06-Bills-of-Exchange-and-Depreciation.pdf

CA. Naresh Aggarwal’s
ACADEMY of ACCOUNTS
Accounting • Costing • Taxation • Financial Management
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Bills of Exchange
&
Accounting for Depreciation

ACADEMY of ACCOUNTS
AoA
(1) (2)
Bills of Exchange
Q-1: On 01.05.2012, A sold goods to B for Rs.3,000 and drew upon him a bill for the
amount payable two months after date. The bill was duly accepted by B. A retained
the bill till due date. On the due date, the bill was paid by B.
Pass Journal entries in the books of A and B.
Q-2: On 12.04.2012, A sold goods to B of the value of Rs.2,000 drawing upon him a
bill for the amount payable three months after date. B accepted the bill and returned it
to A. On the due date, A presented the bill to B who honored it.
Pass Journal entries in the books of both the parties.
Q-3: On 24.02.2012 ‘Veena’ draws on ‘Meena’ a bill at three months for Rs.1,000
which ‘Meena’ accepts immediately and returns to ‘Veena’. The bill is duly honored on
the due date. Pass the necessary journal entries in the books of both parties.
Q-4: ‘X’ sold goods to ‘Y’ for Rs.1,200 on credit. He drew on latter a bill for the
amount for 2 months. ‘X’ endorsed the bill in favor of ‘Z’, who got the payment on
maturity from ‘Y’. Give Journal entries in the books of ‘X’, ‘Y’ and ‘Z’.
Q-5: On 15.3.2012, ‘A’ sold goods to ‘B’ for Rs.3,200 and drew upon him at two
months a bill for the amount. ‘B’ accepted the bill. After one month, ‘A’ endorsed the bill
to his creditor ‘C’. On the due date, acceptance is duly met.
Show entries in the books of all the parties.
Q-6: Ram drew a bill of Rs.1,000 on Shyam which was duly accepted by the latter.
Ram endorsed the bill to Mohan in full payment of his own due to him for a like amount.
Pass journal entries in the books of Ram, Shyam and Mohan.
Q-7: On 01.01.2012 Anita sold goods to Sunita of Rs.2,500 on credit. She drew on
latter a bill for the amount for 3 months. On 15.01.2012 Anitia deposited the bill with
her banker for collection. On the due date bill was duly honored.
Give Journal entries in the books of Anita and Sunita.
Q-8: On 10.2.2012 Ajay sold goods to Vijay for Rs.1,000 and drew upon him at
three months a bill for the amount. Vijay accepted the bill and returned that to Ajay.
After one month, Ajay sent the bill to his banker for collection. On the due date,
acceptance was duly met. Show entries in the books of Ajay and Vijay.
Q-9: ‘P’ drew a bill of Rs.1,800 on ‘Q’ which was duly accepted by the latter. ‘P’
sent the bill to bank for collection. On the due ‘Q’ met his acceptance.
Pass journal entries in the books of ‘P’ and ‘Q’.
Q-10: Akber sold goods to Birbal for Rs.4,000. He drew on the latter a bill for the
amount payable 3 months after date. He discounted the bill with his bankers for
Rs.3,800. On maturity, the bill is duty met. Make Journal entries in the books of
Akber and Birbal.
Q-11: Sonu received from Monu an acceptance for Rs.1,000 on 15th September,
2012 at 3 months. Sonu immediately got the acceptance discounted at 12% per annum
from his bank. On the due date, Monu paid the required amount.
Give Journal entries in the books of Sonu and Monu.
Q-12: On 01.02.2012 Seeta sold goods to Geeta of Rs.4,000 and draw on her a bill
for 3 months for the amount due. Geeta accepts the bill and returned it to Seeta. On
4.03.2012 Seeta got the bill discounted from her bank at 12% p.a. On the due date the
bill is duly honored. Pass journal entries in the books of Seeta and Geeta.
Q-13: On 15.07.2012 ‘A’ sold goods to ‘B’ of Rs.3,000 and draw on him a bill for 4
months for the amount due. ‘B’ accepts the bill and returned it to ‘A’. On 18.10.2012
‘A’ got the bill discounted from his bank at 12% p.a. On the due date the bill is duly
honored. Pass journal entries in the books of ‘A’ and ‘B.’
Q-14: A owed B Rs.6,000. A gave a bill for the same on 1st March 2012 payable after
3 Months at Delhi. Immediately after receiving the bill, B endorsed it to C in payment
of his debt. On 1st April 2012, C discounted the bill at 10% p.a. The bill was met an
due date.
Pass the necessary Journal Entries in the books of A, B and C.
Q-15: Ram sold goods to Laxman for Rs.3,000. Laxman accepted three bills of
Rs.1,000 each for 3 months. Ram endorsed 1st Bill to his creditor Bharat, 2nd Bill was
discounted from Bank for Rs.950 and 3rd bill was kept by him till due date. On due
date all the bills were met.
Pass entries in the books of Ram, Laxman and Bharat.
Q-16: On 1.7.2012 Nakul sold goods to Sehdev for Rs.6,000. Sehdev accepted four
bills of Rs.1,500 each for 2 months. Nakul endorsed 1st Bill to his creditor Arjun; 2nd
Bill was discounted from Bank for Rs.1,400; 3rd bill was sent to bank for collection
and the 4th bill was kept by him till due date. On due date all the bills were met. Pass
entries in the books of Nakul, Sehdev and Arjun.

