Balbharati solutions for Book Keeping and Accountancy [English] 11 Standard Maharashtra State Board chapter 7 - Depreciation [Latest edition]

Answer in One Sentence only:

What is depreciation?

Answer in One Sentence only:

Why depreciation is charged?

Answer in One Sentence only:

What is a ‘Scrap Value’ of an asset?

Answer in One Sentence only:

Why depreciation is charged even in the year of loss?

Answer in One Sentence only:

Which account is credited when depreciation is charged?

Answer in One Sentence only:

Where is the profit or loss on sale of asset is transferred?

Answer in One Sentence only:

To which account balance on Depreciation A/c is transferred?

Answer in One Sentence only:

What is the formula to calculate depreciation by Straight Line Method?

Answer in One Sentence only:

What is Fixed Instalment Method?

Answer in One Sentence only:

Which account is debited when expenses are paid on installation of Machinery?

Write the word/term/phrase which can substitute the following statement:

A continuous, gradual and permanent reduction in the value of a fixed asset.

Write the word/term/phrase which can substitute the following statement:

The expenditure incurred for purchase, installation charges, etc. of an asset.

Write the word/term/phrase which can substitute the following statement:

The amount that a fixed asset is expected to realise on its disposal.

Write the word/term/phrase which can substitute the following statement:

The period for which the asset remains in working condition.

Write the word/term/phrase which can substitute the following statement:

The method of depreciation in which the total depreciation is equally spread over the life of the asset.

Write the word/term/phrase which can substitute the following statement:

The method of depreciation in which the rate of depreciation is fixed but the amount of depreciation reduces every year.

Write the word/term/phrase which can substitute the following statement:

The type of asset on which depreciation is charged.

Write the word/term/phrase which can substitute the following statement:

Expenses incurred for fixation of the new asset to bring it in working condition.

Write the word/term/phrase which can substitute the following statement:

Excess of Selling price of fixed asset over its Written Down Value.

Write the word/term/phrase which can substitute the following statement:

Method of depreciation that cannot reach to zero value.

Select the most appropriate answer from the alternatives given below and rewrite the sentence:

Decrease in the value of fixed assets is known as ______

Select the most appropriate answer from the alternatives given below and rewrite the sentence:

Depreciation is charged only on ______ assets.

Select the most appropriate answer from the alternatives given below and rewrite the sentence:

The amount spent on installation of new machinery is a ______ expenditure.

Select the most appropriate answer from the alternatives given below and rewrite the sentence:

The amount that a fixed asset is expected to realise on its disposal is known as ______

Select the most appropriate answer from the alternatives given below and rewrite the sentence:

The amount of depreciation reduces year after year under ______

Select the most appropriate answer from the alternatives given below and rewrite the sentence:

The amount of depreciation remains constant every year under ______

Select the most appropriate answer from the alternatives given below and rewrite the sentence:

The balance of depreciation account is transferred to ______

State whether the following statement is True or False with reasons:

Depreciation is charged on fixed assets.

State whether the following statement is True or False with reasons:

Depreciation increases the value of the asset.

State whether the following statement is True or False with reasons:

Balance of depreciation account is transferred to Profit & Loss A/c.

State whether the following statement is True or False with reasons:

The Profit or Loss on sale of fixed asset is ascertained only after charging depreciation.

State whether the following statement is True or False with reasons:

Wages paid for installation of Machinery are debited to Wages A/c.

State whether the following statement is True or False with reasons:

It is not necessary to depreciate an asset if it is not in use.

State whether the following statement is True or False with reasons:

Depreciation is charged on Current Assets only.

State whether the following statement is True or False with reasons:

Depreciation need not be charged when business is making losses.

Complete the following sentence:

Depreciation is charged on ______ asset.

Complete the following sentence:

Wages paid for Installation/fixation of Machinery is debited to ______ account.

Complete the following sentence:

Under ______ system, the amount of depreciation changes every year.

Complete the following sentence:

Depreciation = `"Cost of asset - _____________"/"Estimated Working Life of the Asset"`

Complete the following sentence:

Gradual and permanent decrease in the value of asset is known as ____________

Complete the following sentence:

In Fixed Instalment System the amount of depreciation is ______ every year.

