OMTEX CLASSES

THE HOME OF SUCCESS

DEPRECIATION QUESTION WITH ANSWER
1. A company purchased Machinery worth Rs. 2, 00,000 on 1st January, 1974. Accounting
year of the Company closes on 31st December every year. Company provides depreciation
at 10% p.a. on the original cost. On 31st December, 1976 the machinery was sold for Rs. 1,
20,000. Give the machinery Account for three years. [F.I.M]

Working Note: calculation of depreciation

Date Machinery Total depreciation
1.1.74 200000
Depreciation@10% 20000 20000
1.1.75 180000
Depreciation@10% 20000 20000
1.1.76 160000
Depreciation@10% 20000 20000
31.12.76/1.1.77 140000
Sold 120000
20000(loss)

M/S ______________________
MACHINERY ACCOUNT
DATE PARTICULARS AMOUNT DATE PARTICULARS AMOUNT
1.1.74 To Cash Bank Account 200000 31.12.74 By depreciation Account 20000
31.12.74 By balance c/d 180000
200000 200000
1.1.75 To balance b/d 180000 31.12.75 By depreciation account 20000
31.12.75 By balance c/d 160000
180000 180000
1.1.76 To balance b/d 160000 31.12.76 By depreciation account 20000
31.12.76 By cash / bank account 120000
31.12.76 By profit / loss account 20000
160000 160000
 OMTEX CLASSES
THE HOME OF SUCCESS
DEPRECIATION QUESTION WITH ANSWER
2. A Good – luck manufacturing Co. Ltd. Luck now purchased new machinery for Rs.
45,000 on 1st January, 1975 and immediately spent Rs. 5,000 on its fixation and
erection. In the same year on 1st July additional machinery costing Rs. 25,000 was
purchased. On 1st July 1977 the machinery purchased on 1st January, 1975 became
obsolete and was sold for Rs. 30,000. Depreciation was provided for annually on 31 st
December at the rate of 10% per annum on Fixed Instalment method. You are required
to prepare Machinery Account for the period from 1975 to 1977. [F.I.M]

Working Note: calculation of depreciation

Date Machinery 1 Machinery 2 Total depreciation
1.1.75 50000
1.7.75 25000
Depreciation@10% 5000 1250 6250
1.1.76 45000 23750

Depreciation@10% 5000 2500 7500

1.1.77 40000 21250
Depreciation@10% 2500 2500
30.6.77/1.7.77 37500
Sold 30000
7500
Loss
Depreciation@10% 2500 2500
1.1.78 18750

M/s Good – luck Manufacturing Co. Ltd.

Machinery Account
DATE PARTICULARS AMOUNT DATE PARTICULARS AMOUNT
1.1.75 To Cash Bank Account 45000 31.12.75 By depreciation Account 6250
1.1.75 To cash bank account 5000
1.7.75 To cash/bank account 25000 31.12.75 By balance c/d 68750
75000 75000
1.1.76 To balance b/d 68750 31.12.76 By depreciation account 7500
31.12.76 By balance c/d 61250
68750 68750
1.1.77 To balance b/d 61250 1.7.77 By depreciation account 2500
1.7.77 By cash / bank account 30000
1.7.77 By profit / loss account 7500
31.12.77 By depreciation account 2500
31.12.77 By balance c/d 18750
61250 61250
1.1.78 To balance b/d 18750
 OMTEX CLASSES
THE HOME OF SUCCESS
DEPRECIATION QUESTION WITH ANSWER
3. A company purchased a machine worth Rs. 2,00,000 on 1st Jan. 1976. On 1st Jan 1977,
the company purchased an additional machine for Rs. 40,000. On 1 st July 1978, the
company sold the machine purchased on 1st Jan 1977 for Rs. 32,000. Company writes off
depreciation at the rate of 10% on the original cost and the accounts are closed every year
on 31st Dec. Show the Machinery Account and Depreciation Account for the three years
ending 31st Dec. 1976, 1977 and 1978 under Fixed Instalment Method. [F.I.M]

Working Note: calculation of depreciation

Date Machinery Machinery 2 Total depreciation
1.1.76 200000
Depreciation@10% 20000 20000
1.1.77 180000 40000
Depreciation@10% 20000 4000 24000
1.1.78 160000 36000
Depreciation@10% 2000 2000
31.6.78/1.7.78 34000
Sold 32000
2000
Loss
Depreciation@10% 20000 20000
1.1.79 140000
M/S ______________________
MACHINERY ACCOUNT
DATE PARTICULARS AMOUNT DATE PARTICULARS AMOUNT
1.1.76 To Cash Bank Account 200000 31.12.76 By depreciation Account 200000
31.12.76 By balance c/d 180000
200000 200000
1.1.77 To balance b/d 180000 31.12.77 By depreciation account 24000
1.7.77 To cash/bank account 40000 31.12.77 By balance c/d 196000
220000 220000
1.1.78 To balance b/d 196000 1.7.78 By depreciation account 2000
1.7.78 By cash / bank account 32000
1.7.78 By profit / loss account 2000
31.12.78 By depreciation account 20000
31.12.78 By balance c/d 140000
196000 196000
1.1.79 To balance b/d 140000
 OMTEX CLASSES
THE HOME OF SUCCESS
DEPRECIATION QUESTION WITH ANSWER
37. M/s Jalaram Mill, Mulund, showed a debit balance of Rs. 32,000 to the Machinery A/c on 1st
April, 2001(Original cost of the Machinery was Rs. 40,000). On 1st October, 2001 the Mill
bought additional Machinery for Rs. 15,000 and spent Rs. 1,000 for its installation. One more
machinery costing Rs. 20,000 was purchased on 31st March, 2003. Depreciation is charged on
31st March, every year at 10% p.a. under the Diminishing Balanced Method. On 31st March,
2004, the machinery which was purchased on 1st October, 2001 was sold for Rs. 12000. Prepare
Machinery A/c and Depreciation A/c for the years 2001 – 2001, 2002 – 2003 and 2003 – 2004.
(February, 2008)