ACADEMY of ACCOUNTS
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(3) (4)
Q-17: On 1.1.2012 Ajay sold goods to Vijay for Rs.10,000. Vijay accepted four bills
of Rs.2,500 each for 3 months. Ajay endorsed 1st Bill to his creditor Sanjay; 2nd Bill
was discounted from Bank for Rs.2,350; 3rd bill was sent to bank for collection and
the 4th bill was kept by him till due date. On due date all the bills were met. Pass
entries in the books of Ajay, Vijay and Sanjay.
Dishonor of Bill
Q-18: On 01.01.2012, A sold goods to B for Rs.1,500 and drew upon him a bill for the
the bill till due date. On the due date, the bill was dishonored by B.
Q-19: On 15.07.2012, Ram sold goods to Shyam of the value of Rs.2,500 drawing
upon him a bill for the amount payable three months after date. Shyam accepted the
bill and returned it to Ram. On the due date, Ram presented the bill to Shyam who
failed to pay that.
Q-20: On 20.03.2012 Meena draws on Preeti a bill at three months for Rs.1,000 which
Preeti accepts immediately and returns to Meena. The bill is not honored on the due
date. Pass the necessary journal entries in the books of both parties.
Q-21: ‘X’ sold goods to ‘Y’ for Rs.3,200 on credit. He drew on latter a bill for the
amount for 2 months. ‘X’ endorsed the bill in favor of ‘Z’, who failed to get the payment
on maturity from ‘Y’. Give Journal entries in the books of ‘X’, ‘Y’ and ‘Z’.
Q-22: On 1.3.2012, ‘A’ sold goods to ‘B’ for Rs.1,000 and drew upon him at two
months a bill for the amount. ‘B’ accepted the bill. After one month, ‘A’ endorsed the bill
to his creditor ‘C’. On the due date, acceptance could not met.
Show entries in the books of all the parties.
Q-23: On 10.1.2012 A drew a bill of Rs.2,000 for two months on B which was duly
accepted by the latter. On 15.1.2012 A endorsed the bill to C in full payment of his
own due to him for a like amount. On the due date B failed to pay his acceptance.
Pass journal entries in the books of A, B and C.
Q-24: On 01.04.2012 Teena sold goods to Meena of Rs. 2,500 on credit. She drew
on latter a bill for the amount for 3 months. On 15.04.2012 Teena deposited the bill
with her banker for collection. On the due date bill was dishonored.
Give Journal entries in the books of Teena and Meena.
Q-25: On 20.4.2012 Arti sold goods to Bharti for Rs. 1,000 and drew upon her at
three months a bill for the amount. Arti accepted the bill and returned that to Bharti.
After one month, Arti sent the bill to her banker for collection. On the due date,
acceptance was failed to meet. Show entries in the books of Arti and Bharti.
Q-26: ‘X’ drew a bill of Rs. 1,500 on ‘Y’ which was duly accepted by the latter. ‘X’
sent the bill to bank for collection. On the due ‘Y’ could not meet his acceptance.
Pass journal entries in the books of ‘X’ and ‘Y’.
Q-27: Teena sold goods to Meena for Rs. 2,000. She drew on the latter a bill for the
amount payable 3 months after date. Teena discounted the bill with her bankers for
Rs. 1,850. On maturity, the bill was failed to meet. Make Journal entries in the books
of Teena and Meena.
Q-28: Rinki received from Pinki an acceptance for Rs. 1,000 on 15th January, 2012
at 3 months. Rinki immediately got the acceptance discounted at 12% per annum
from her bank. On the due date, Pinki failed to pay the required amount.
Give Journal entries in the books of Rinki and Pinki.
Q-29: On 01.02.2012 Sonu sold goods to Monu of Rs. 3,000 and draw on him a bill
for 3 months for the amount due. Monu accepted the bill and returned it to Sonu. On
4.03.2012 Sonu got the bill discounted from his bank at 12% p.a. On the due date the
bill was dishonored.
Pass journal entries in the books of Sonu and Monu.
Q-30: On 15.03.2012 ‘A’ sold goods to ‘B’ of Rs. 2,000 and draw on him a bill for 4
‘A’ got the bill discounted from his bank at 12% p.a. On the due date the bill was
dishonored. Pass journal entries in the books of ‘A’ and ‘B.’
Noting Charges on Dishonor of Bill
Q-31: On 01.06.2012, A sold goods to B for Rs. 5,000 and drew upon him a bill for the
the bill till due date. On the due date, the bill was dishonored by B and noting charges
paid by A amounted to Rs. 100.
Q-32: On 10.02.2012, Anil sold goods to Sunil of the value of Rs. 1,500 drawing upon
him a bill for the amount payable three months after date. Sunil accepted the bill and

ACADEMY of ACCOUNTS
AoA
(5) (6)
returned it to Anil. On the due date, Anil presented the bill to Sunil who failed to pay
that and noting charges paid by Anil Rs. 50.
Q-33: On 1.03.2012 Sonia draws on Monika a bill at three months for Rs. 2,000 which
Monika accepts immediately and returns to Sonia. The bill is not honored on the due
date and noting charges paid amounted to Rs. 20.
Pass the necessary journal entries in the books of both parties.
Q-34: ‘A’ sold goods to ‘B’ for Rs. 1,200 on credit. He drew on latter a bill for the
amount for 3 months. ‘A’ endorsed the bill in favor of ‘C’ and ‘C’ endorsed the bill to ‘D’
who failed to get the payment on maturity from ‘B’. ‘C’ paid noting charges Rs. 30.
Give Journal entries in the books of ‘A’, ‘B’ ‘C’ and ‘D’.
Q-35: On 1.7.2012, ‘P’ sold goods to ‘Q’ for Rs. 2,000 and drew upon him at three
months a bill for the amount. ‘Q’ accepted the bill. After one month, ‘P’ endorsed the
bill to his creditor ‘R’ who endorsed the bill in favor of ‘S’. On the due date, acceptance
could not met and ‘R’ paid noting charges Rs. 50. Show entries in the books of all the
parties.
Q-36: On 1.1.2012 Ajay drew a bill of Rs. 1,000 for three months on Vijay which was
duly accepted by the latter. On 15.1.2012 Ajay endorsed the bill to Sanjay in full
payment of his own due to him for a like amount. On 25.02.2012 Sanjay endorsed the
bill to Dinesh. On the due date Vijay failed to pay his acceptance. Noting charges
Rs. 20 paid by Sanjay.
Pass journal entries in the books of all the parties.
Q-37: On 01.04.2012 Radha sold goods to Meera of Rs. 2,500 on credit. She drew
on latter a bill for the amount for 3 months. On 15.04.2012 Radha deposited the bill
with her banker for collection. On the due date bill was dishonored and noting charges
paid by her Rs. 50.
Give Journal entries in the books of Radha and Meera.
acceptance was failed to meet and noting charges paid Rs. 30.
Show entries in the books of Arti and Bharti.
Q-39: Amit drew a bill of Rs. 2,500 on Sumit which was duly accepted by the latter.
Amit sent the bill to bank forcollection. On the due Sumit could notmeet his acceptance
and noting charges paid were Rs. 50.
Pass journal entries in the books of Amit and Sumit.
Q-40: Raja sold goods to Rani for Rs. 2,000. He drew on the latter a bill for the amount
payable 3 months after date. He discounted the bill with his bankers for Rs. 1,850.
On maturity, the bill was failed to meet. Noting charges paid by Bank Rs. 30. Make
Journal entries in the books of Raja and Rani.
Q-41: Reena received from Meena an acceptance for Rs. 2,400 on 10.5.2012 at 3
months. Reena immediately got the acceptance discounted at 10% per annum from
her bank. On the due date, Meena failed to pay the required amount and bank paid
noting charges Rs. 50.
Give Journal entries in the books of Reena and Meena.
Q-42: On 01.02.2012 Ram sold goods to Shyam of Rs. 2,000 and draw on him a bill
for 3 months for the amount due. Shyam accepted the bill and returned it to Ram. On
4.03.2012 Ram got the bill discounted from his bank at 12% p.a. On the due date the
bill was dishonored and bank paid noting charges Rs. 20. Pass journal entries in the
books of Ram and Shyam.
months for the amount due. ‘B’ accepts the bill and returned it to ‘A’. On 8.07.2012 ‘A’
gotthe billdiscounted from his bank at 12% p.a. On the due date the bill was dishonored.
On the due date the bill was dishonored and bank paid noting charges Rs. 20. Pass
journal entries in the books of ‘A’ and ‘B.’
Renewal of Bill
the bill till due date. On the due date, B request A to renew the bill for two months at
interest of 12% p.a. The renewed bill was duly met.
Q-45: On 15.07.2012, Ram sold goods to Shyam of the value of Rs. 2,000 drawing
bill and returned it to Ram. On the due date, Ram presented the bill to Shyam who
failed to pay that and requested Ram to renew the bill for three months at interest of
10% p.a. The renewed bill was duly met.