Complete the following sentence:

The amount spent on installation of Machinery is a ______ expenditure.

Complete the following sentence:

______ is the value which an asset realises at the end of its useful life.

Complete the following sentence:

Depreciation Account is a ______ account.

Complete the following sentence:

Depreciation is derived from a Latin word ______.

Do you agree or disagree with the following statement:

Depreciation is non-cash expense.

Do you agree or disagree with the following statement:

Under written down value method the Depreciation curve slopes parallel to 'X' axis.

Do you agree or disagree with the following statement:

The rate of depreciation depends upon the life of fixed asset.

Do you agree or disagree with the following statement:

The terminal value of assets never affects the annual amount of depreciation.

Do you agree or disagree with the following statement:

By charging depreciation on fixed assets ascertainment of true and fair financial position is possible.

Correct the following statement and rewrite the statement.

The residual value of an asset increases the amount of annual depreciation.

Correct the following statement and rewrite the statement.

Depreciation is calculated on all assets.

Correct the following statement and rewrite the statement.

Underwritten down value method depreciation is calculated on the original cost of an asset.

Correct the following statement and rewrite the statement.

Depreciation provided on assets is debited to an asset accounts

 Correct the following statement and rewrite the statement.

Profit on sale of the asset is credited to an asset account.

A machine costing ₹ 23,000 is estimated to have a life of 7 years and the scrap value is estimated at ₹ 2,000 at the end of its useful life. Find out the amount of depreciation p.a.

If the cost of the Computer is ₹ 40,000 and depreciation is to be charged at 8% p.a. Calculate the amount of depreciation.

Mr. ‘X’ purchased Furniture on 1st October 2015 at ₹ 2,80,000 and spent ₹ 20,000 on its installation. He provides depreciation at 6% under the straight-line method on 31st March 2016. Calculate the amount of depreciation.

M/s Sitaram and Co Purchased a Machinery on 1st January 2016 for ₹ 2,00,000. The company provides depreciation @ 10% p.a. on Reducing Balance Method on 31st March every year. Calculate Written Down Value of Machinery as of 31st March 2017.

On 1st July 2016 M/s. Ramai & Co. .sold Machinery for ₹ 7,000 the original cost of ₹ 10,000 which was purchased on 18th April 2015. Find out the profit or loss on sale of Machinery by charging depreciation at 10% p.a. on original cost on 31st March every year.

On 1st April 2015, Farid of Nasik purchased a Motor Car for ₹ 55,000. The scrap value of the Motor Car was estimated at ₹ 10,000 and its estimated life is 10 years. The Registration charge for the Motor Car was ₹ 5,000.
Show Motor Car Account for first four years, assuming that the books of accounts are closed on 31st March every year.

On 1st January 2017 ‘Sai Industries, Nagpur’ purchased a Machine costing ₹ 1,65,000 and spent ₹ 15,000 for its installation charges. The estimated life of the Machine is to be 10 years and the scrap value at the end of its life would be ₹ 30,000. On 1st October 2018, the entire Machine was sold for ₹ 1,50,000.
Show Machinery Account, Depreciation Account, for the years 2016-17, 2017-18, and 2018-19 assuming that the accounts are closed on 31st March every year.

Shubhangi Trading Company of Dombivli purchased Machinery for ₹ 86,000 on 1st January 2016 and immediately spent ₹ 4,000 on its fixation and erection. On 1st October 2016 additional Machinery costing ₹ 40,000 was purchased.

On 1st October 2017, the Machinery purchased on 1st January 2016 became obsolete and was sold for ₹ 70,000. On 1st July 2017, a new Machine was also purchased for ₹ 45,000.

Depreciation was provided annually on 31st March at the rate of 12% per annum on the fixed installment method.
Prepare Machinery Account for three years and pass Journal Entries for the Third year i.e. 2017-2018.