WORKING NOTE : CALCULATION OF DEPRECIATION

Date Machinery Machinery 2 Machinery 3 Total depreciation

1.4.01 32000
1.10.01 16000
Depreciation @10% 3200 1800 4000
1.4.02 28800 15200
31.3.2003 20000
Depreciation @10% 2880 1520 4400
1.4.03 25920 13680 20000
Depreciation @10% 2592 1368 2000 5960
31.3.01/1.4.04 12312
Sold 12000
312
Loss
1.4.04 23328 18000
M/S ______________________
MACHINERY ACCOUNT
DATE PARTICULARS AMOUNT DATE PARTICULARS AMOUNT
1.4.01 To balance b/d Nil 31.3.02 By depreciation account 4000
1.10.01 To cash / bank account 15000
1.10.01 To cash bank account 1000
31.3.02 By balance c/d 44000
48000 48000
1.4.02 To balance b/d 44000 31.3.03 By depreciation account 4400
31.3.03 To cash / bank account 20000
31.3.03 By balance c/d 59600
64000 64000
1.4.03 To balance b/d 59600 31.3.04 By depreciation account 5960
31.3.04 By cash bank account 12000
31.3.04 By profit / loss account 312
31.3.04 By balance c/d 41328
59600 59600
1.4.04 To balance b/d 41328
 OMTEX CLASSES
THE HOME OF SUCCESS
DEPRECIATION QUESTION WITH ANSWER
38. On 1st April, 2004 Saikripa enterprises purchased two computers of Rs. 40,000 each. On
1st October, 2004 they purchased one more computer for Rs. 40,000. On 1 st October,
2006 they sold one computer, which was purchased on 1st April, 2004 for Rs. 18,780.
Depreciation on computers was provided @ 10% p.a. on diminishing balance method
and the financial year closes on 31st March every year. Prepare computer A/c
depreciation A/c for years 2004 – 05, 2005 – 06 and 2006 – 07. (September. 2008)
[W.D.V.]
WORKING NOTE : CALCULATION OF DEPRECIATION

Date Machinery Machinery 2 Machinery 3 Total depreciation

1.4.04 40000 40000
1.10.04 40000
Depreciation @10% 4000 4000 2000 10000
1.4.05 36000 36000 38000
Depreciation @10% 3600 3600 3800 11000
1.4.06 32400 32400 34200
Depreciation @10% 1620 1620
30.9.06/1.10.06 30780
SOLD 18780
12000
Loss
Depreciation @10% 3240 3420 6660
1.4.07 9160 30780
M/S ______________________
MACHINERY ACCOUNT
DATE PARTICULARS AMOUNT DATE PARTICULARS AMOUNT
1.4.04 To cash / bank account 40000 31.3.05 By depreciation account 10000
1.4.04 To cash / bank account 40000
1.10.04 To cash / bank account 40000 31.3.05 By balance c/d 110000
120000 120000
1.4.05 To balance b/d 110000 31.3.06 By depreciation account 11000
31.3.06 By balance c/d 99000
110000 110000
1.4.06 To balance b/d 99000 1.10.06 By depreciation account 1620
1.10.06 By cash/bank account 18780
1.10.06 By profit / loss account 12000
31.3.07 By depreciation account 6660
31.3.07 By balance c/d 59940
99000 99000
1.4.07 To balance b/d 59940
 OMTEX CLASSES
THE HOME OF SUCCESS
DEPRECIATION QUESTION WITH ANSWER
5. M/s Amol Industries, Pune, purchased machinery for Rs. 19,400 on 1st January, 1976, and
spent Rs. 600 for its erection. On 1st July 1976, additional machinery costing Rs. 10,000 was
acquired. On 1st July 1978 the machinery purchased on 1st January, 1976 was sold for Rs. 12,000
and on the same date fresh machinery was purchased at a cost of Rs. 16,000. Depreciation was
provided annually on 31st December at the rate of 10% on the original cost. Give the machinery
account and deprecation account for 1976, 1977 and 1978. [F.I.M]

WORKING NOTE : CALCULATION OF DEPRECIATION

Date Machinery Machinery 2 Machinery 3 Total depreciation

1.1.76 20000
1.7.76 10000
Depreciation @10% 2000 500 2500
1.1.77 18000 9500
Depreciation @10% 2000 1000 3000
1.1.78 16000 8500
Depreciation @10% 1000 1000
30.6.78/1.7.78 15000
Sold 12000
3000
Loss
1.7.78 16000
Depreciation @10% 1000 800 1800
1.1.79 7500 15200
M/S ______________________
MACHINERY ACCOUNT
DATE PARTICULARS AMOUNT DATE PARTICULARS AMOUNT
1.1.76 To cash / bank account 19400 31.12.76 By depreciation account 2500
1.1.76 To cash/ bank account 600
1.7.76 To cash bank account 10000 31.12.76 By balance c/d 27500
30000
30000
1.1.77 To balance b/d 27500 31.12.77 By depreciation account 3000
31.12.77 By balance c/d 24500
27500 27500
1.1.78 To balance b/d 24500 1.7.78 By depreciation account 1000
1.7.78 To cash/bank account 16000 1.7.78 By cash / bank account 12000
1.7.78 By profit / loss account 3000
31.12.78 By depreciation account 1800
31.12.78 By balance c/d 22700
40500 40500
1.1.79 To balance b/d