ACADEMY of ACCOUNTS
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(7) (8)
Q-46: On 20.03.2012 Neha draws on Ritu a bill at three months for Rs. 1,000 which
Ritu accepts immediately and returns to Neha. The bill is not honored on the due date
and Noting charges of Rs. 20 paid by Neha. On 01.07.2012 Ritu accepted a new bill
for amount due with Rs. 50 as interest which was met on maturity.
amount for 3 months. ‘A’ endorsed the bill in favor of ‘C’ and ‘C’ endorsed the bill to ‘D’
who failed to get the payment on maturity from ‘B’. ‘C’ paid noting charges Rs. 30.
Later B accepted a new bill with interest Rs. 80 which was duly met on maturity.
Give Journal entries in the books of ‘A’, ‘B’ ‘C’ and ‘D’.
Q-48: ‘X’ sold goods to ‘Y’ for Rs. 3,600 on credit. He drew on latter a bill for the
amount for 2 months. ‘X’ endorsed the bill in favor of ‘Z’, who failed to get the payment
on maturity from ‘Y’. X then received a new bill for Rs. 3,800 from Y which was duly
met. Give Journal entries in the books of ‘X’, ‘Y’ and ‘Z’.
acceptance was failed to meet. Noting charges paid were Rs. 20. Bharti then gave a
new bill for Rs. 1,900 for two months which was duly met.
Show entries in the books of Arti and Bharti.
Noting charges paid were Rs. 30. ‘Y’ then gave a new bill for Rs. 1,600 which was
duly met on maturity.
Pass journal entries in the books of ‘X’ and ‘Y’.
Q-51: Reena received from Meena an acceptance for Rs. 2,400 on 10.5.2012 at 3
months. Reena immediately got the acceptance discounted at 10% per annum from
her bank. On the due date, Meena failed to pay the required amount and bank paid
noting charges Rs. 50. Meena then paid 450 and accepted a new bill for 2 months
with interest at the rate of 12% p.a. The second bill was duly met.
Give Journal entries in the books of Reena and Meena.
dishonored and bank paid noting charges Rs. 20. ‘B’ then paid Rs. 620 to ‘A’ and
accepted a new bill for 2 months at 10% p.a. The new bill was duly met. Pass journal
entries in the books of ‘A’ and ‘B.’
Rebate / Discount on earlier payment of Bill
amount payable three months after date.The bill was duly accepted by B. On 01.7.2012
B retire his bill by paying amount at 10% p.a.
Q-54: On 10.07.2012, Ram sold goods to Shyam of the value of Rs. 2,500 drawing
bill and returned it to Ram. On 10.8.2012 Shyam paid his bill at a rebate of 10% p.a.
Q-55: On 20.03.2012 Sangeeta draws on Chetali a bill at four months for Rs. 1,000
which Chetali accepts immediately and returns to Sangeeta. On 25.03.2012 Sangeeta
endorsed the bill in favor of Neeru who got the payment from Chetali on 20.06.2012 by
allowing her a rebate of 12% p.a.
Pass the necessary journal entries in the books of all the parties.
Q-56: On 15.4.2012 ‘X’ sold goods to ‘Y’ for Rs. 3,200 on credit. He drew on latter a
bill for the amount for 3 months. ‘X’ endorsed the bill in favor of ‘Z’. On 15.06.2012 Y
retire his bill by paying amount at 10% p.a.
Give Journal entries in the books of ‘X’, ‘Y’ and ‘Z’.
Insolvency of the Acceptor of the Bill
the bill till due date. On the due date, B was insolvent and only 60% amount could be
received. Pass Journal entries in the books of A and B.
Q-58: On 10.04.2012, Ravi sold goods to Dinesh of the value of Rs. 1,500 drawing
upon him a bill for the amount payable three months after date. Dinesh accepted the
bill and returned it to Ravi. On the due date, Dinesh is declared insolvent and a
compensation of 40% received from his private estate.
Q-59: On 1.03.2012 Sonia draws on Anita a bill at three months for Rs. 2,000 which
Anita accepts immediately and returns to Sonia. The bill is not honored on the due
date and noting charges paid amounted to Rs. 40. On 25.07.2012 Anita declared

