||
| Dr. | Provision for Depreciation A/c | Cr. | |||||
| Date | Particulars |
J.F. | Amount | Date | Particulars |
J.F. | Amount |
| 01/03/17 | By Depreciation A/c*1 | 24,000 | |||||
| 31/03/16 | To Balance c/d | 24,000 | |||||
| 24,000 | 24,000 | ||||||
| 01/04/17 | By Balance b/f | 24,000 | |||||
| 01/03/18 | By Depreciation A/c | 24,600 | |||||
| 01/03/18 | To Balance c/d | 48,600 | |||||
| 48,600 | 48,600 | ||||||
| 1/12/18 | To Machinery A/c | 30,090 | 01/04/8 | By Balance b/f | 48,600 | ||
| 01/12/18 | By Depreciation A/c | 7,290 | |||||
| 13/03/18 | By Depreciation A/c*3 | 15,420 | |||||
| 13/03/18 | To Balance c/d | 71,310 | |||||
| 71,310 | 71,310 |
||||||
Working note:-
*1:- Calculation of the amount of Depreciation on furniture for the year 2015-16
Machinery purchased on 1st Apr 2016
Depreciation = Value of Asset X Rate of Depreciation X Period
Value of Asset = 2,40,000
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)
= 2,40,000 X 10/100 X 12/ 12
Depreciation = 24,000
Total Depreciation for the year = 24,000
*2:- 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 = 2,16,000
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 end of the financial year)
= 2,16,000 X 10/100 X 12/ 12
Depreciation = 12,600
Machinery purchased on 1st Oct 2017
Depreciation = Value of Asset X Rate of Depreciation X Period
Value of Asset = 60,000
Rate of Depreciation = 10%
Period = from 01/10/2016 to 31/03/2017 i.e.6 months
(from the date of purchase/Beginning balance to end of the financial year)
= 60,000 X 10/100 X 6/ 12
Depreciation = 3,000
Total Depreciation for the year =24,600
| Statement Showing profit or loss on the sale of Machinery | |
| Particulars |
Amount |
| Purchase value of Equipment as on 1st Apr, 2016 ½ | 1,20,000 |
| Less: – Amount of Depreciation charged on the year 2017-18 | |
| 1,20,000 *10%* 12/12 | 12,000 |
| Amount of Depreciation charged on the year 2017-18 | |
| 1,08,000 *10%* 12/12 | 10,800 |
| Amount of Depreciation charged on the year 2018-19 | |
| 97,200 *10%* 9/12 | 7,290 |
| Book value of the asset as on 1st December 2018 | 89,910 |
| Sale Price of Machinery | 75,000 |
| Profit on the sale of the asset | 14,910 |
*3:- Calculation of the amount of Depreciation on furniture for the year 2018-19
Machinery purchased on 1st Apr 2016 ½
Depreciation = Value of Asset X Rate of Depreciation X Period
Value of Asset = 97,200
Rate of Depreciation = 10%
Period = from 01/04/2018 to 31/03/2019 i.e.12 months
(from the date of purchase/Beginning balance to end of the financial year)
= 97,200 X 10/100 X 12/ 12
Depreciation = 9,720
Machinery purchased on 1st Oct 2017
Depreciation = Value of Asset X Rate of Depreciation X Period
Value of Asset = 57,000
Rate of Depreciation = 10%
Period = from 01/04/2018 to 31/03/2019 i.e.12 months
(from the date of purchase/Beginning balance to end of the financial year)
= 57,000 X 10/100 X 12/ 12
Depreciation = 5,700
Total Depreciation for the year = 15,420
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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
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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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