On 1st Jan 2015, Triveni Traders Raigad purchased a Plaint for ₹ 12,000, and installation charges being ₹ 3,000. On 1st July 2016 another Plant was purchased for ₹ 25,000, on 1st April 2017 another Plant was purchased for ₹ 27,000, wages paid for installation amounted to ₹ 2,000. Carriage paid for the Plant amounted to ₹ 1,000. Show Plant Account up to 31st March 2018 assuming that the rate of depreciation is @ 10% p.a. on Straight Line Method.

Sameer & Company, Mumbai purchased a Machine worth ₹ 2,00,000 on 1st April 2016. On 1st July 2017, the company purchased an additional Machine for ₹ 40,000.
On 31st March 2019, the company sold the Machine purchased on 1st July 2017 for ₹ 35,000. The company writes off depreciation at the rate of 10% on the original cost and the books of accounts are closed every year on 31st March.
Show the Machinery Account and Depreciation Account for the first three years ending 31st March 2016-17, 2017-18 and 2018-19

Samarth Manufacturing Co. Ltd, Aurangabad, purchased a New Machinery for ₹ 45,000 on 1st Jan 2015 and immediately spent ₹ 5,000 on its fixation and erection. In the same year, 1st July additional Machinery costing ₹ 25,000 was purchased. On 1st July 2016, the Machinery purchased on 1st Jan 2015 became obsolete and was sold for ₹ 40,000.
Depreciation was provided annually on 31st March at the rate of 10% per annum on the Fixed Instalment Method.
You are required to prepare Machinery Account for the year 2014-15, 2015-16, 2016-17.

M/s Omkar Enterprise Jalgaon acquired a Printing Machine for ₹ 75,000 on 1st Oct 2015 and spent ₹ 5,000 on its transport and installation. Another Machine for ₹ 45,000 was purchased on 1st Jan 2017. Depreciation is charged at the rate of 20% on Written Down Value Method, on 31st March every year.
Prepare Printing Machine Account for the first four years.

Vishal Company, Dhule, purchased Machinery costing ₹ 60,000 on 1st April 2016. They purchased further Machinery on 1st October 2017, costing ₹ 30,000, and on 1st July 2018, costing ₹ 20,000. On 1st Jan 2019, one-third of the Machinery, which was purchased on 1st April 2016, became obsolete and it was sold for ₹ 18,000.
Assume that, company account closes on 31st March every year.
Show Machinery Account for the first three(3) years and pass journal entries for the Third year, after charging depreciation at 10% p.a. on Written Down Value Method.

Mahesh Traders Solapur purchased Furniture on 1st April 2014 for ₹ 20,000. In the same year on 1st, Oct. additional Furniture was purchased for ₹ 10,000.
On 1st Oct. 2015, the Furniture purchased on 1st April 2014 was sold for ₹ 15,000 and on the same day, a new Furniture was purchased for ₹ 20,000.
The firm charged depreciation at 10% p.a. on the Reducing Balance Method.
Prepare Furniture Account and Depreciation Account for the year ending 31st March 2015, 2016, and 2017.

Radhika-Masale’ Amravati purchased a Plant on 1st Jan. 2015 for ₹ 80,000. A new Plant was also purchased
for ₹ 60,000, installation expenses being ₹ 10,000 on 1st April 2016. On 1st Jan 2017, a new Plant was purchased for ₹ 20,000, by disposing of the 1st Plant at ₹ 60,000.
Prepare Plant Account and Depreciation Account for 31st March 2015, 31st March 2016, and 31st March 2017, assuming that the rate of depreciation was @ 10% on Diminishing Balance Method.
Solution:

On 1st April 2015, Suman Traders purchased Machinery for ₹ 30,000. On 1st Oct. 2015, they purchased further Machinery costing ₹ 20,000.
On 1st Oct. 2016, they sold the Machine purchased on 1st April 2015 for ₹ 18,000 and brought another Machine for ₹ 15,000 on the same date.
Depreciation is provided on Machinery @ 20% p.a. on the Diminishing Balance Method and the financial year closes on 31st March every year.
Prepare the Machinery Account and Depreciation Account for the year 2015-16, 2016-17, and 2017-18.