ACADEMY of ACCOUNTS
AoA
(9) (10)
insolvent and 25% of the claim is received.
amount for 3 months. ‘A’ endorsed the bill in favor of ‘C’ who failed to get the payment
on maturity from ‘B’. ‘C’ paid noting charges Rs. 30. After some time B was declared
bankrupt and could pay only 2/3 of his debts.
Give Journal entries in the books of ‘A’, ‘B’ and ‘C’.
Q-61: On 1.7.2012, ‘P’ sold goods to ‘Q’ for Rs. 2,400 and drew upon him at three
months a bill for the amount. ‘Q’ accepted the bill. After one month, ‘P’ endorsed the
bill to his creditor ‘R’. On the due date, acceptance could not met and ‘R’ paid noting
charges Rs. 40. After some time Q was declared bankrupt and could pay only 3/4 of
his debts. Show entries in the books of all the parties.
Q-62: On 20.4.2012 A sold goods to B for Rs. 2,800 and drew upon her at three
months a bill for the amount. B accepted the bill and returned that to A. After one
month, A sent the bill to his banker for collection. On the due date, acceptance was
failed to meet. Noting charges paid were Rs. 50. B then gave a new bill for Rs. 3,000
for two months but on 28.08.2012 B declared insolvent and A received 70 paise in
rupee. Show entries and personal A/cs in the books of A and B.
Noting charges paid were Rs. 30. ‘Y’ then gave a new bill for Rs. 2,000. Before the
due date of the new bill Y was declared bankrupt and a full and final compensation
was allowed to his creditors @ 75 paise in rupee.
Pass journal entries and personal A/cs in the books of ‘X’ and ‘Y’.
Q-64: Rashmi received from Kajal an acceptance for Rs.2,400 on 7.5.2012 at 3
months. Rashmi immediately got the acceptance discounted at 10% per annum from
her bank. On the due date, Kajal failed to pay the required amount and bank paid
noting charges Rs.50. Kajal then paid Rs.950 and accepted a new bill for 2 months
with interest at the rate of 12% p.a. On the due date of the second bill Kajal declared
insolvent and Rashmi could received only 50% of her due.
Give Journal entries and personal A/cs in the books of Rashmi and Kajal.
Q-65: On 15.06.2012 ‘A’ sold goods to ‘B’ of Rs.2,000 and draw on him a bill for 4
dishonored and bank paid noting charges Rs.20. ‘B’ then paid Rs.820 to ‘A’ and
accepted a new bill for 2 months at 10% p.a. On the due date of the second bill B
declared insolvent and A could received only 40% of his due. Pass journal entries.
Miscellaneous Questions
Q-66: Record the following transaction in the Books of Neeru :
(a) Neeru’s acceptance in favour of Megha for Rs.1,000 is dishonored.
(b) A bill received from Pooja of Rs.500 and endorsed to Sunita is dishonored on the
due date.
(c) A bill of Rs.2,000 written by Rajani and accepted by Sangeeta, was received from
Anjali is dishonored.
(d) Neeru’s acceptance of Rs.1,200 in favour of Poonam was endorsed by her to
Rekha was met on maturity.
(e) Neeru’s acceptance in favour of Shivani for Rs.3,000 is met by giving a bill of the
same amount, which was accepted by Madhu.
(f) A bill received from Rosy was endorsed to Neetu is met on maturity.
Q-67: Record the following transaction in the Books of Sanjay :
(a) Sanjay’s acceptance in favour of Deepak for Rs.1,800 is dishonored.
(b) A bill received from Prem of Rs.1,500 and endorsed to Sameer is dishonored on
the due date.
(c) A bill of Rs.1,000 written by Rajesh and accepted by Suresh, was received from
Dinesh is dishonored.
(d) Sanjay’s acceptance of Rs.2,500 in favour of Pramod was endorsed by him to
Ramesh was met on maturity.
(e) Sanjay’s acceptance in favour of Prakash for Rs.1,200 is met by giving a bill of
the same amount, which was accepted by Mahesh.
(f) A bill of Rs.900 received from Ram was endorsed to Shyam is met on maturity.
Q-68: Record the following transaction in Our Book :
(a) A bill received from Ravi of Rs.2,000 and endorsed to Sudhir is dishonored on the
due date.
(b) A bill of Rs.3,000 written by Raju and accepted by Pooja, was received from
Deepak is met on maturity.
(c) Ravi’s acceptance in favour of Sudha for Rs.3,000 is dishonored and noting
charges of Rs.50 are paid by us.
(d) A bill of Rs.2,000 written by Rosy and accepted by us was endorsed to Neha, is
met on maturity.
(e) Mohan’s acceptance of Rs.2,500 in favour of Ajay was endorsed by him to us is
met on maturity.

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(11) (12)
Q-69: A bill of Rs.1,000 is drawn by Ajay on Vijay and accepted by the latter, payable
three months after the date. Show what entries should be passed in the books of both
parties in each of the following situations :
(a) If Ajay retained the bill till due date and then realised on maturity.
(b) If Ajay discounted the bill with his banker for Rs.950.
(c) If Ajay endorsed the bill to Sanjay and the bill met on maturity.
(d) If Ajay sent the bill for collection and met on maturity.
Q-70: A bill of Rs.3,000 is drawn by Anita on Babita and accepted by the latter, payable
two months after the date. Show what entries should be passed in the books of both
parties in each of the following situations :
(a) If Anita retained the bill till due date and then realised on maturity.
(b) If Anita discounted the bill with his banker for Rs.2,800.
(c) If Anita endorsed the bill to Sunita and the bill met on maturity.
(d) If Anita sent the bill for collection and met on maturity.
Q-71: A bill of Rs.2,000 is drawn by Sonu on Monu and accepted by the latter, payable
three months after the date. Show what entries should be passed in the books of both
parties in each of the following situations,if the bill is dishonored by the drawee on the
due date :
(a) If he retained the bill till due date.
(b) If he discounted the bill with his banker for Rs.1,920.
(c) If he endorsed the bill to Dinesh.
(d) If he sent the bill for collection.
Theoretical Questions
1. What is a Bills of Exchange?
2. What is a Promissory Note?
3. Distinguish between Bills of Exchange and Promissory Note.
4. Write a short note on ‘Discounting of Bill’.
5. Write a short note on ‘Grace Period’.
6. Write a short note on ‘Renewal of Bill’.
7. Write a short note on ‘Endorsement of Bill’.
8. Show a specimen of a Bills of Exchange.
• • • • • • • • • • • • • • • • • • • • • •
Depreciation
Straight Line Method
Q-1: On 1.1.2010 a company purchased a machinery costing Rs.47,000 and spent
Rs.5,000 on its installations. After the useful life of 10 years its scrap value is estimated
to be Rs.2,000. Show Machinery account for first four years.
[Rs.32,000]
Q-2: Rajesh Bros. acquired a Machinery on 1.1.2010 costing Rs.18,000 and spent
Rs.4,000 on its installation and Rs.1,000 on its freight. The scrap value of the machine
is estimated atRs.2,000. The life of the machine is assumed to be 7 years and accounts
are closed on 31st December each year. You are required to show Machine Account
upto 2012.
[Rs.14,000]
Q-3: Best Enterprises bought a Plant and Machinery on 1.7.2010 for Rs.22,000
which will have useful life of 5 years at the end of which it will fetch Rs.2,000. Accounts
are closed on 31st December each year. Show Plant and Machine A/c for first 3
years.
[Rs.12,000]
Q-4: Akber and Sons purchased on 1.7.2010 furniture costing Rs.19,500 and spent
Rs.500 on its cartage. Depreciation is charged at the rate of 10% p.a. by Straight Line
Method on 31st December each year. Show Furniture Account for first 3 years.
[Rs.15,000]
Q-5: Satyam Cineplex purchases a projector costing Rs.2,00,000 from a company
in USA. Custom duty of Rs.80,000 is levied by the government and Rs.35,000 were
spent on its carriage and cartage. Further Rs.25,000 were spent on its installation
and erection. The residual value of the projector is estimated to be Rs.40,000.
Depreciation is charged at the rate of 10% p.a. by straight line method. Show Projector
A/c for first 4 years.
[Rs.2,20,000]
Q-6: Handi Restaurant bought an Air Conditioner on 1.7.2010 costing Rs.20,000. It
is decided to depreciate it at the rate of 15% p.a. under straight line method on 31st
march every year. Show necessary A/c for first 3 years.
[Rs.11,750]
Q-7: On 01.01.2010 Atal & Co. bought a machine costing Rs.20,000 and spent
Rs.5,000 on its installation. On 01.07.2011 it purchases another machine costing
Rs.15,000 having scrap value of Rs.3,000. On 31.03.2012 it purchased third machine

