11th CBSE Accountancy - Depreciation, Provisions and Reserves Six Mark Question Paper | QB365

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11th CBSE Accountancy - Depreciation, Provisions and Reserves Six Mark Question Paper

Published on: 25/09/2019

Depreciation, Provisions and Reserves

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Questions:

Generic 6

9 x 6 = 54

Name and Explain different types of Reserves in detail.

Surya Ltd. purchased on 1st January, 2009 machinery for Rs.36,000 and spend Rs.4,000 on its installation. On 1st July, 2009 another Machine purchased for Rs.20,000. On 1st July, 2011 machine bought on 1st January, 2009 was sold for Rs.12,000 and a new machine purchased for Rs.64,000 on the sa.me date. Depreciation is provided on 31st December @ 10% p.a. on the written down value method. Prepare Machinery Alc from 2009 to 2011

The cost of the Machinery in use with Pramod & Co.on 1st April, 2013 was Rs.3,00,000 against which the depreciation provision stood at Rs.1,00,000 on that date. The firm provided depreciation at 10% on the diminishing value.
On 1st October 2013, a machine costing Rs.40,000 purchased on 1st April, 2011 was sold for Rs.32,000 and on the same date another machine was purchased for Rs.50,000.
Show the following accounts in the books of Pramod & Co. for the year 2013-14:
1. Machinery Account.
2. Provision for Depreciation Account.
3. Machinery Disposal Account

On 1st April, 2011 a firm purchased a machinery for Rs.2,00,000. On 1st October in the same accounting year additional machinery costing Rs. 1,00,000 was purchased. On 1st October, 2012 the machinery purchased on 1st April, 2011 having become obsolete, was sold off for Rs. 90,000. On 1st October, 2013 new machinery was purchased for Rs. 2,50,000 while the machinery purchased on 1st October, 2011 was sold for Rs. 85,000 on the same day. The firm provides depreciation on its machinery @ 10% per annum on original cost on 31st March every year.

A company writes off depreciation on straight line basis on machinery at 10%. On 31st March, 2013 the position was as under :

Particulars	Rs.
Cost of purchase to date	52,590
Depreciation written off to date	25,670

During 2013-14 an addition of Rs.2,480 was made to machinery. A machine bought in 2009-10 for Rs. 2,800 was sold for Rs. 800 during the year.
You are required to show the Machinery Account for the year 2013-14. (Show your workings fully).

After purchasing a second hand machine for Rs.50,000, it was overhauled and installed on 1.1.2011; overhauling expenses being Rs.8,000. On 1.7.2011 another machine was purchased for Rs.30,000. On 1.7.2013 the Machine installed on 1.1.2011 was sold for Rs.25,000 dismantling charges being Rs.1,000. On the same date another machine was purchased for Rs.75,000 which was erected on 30.09.2013. Accounts are closed on 31 st December. Depreciation at 10% per annum on the original cost was written off. Show the Machinery Account from 2011 to 2013.

Machine was purchased on 1st Jan., 2000 for Rs. 19,400 and Rs.600 were spent on its installation. On 1st July 2000, in the same year, additional machinery costing Rs.10,000 was purchased. On 1st July, 2002, the machine purchased on January 2000, having become useless was sold for Rs. 8,000 and on the same date a new, machine was purchased at a cost of Rs.15,000. Depreciation is provided annually on 31st December @ 10% per annum on original cost.

On 1st January, 2009, a firm purchased machinery worth Rs. 50,000. On 1st July, 2011, it buys additional machinery worth Rs.10,000 and spends Rs.1,000 on its erection. The accounts are dosed each year on 31st December. Assuming that the annual depreciation is 10 percent, show the machinery account for 5 years under the straight line method.

An asset is purchased for Rs.,10,000. Depreciation is to be provided annually according to the straight line method. The useful life of the asset is 10 years and the residual value is Rs.10,000. You are required to find out the amount of annual depreciation and prepare asset account for the first three years.

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Answers Key:

Generic 6

9 x 6 = 54

Reserves
Meaning:
Reserves mean amounts set aside out of profits and other surplus to meet future uncertainties. In other words, a reserve is meant for meeting any unknown liability or loss in the future.

Revenue Reserves:
These reserves come into existence out of profits which have been earned in the course of day-to-day business operations. Therefore, the revenue reserves represent undistributed profits and as such are available for the distribution of dividends.
(i) General Reserve:
Usually, the businessmen do not withdraw the entire profits from the business but retain a part of it in the business to meet unforeseen future uncertainties. Profits so retained in the business for 'a rainy day' are known as 'General Reserve'. Similarly, companies also do not distribute the entire profits as dividends but keep, aside a part of it in the form of General Reserve. Such reserves are also termed as 'Contingency Reserves' or 'Free Reserves' because these are not created for any specific purpose and can be freely used for any purpose.