ACADEMY of ACCOUNTS
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for Rs.8,000 and spent Rs.2,500 on its erection, having residual value of Rs. 500. All
the machines are subject to depreciation @ 10% p.a. under straight line method on
31st December each year.
Show Machinery account for the years upto 2013.
[Rs.35,750 (1st- 15,000; 2nd- 12,000; 3rd- 8,750)]
Q-8: On 01.01.2010 Diamond Limited boughta machine costing Rs.40,000 and spent
Rs.10,000 on its installation. On 01.07.2011 it purchases another machine costing
Rs.30,000 having scrap value of Rs.6,000. On 31.03.2012 it purchased third machine
for Rs.16,000 and spent Rs.5,000 on its erection, having residual value of Rs.1,000.
All the machines are subject to depreciation @ 10% p.a. under straight line method on
31st December each year.
[Rs. 71,500 (1st- 30,000; 2nd- 24,000; 3rd- 17,500)]
Q-9: On 01.07.2010 Seema bought a machine costing Rs.10,000 and spentRs.5,000
on its erection having a life of 7 years and estimated to realise Rs.1,000 after that. On
01.10.2010 she purchases another machine costing Rs.40,000 having scrap value of
Rs.4,000 will have a life of 9 years. On 01.01.2012 she purchased third machine for
Rs.26,500 and spent Rs.3,500 on its erection, will work for 10 years. All the machines
are subject to depreciation under straight line method on 31st Dec. each year. Show
Machinery A/c for the years upto 2013.
[Rs.59,000 (1st- 8,000; 2nd- 27,000; 3rd- 24,000)]
Q-10: On 01.07.2010 Beena bought a machine costing Rs.19,000 and spent Rs.5,000
on its erection having a life of 10 years and estimated to realise Rs.4,000 after that.
On 01.10.2010 she purchases another machine costing Rs.45,000 having scrap value
of Rs.3,000 will have a life of 7 years. On 01.01.2012 she purchased third machine for
Rs.20,500 and spent Rs.3,500 on its erection, will work for 6 years. All the machines
are subject to depreciation under straight line method on 31st Dec. each year. Show
Machinery account for the years upto 2013.
[Rs.58,500 (1st- 17,000; 2nd- 25,500; 3rd- 16,000)]
Q-11: Raju purchased on 01.07.2010, a machine costing Rs.17,000 and spent
Rs.3,000 on its installation and erection.He purchased another machine on 01.04.2011
for Rs.12,000. On 30.06.2012 he sold the first machine for Rs.14,500. Depreciation
is charged on machine at the rate of 10% p.a. by original cost method on December
31st every year. You are required to show Machinery A/c upto 2013.
[Loss on sale: Rs.1,500; Balance: Rs.8,700]
Q-12: Sangeeta purchased on 01.04.2010, a machine costing Rs. 13,500 and spent
Rs.2,500 onits installation and erection. She purchased anothermachine on 30.09.2011
for Rs. 24,000. On 30.06.2012 she sold the first machine for Rs. 10,000. Depreciation
31st every year. You are required to show Machinery A/c upto 2013.
Q-13: On 1st May 2010, Dhirubhai Ltd. purchased a machinery costing Rs. 26,400
and spent Rs. 5,600 on its installation and will have a scrap value of Rs. 2,000 . It
purchased another machine on 30th September 2010 for Rs. 20,000. On 1st January
2012 it sold the first machine for Rs. 14,000 and bought a new machinery for Rs.
15,000. Depreciation is charged on machine at the rate of 20% p.a. by fixed instalment
method on December 31st every year. You are required to show Machinery A/c for 3
years.
Q-14: On 1st May 2010, Pyare Lal purchased a machinery costing Rs. 53,800 and
spent Rs. 10,200 on its installation and will have a scrap value of Rs. 4,000 . He
2012 he sold the first machine for Rs. 28,000 and bought a new machinery for Rs.
30,000. Depreciation is charged on machine at the rate of 20% p.a. by fixed instalment
years.
Q-15: On 01.01.2010, M/s ABC Ltd. purchased a second hand machinery for Rs.
17,000 and spent on its repairs and installation Rs. 2,500 and Rs. 500 respectively.
On 01.07.2010, it purchased another Machinery for Rs. 8,000. On 30.09.2012 it sold
the first Machinery for Rs. 17,800 and purchased a new machinery for Rs. 30,000 on
the same day.
Depreciation is charged on machine at the rate of 5% p.a. by fixed instalment method
on December 31st every year. You are required to show Machinery A/c for 3 years.
[Profit on sale: Rs.550; Balance: Rs.36,625]
Q-16: On 01.01.2010, M/s Sunder Ltd. purchased a second hand machinery for Rs.
51,000 and spent on its repairs and installation Rs. 7,500 and Rs. 1,500 respectively.
the same day.

ACADEMY of ACCOUNTS
AoA
(15) (16)
on December 31st every year. You are required to show Machinery A/c for 3 years.
[Profit on sale: Rs.1,650; Balance: Rs.1,09,875]
Q-17: A second hand machinery was purchased on 01.07.2010 for Rs. 44,000 and
Rs. 3,500 and Rs. 2,500 were spent on its repairs and installations. On 01.01.2011
another machinery was purchased for Rs. 30,000. On 01.01.2012 the first machinery
having become obsolete was disposed off for Rs. 41,000 and on the same day a new
machine was purchased for Rs. 25,000. On 31.03.2013 the second machine auctioned
for Rs. 24,500.
on December 31st every year. You are required to show Machinery A/c for years
upto 2013.
[Loss on sale of 1st machine: Rs.1,500; Profit on sale of 2nd machine: Rs.1,250; Balance:
Rs.20,000]
Q-18: A second hand machinery was purchased on 01.07.2010 for Rs.22,000 and
Rs.1,750 and Rs.1,250 were spent on its repairs and installations. On 01.01.2011
another machinery was purchased for Rs.15,000. On 01.01.2012 the first machinery
having become obsolete was disposed off for Rs.20,000 and on the same day a new
machine was purchased for Rs.12,000. On 31.03.2013 the second machine auctioned
for Rs.12,250.
on December 31st every year. You are required to show Machinery A/c for years
upto 2013.
[Loss on sale of 1st machine: Rs.1,250; Profit on sale of 2nd machine: Rs.625; Balance: Rs.9,600]
Diminishing Balance Method
Q-19: On 1.1.2010 a company purchased a machinery costing Rs. 47,500 and spent
Rs. 2,500 on its installations. After the useful life its scrap value is estimated to be Rs.
2000. Depreciation is charged under Diminishing Balance Method @ 10% p.a. Show
Machinery account for first 3 years.
[Rs. 36,450]
Q-20: Sarvodaya Ltd. acquired a Machinery on 1.1.2010 costing Rs.27,000 and spent
Rs.2,000 on its installation and Rs.1,000 on its freight. The scrap value of the machine
is estimated at Rs.5,000. The accounts are closed on 31st December each year and
depreciation is charged @ 5% p.a under Diminishing Balance Method.You are required
to show Machine Account upto 2012.
[Rs. 25,721]
Q-21: Sonia bought a Plant and Machinery on 1.7.2010 for Rs. 10,000 which will
have useful life of 8 years. Accounts are closed on 31st December each year and
depreciation is charged @ 15% p.a. by written down method. Show Plant and Machine
A/c for first 3 years.
[Rs. 6,683]
Q-22: Amar and Sons purchased on 1.7.2010 furniture costing Rs. 29,500 and spent
Rs. 500 on its cartage. Depreciation is charged at the rate of 20% p.a. by written
down method on 31st December each year. Show Furniture Account for first 3 years.
[Rs. 17,280]
Q-23: PVR Multiplex purchases a projector costing Rs. 2,00,000 from a company in
Japan. Custom duty of Rs. 55,000 is levied by the government and Rs. 30,000 were
spent on its carriage and cartage. Further Rs. 15,000 were spent on its installation
and erection. The residual value of the projector is estimated to be Rs.25,000.
Depreciation is charged at the rate of 12.5% p.a. by reducing installment method.
Show Projector A/c for first three years.
[Rs. 2,00,977]
Q-24: On 01.01.2010 Manmohan & Co. bought a machine costing Rs. 20,000 and
spent Rs. 5,000 on its installation. On 01.07.2011 it purchases another machine costing
Rs. 15,000 having scrap value of Rs. 3,000. On 31.03.2012 it purchased third machine
for Rs. 8,000 and spent Rs. 2,000 on its erection, having residual value of Rs. 500. All
the machines are subject to depreciation @ 10% p.a. underdiminishing balance method
on 31st December each year.
[Rs. 40,300 (1st- 18,225; 2nd- 12,825; 3rd- 9,250)]
Q-25: On 01.01.2010 Sun Limited bought a machine costing Rs. 40,000 and spent
Rs. 10,000 on its installation. On 01.07.2011 it purchases another machine costing
Rs. 30,000 having scrap value of Rs. 6,000. On 31.03.2012 it purchased third machine
for Rs. 17,000 and spent Rs. 3,000 on its erection, having residual value of Rs. 1,000.
All the machines are subject to depreciation @ 10% p.a. under diminishing balance
method on 31st December each year.
[Rs. 80,600 (1st- 36,450; 2nd- 25,650; 3rd- 18,500)]

ACADEMY of ACCOUNTS
AoA
(17) (18)
Q-26: On 01.07.2010 Karishna bought a machine costing Rs. 10,000 and spent Rs.
5,000 on its erection . On 01.10.2010 it purchases another machine costing Rs. 40,000
having scrap value of Rs. 4,000. On 01.01.2012 it purchased third machine for Rs.
26,500 and spent Rs. 3,500 on its erection. All the machines are subject to 10%
depreciation under written down value method on 31st March each year. Show
Machinery account for the years upto 31st March 2013.
[Rs. 68,343 (1st- 11,238; 2nd- 30,780; 3rd- 26,325)]
Q-27: On 01.07.2010 Kamal bought a machine costing Rs. 19,000 and spent Rs.5,000
on its erection, estimated to realize Rs. 4,000 after its useful life. On 01.10.2010 he
purchases another machine costing Rs. 40,000 having scrap value of Rs. 3,000. On
01.01.2012 it purchased third machine for Rs. 20,500 and spent Rs. 3,500 on its
erection. All the machines are subject to 10% depreciation under reducing balance
method on 30th June each year. Show Machinery account for the years upto 30th
June 2013.
[Rs. 67,986 (1st- 17,496; 2nd- 29,970; 3rd- 20,520)]
Q-28: Raju purchased on 01.07.2010, a machine costing Rs. 17,000 and spent Rs.
3,000 on its installation and erection. He purchased another machine on 01.04.2011
for Rs. 30,000. On 30.06.2012 he sold the first machine for Rs. 14,500. Depreciation
is charged on machine at the rate of 10% p.a. by written down value method on
December 31st every year. You are required to show Machinery A/c upto 2013.
Q-29: Anita purchased on 01.04.2010, a machine costing Rs. 12,500 and spent Rs.
2,500 on its installation and erection. She purchased another machine on 30.09.2011
for Rs. 20,000. On 30.06.2012 she sold the first machine for Rs. 11,000. Depreciation
is charged on machine at the rate of 10% p.a. by written down value method on
December 31st every year. You are required to show Machinery A/c upto 2013.
[Loss on sale: Rs.863; Balance: Rs.15,795]
Q-30: On 1st May 2010, Ambani Ltd. purchased a machinery costing Rs. 54,400 and
spent Rs. 5,600 on its installation and will have a scrap value of Rs. 2,000 . It purchased
another machine on 30th September 2010 for Rs. 20,000. On 1st January 2012 it sold
the first machine for Rs. 31,500 and bought a new machinery for Rs. 25,000.
Depreciation is charged on machine at the rate of 20% p.a. by reducing instalment
years.
Q-31: On 1st May 2010, Sangeeta purchased a machinery costing Rs. 92,800 and
spent Rs. 27,200 on its installation and will have a scrap value of Rs. 9,000 . She
2012 she sold the first machine for Rs. 73,000 and bought a new machinery for Rs.
50,000. Depreciation is charged on machine at the rate of 20% p.a. by reducing
instalment method on December 31st every year. You are required to show Machinery
A/c for 3 years.
Q-32: On 01.01.2010, M/s XYZ Ltd. purchased a second hand machinery for Rs.
the same day.
Depreciation is charged on machine at the rate of 5% p.a. by diminishing balance
years.
Q-33: On 01.01.2010, M/s Best Ltd. purchased a second hand machinery for Rs.
51,000 and spent on its repairs and installation Rs. 7,500 and Rs. 1,500 respectively.
the same day.
years.
[Profit on sale: Rs.1,881; Balance: Rs.1,09,992]
Q-34: A second hand machinery was purchased on 01.07.2010 for Rs. 44,000 and
Rs. 3,500 and Rs. 2,500 were spent on its repairs and installations. On 01.01.2011
another machinery was purchased for Rs. 30,000. On 01.01.2012 the first machinery
having become obsolete was disposed off for Rs. 32,300 and on the same day a new
machine was purchased for Rs. 25,000. On 31.03.2013 the second machine auctioned
for Rs. 28,700.
method on December 31st every year. You are required to show Machinery A/c for
years upto 2013.
[Loss on sale of 1st machine: Rs.10,450; Profit on sale of 2nd machine: Rs.5008; Balance:
Rs.20,250]

ACADEMY of ACCOUNTS
AoA
(19) (20)
Q-35: A second hand machinery was purchased on 01.07.2010 for Rs.22,000 and
Rs.1,750 and Rs.1,250 were spent on its repairs and installations. On 01.01.2011
another machinery was purchased for Rs.15,000. On 01.01.2012 the first machinery
having become obsolete was disposed off for Rs.19,200 and on the same day a new
machine was purchased for Rs.12,000. On 31.03.2013 the second machine auctioned
for Rs.13,850.
method on December 31st every year. You are required to show Machinery A/c for
years upto 2013.
[Loss on sale of 1st machine: Rs.2,175; Profit on sale of 2nd machine: Rs.2,004; Balance: Rs.9,720]
Sale of a Part (Diminishing Balance Method)
Q-36: A company bought a machinery for Rs. 1,00,000 including a boiler worth Rs.
20,000. The Machinery Account had been credited at the rate of 10% p.a. each year
by diminishing balance method. At the beginning of the 4th year, the boiler become
useless and sold for Rs. 10,000. Show Machinery Account for four years.
Q-37: A company bought a machinery for Rs. 3,00,000 including a generator worth
Rs. 60,000. The Machinery Account had been credited at the rate of 10% p.a. each
year by diminishing balance method. At the beginning of the 4th year, the generator
become useless and sold for Rs. 30,000. Show Machinery Account for four years.
[Loss on sale: Rs.13,740; Balance: Rs.1,57,464]
Q-38: Nakul bought a machine costing Rs. 56,000 on 01.01.2010 and spent Rs. 1,000
on its freight and Rs. 3,000 on its installation. On 31.03.2012, 1/3 of the machine
become useless and disposed off for Rs. 13,500.
Depreciation is charged at the rate of 10% p.a. by reducing instalment method on 31st
December each year. Show Plant and Machinery Account upto 2013.
Q-39: Sehdev bought a machine costing Rs. 36,000 on 01.01.2010 and spent Rs.
1,000 on its freight and Rs. 3,000 on its installation. On 31.03.2012, 1/4 of the machine
become useless and disposed off for Rs. 6,500.
Depreciation is charged at the rate of 10% p.a. by reducing instalment method on 31st
Q-40: On 01.07.2010, Mahesh purchased plant and machinery costing Rs. 80,000.
On 01.01.2011, he purchased another machine for Rs. 15,000 and spent Rs. 5,000 on
its erection and installation. On 30.06.2012 he sold a part of machinery for Rs. 18,000
which was purchased for Rs. 30,000 on 01.07.2010.
Depreciation is charged at the rate of 10% p.a. under diminishing balance method on
31st December each year. Show Plant and Machinery Account upto 2012.
Q-41: On 01.07.2010, Anamika purchased plant and machinery costing Rs.20,000.
On 01.01.2011, she purchased another machine for Rs.4,200 and spent Rs.800 on its
erection and installation. On 30.06.2012 she sold a part of machinery for Rs.4,500
which was purchased for Rs.7,500 on 01.07.2010.
Depreciation is charged at the rate of 10% p.a. by written down value method on 31st
Sale of a Part (Straight Line Method)
Q-42: On 01.01.2010 Amit bought a machine costing Rs. 26,000 and spent Rs. 500
on its freight and Rs. 3,500 on its installation. On 31.03.2012, 1/3 of the machine
become useless and disposed off for Rs. 6700.
Depreciation is charged at the rate of 10% p.a. by Straight line method on 31st
Q-43: On 01.01.2010 Atal purchased a machine costing Rs. 93,000 and spent Rs.
1,500 on its freight and Rs. 5,500 on its installation. On 30.06.2012, 1/4 of the machine
become useless and disposed off for Rs.16,000.
Q-44: On 01.01.2010 Ram bought a machine costing Rs. 50,000. On 01.07.2012, a
part of the machine become useless and disposed off for Rs.13,000; its original cost
was Rs. 20,000 on 01.01.2010.
Q-45: On 01.01.2010 Rajrani bought a machine costing Rs. 70,000. On 01.07.2012,
a part of the machine become useless and disposed off for Rs.19,000; its original cost

ACADEMY of ACCOUNTS
AoA
(21) (22)
was Rs. 30,000 on 01.01.2010.
Asset purchased on installments
Q-46: Ram purchased on 1.7.2010 a Machine on hire purchase from Laxman. The
payment schedule was decided as follows:
Down payment on 01.07.2010 - Rs. 9,000
1st Instalment on 30.06.2011 - Rs. 8,000 (including interest Rs. 1,000)
2nd Instalment on 30.06.2012 - Rs. 7,800 (including interest Rs. 800)
3rd Instalment on 30.06.2013 - Rs. 7,500 (including interest Rs. 500)
Depreciation is charged at the rate of 20% p.a. by Straight Line Method on 31st
December each year. Show Machinery Account for first 3 years.
[Rs. 15,000]
Q-47: Seeta purchased on 1.7.2010 a Machine on hire purchase from Geeta. The
payment schedule was decided as follows:
Down payment on 01.07.2010 - Rs. 20,000
1st Instalment on 30.06.2011 - Rs. 11,500 (including interest Rs. 1,500)
2nd Instalment on 30.06.2012 - Rs. 11,000 (including interest Rs. 1,000)
3rd Instalment on 30.06.2013 - Rs. 10,500 (including interest Rs. 500)
Depreciation is charged at the rate of 10% p.a. by Straight Line Method on 31st
December each year. Show Machinery Account for first 3 years.
[Rs. 37,500]
Preparation of Provision for Depreciation (SLM)
Q-48: Rich Enterprises bought a Plant and Machinery on 1.7.2010 for Rs. 43,000
which will fetch at Rs. 3,000 after its useful life. On 1.1.2011 it purchases another
machine for Rs. 30,000. Depreciation is charged @ 10% p.a. under Fixed Instalment
Method and accounts are closed on 31st December each year. Show Plant and
Machine A/c and Provision for Depreciation A/c for first 3 years.
[Machine A/c- Rs.73,000; Prov. for Dep. A/c- Rs. 16,000]
Q-49: Amar Singh purchased on 1.4.2010 furniture costing Rs. 19,500 and spent Rs.
500 on its cartage. On 30.4.2011 he purchased another furniture for Rs. 15,000.
Depreciation ischarged at the rate of 5% p.a. by Straight Line Method on 31st December
each year. Show Furniture Account and Provision for Depreciation A/c for first 3
years.
[Machine A/c- Rs.35,000; Prov. for Dep. A/c- Rs.4,000]
Q-50: Anjali purchased on 01.07.2010, a machine costing Rs.17,000 and spent
Rs.3,000 onits installation and erection.She purchased another machine on 01.04.2011
for Rs.12,000. On 30.06.2012 she sold the first machine for Rs.14,500. Depreciation
31st every year. You are required to show Machinery A/c and Provision for
Depreciation A/c upto year 2013.
[Loss on sale: Rs.1,500; Machine A/c: Rs.12,000; Prov. for Dep. A/c: Rs.3,300]
Q-51: Neha purchased on 01.04.2010, a machine costing Rs.13,500 and spent
31st every year.You are required to show Machinery A/c and Provision for Depreciation
A/c upto yea 2013.
Preparation of Disposal Account
Q-52: On 01.01.2010, M/s ABC Ltd. purchased a second hand machinery for Rs.
the same day.
on December 31st every year. You are required to show Machinery A/c, Machine
Disposal A/c and Provision for Depreciation A/c for 3 years.
[Profit on sale: Rs.550; Machine A/c: Rs.38,000; Prov. for Dep. A/c: Rs.1,375]
Q-53: On 01.01.2010, M/s Sunder Ltd. purchased a second hand machinery for
Rs.51,000 and spent on its repairs and installation Rs.7,500 and Rs.1,500 respectively.
On 01.07.2010, it purchased another Machinery for Rs.24,000. On 30.09.2012 it sold
the first Machinery for Rs.53,400 and purchased a new machinery for Rs.90,000 on
the same day.
on December 31st every year. You are required to show Machinery A/c, Machine
Disposal A/c and Provision for Depreciation A/c for 3 years.
[Profitonsale:Rs.1,650;MachineA/c:Rs.,1,14,000;Prov.forDep.A/c:Rs.4,125]

ACADEMY of ACCOUNTS
AoA
(23) (24)
Q-54: On 1st May 2010, Alfa Ltd. purchased a machinery costing Rs.26,400 and
spent Rs.5,600 on its installation and will have a scrap value of Rs.2,000. It purchased
another machine on 30th September 2010 for Rs.20,000. On 1st January 2012 it sold
the firstmachine for Rs.14,000 and bought a newmachineryfor Rs.15,000. Depreciation
is charged on machine at the rate of 20% p.a. by fixed instalment method on December
31st every year. Show Machinery A/c, Provision for Depreciation A/c and Machine
Disposal A/c for 3 years.
Q-55: On 1st May 2010, Beeta Ltd. purchased a machinery costing Rs.53,800 and
spent Rs.10,200 on its installation and will have a scrap value of Rs.4,000. It purchased
another machine on 30th September 2010 for Rs.40,000. On 1st January 2012 it sold
the firstmachine for Rs.28,000 and bought a newmachineryfor Rs.30,000. Depreciation
is charged on machine at the rate of 20% p.a. by fixed instalment method on December
31st every year. Show Machinery A/c, Machine Disposal A/c and Provision for
Depreciation A/c for 3 years.
Q-56: A company which charges depreciation @ 10% p.a. by straight line method
had the following balances on 01.01.2010
Machinery A/c : Rs.80,000
Provision for Depreciation A/c : Rs.25,000
On 01.01.2010 the company sold a part of the machine costing Rs.15,000 and
accumulated depreciation Rs.5,000 for Rs.7,000. On the same day itpurchased another
machinery for Rs.35,000
Show Machinery A/c and Provision for Depreciation A/c for the year 2010.
[Loss on sale: Rs.3,000; Machine A/c: Rs.1,00,000; Prov. for Dep. A/c: Rs.30,000]
Q-57: A company which charges depreciation @ 20% p.a. by straight line method
had the following balances on 01.01.2010
Machinery A/c : Rs.20,000
Provision for Depreciation A/c : Rs.5,000
On 01.01.2010 the company sold a part of the machine costing Rs.8,000 and
accumulated depreciation Rs.2,000 for Rs.4,500. On the same day itpurchased another
machinery for Rs.35,000
Show Machinery A/c and Provision for Depreciation A/c for the year 2010.
Preparation of Provision for Depreciation (DBM)
Q-58: Diamond Ltd. bought a Plant and Machinery on 1.7.2010 for Rs.40,000. On
1.1.2011 it purchases another machine for Rs.30,000. Depreciation is charged @
10% p.a.underDiminishing Balance Methodand accounts are closed on 31st December
each year. Show Plant and Machine A/c and Provision for Depreciation A/c for first 3
years.
Q-59: Surender Singh purchased on 1.4.2010 furniture costing Rs.19,200 and spent
Rs.800 on its cartage. On 30.6.2011 he purchased another furniture for Rs.15,000.
Depreciation is charged at the rate of 10% p.a. by Diminishing Balance Method on
31st December each year. Show Furniture Account and Provision for Depreciation A/
c for first 3 years.
Q-60: Anita purchased on 01.07.2010, a machine costing Rs.17,000 and spent
is charged on machine at the rate of 10% p.a. by Diminishing Balance Method on
December 31st every year. You are required to show Machinery A/c and Provision
for Depreciation A/c upto year 2013.
Q-61: Sonia purchased on 01.04.2010, a machine costing Rs.13,500 and spent
is charged on machine at the rate of 10% p.a. by Diminishing Balance method on
December 31st every year. You are required to show Machinery A/c and Provision
for Depreciation A/c upto yea 2013.
Theoretical Questions
1. What is Depreciation? Why is it charged?
2. What are the causes of Depreciation?
3. Distinguish between Straight Line Method and Diminishing Balance Method.
4. What do you mean by Reserves and Provisions?
5. Distinguish between Reserves and Provisions.
6. Distinguish between Capital Reserves and Revenue Reserves.
• • • • • • • • • • • • • • • • • • • • • •

ACADEMY of ACCOUNTS
AoA
(25)
When Asset is purchased :
Asset’s Name A/c (Cost + Expense) Dr.
To Cash / Bank A/c
When Depreciation is charged :
Depreciation A/c Dr.
To Asset’s Name A/c
If Provision for Depreciation is created :
Profit & Loss A/c Dr.
To Depreciation A/c
Depreciation A/c Dr.
To Provision for Depreciation A/c
When Asset is Sold :
Cash / Bank A/c Dr.
For Profit on Sale of Asset :
Asset’s Name A/c Dr.
To Profit on Sale of Asset A/c
For Loss on Sale of Asset :
Loss on Sale of Asset A/c Dr.
Hints for Depreciation
Journal Entries
Calculation of Annual Depreciation
Straight Line Method / Original Cost Method / Fixed Instalment Method :
Cost + Expense on Purchase/Installation - Scrap Value
No. of Years of Life of the Asset
or
(Cost + Expense on Purchase/Installation - Scrap Value) x Rate
100
Diminishing Balance Method / Written Down Value Method /
Reducing Instalment Method :
Opening Balance of Each Year x Rate
100

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