Dr. Machinery Account Cr.
Date	Particulars	Amount(Rs.)	Date	Particulars	Amount(Rs.)
1-Jan-09	To Bank A/c	36,000	31-Dec-09	By Depreciation A/c
1-Jan-09	To Bank A/c	4,000		(4,000+1,000)	5,000
1-July-09	To Bank	20,000	31-Dec-09	By Balance c/d	55,000
		60,000			60,000
1-Jan-10	To Balance b/d	55,000	31-Dec-10	By Depreciation A/c	5,500
			31-Dec-10	By Balance c/d	49,500
		55,000			55,000
1-Jan-11	To Balance b/d	49,500	1-July-11	By Depreciation A/c	1,620
		64,500	1-July-11	By Bank A/c (Sale of Machinery)	12,000
			1-July-11	By Profit and Loss A/c (loss)	18,780
			31-Dec-11	By Depreciation A/c	4,910
				(1710+3200)
			31-Dec-11	By Balance c/d	76,190
		1,13,500			1,13,500

Working Note:

Loss on Sale of Machinery	Rs.
Machine ( 36000 + 4000 )	40,000
Depreciation 1st year	4,000
	36,000
Depreciation 2nd Year	3,600
Depreciation 3rd year (6 months)	1,620
	30,780
Sale Price	12,000
Loss on Sale Machinery	18,780

Dr. Machinery Account Cr.
Date	Particulars	Amount(Rs)	Date	Particulars	Amount(Rs)
1.4.13	To Balance b/d	3,00,000	1.10.13	By Machinery
1.10.13	To Bank A/c	50,000		Disposal A/c	40,000
			31.3.14	By Balance c/d	3,10,000
		3,50,000			3,50,000
1.4.14	To Balance b/d	3,10,000

Dr. Provision For Depreciation Account Cr.
Date	Particulars	Amount(Rs)	Date	Particulars	Amount(Rs)
1.10.13	To Machinery		1.04.13	By Balance b/d	1,00,000
	Disposal A/c	9,220	1.10.13	By Dep.A/c (1)	1,620
31.3.14	To Balance c/d	1,11,660	31.3.14	By Dep.A/c (2)	19,260
		1,20,880			1,20,880
			1.4.14	By Balance b/d	1,11,660

Dr. Machinery Disposal Account Cr.
Date	Particulars	Amount(Rs)	Date	Particulars	Amount(Rs)
1.10.13	To Machinery	40,000	1.10.13	By Provision for
1.10.13	To Profit & Loss A/c			Dep.A/c (1)	9,200
	-Profit transferred (3)	1,220	1.10.13	By Bank A/c	32,000
		41,220			41,220

Working Notes:
1.Depreciation provided for the machine disposed off on 1.10.2013 :

Particulars	(Rs.)	Depreciation Provided (Rs.)
Value of Machine on 1.4.2011	40,000
Less:Depreciation for 11-12 @ 10%	4,000	4,000
	36,000
Less: Depreciation for 12-13 @ 10% on Rs.36,000	3,600	3,600
	32,400
Less: Depreciation for 6 months on Rs.32,400	1,620	1,620
Net Value	30,780	9,220

2.Depreciation on the Machinery in use:

Particulars	Original Cost (Rs)	Depreciation Provided (Rs)
On 1.4.2012	3,00,000	1,00,000
Less:Value of Asset sold	40,000	7,600*
	2,60,000	92,400

Working Notes:

Particulars	Amt(Rs.)
1.Depreciation at 10% on Rs.1,67,600 Rs.2,60,000 -Rs. 92,400) =	Rs.16,760
Add: Depreciation for 6 months on Rs.50,000 (Addition)	2,500
	19,260

* Rs.4,000 (2011-12)+Rs.3,600 (2012-13) = Rs 7,600
2.Profit on Sale of Machine = Rs.32,000 (S.P.)- Rs.30,780 (Net Value) = Rs.1,220

In the Books of

Dr. Machinery Account Cr.
Date	Particulars	Amount (Rs)	Date	Particulars	Amount(Rs)
2011			2012
Apr 1	To Bank A/c	2,00,000	Mar 31	By Balance c/d	3,00,000
Oct 1	To Bank A/c	1,00,000
		3,00,000			3,00,000
2012			2012
Apr 1	To Balance b/d	3,00,000	Oct 1	By Bank A/c (Sale)	90,000
			Oct 1	By Provision for Depreciation A/c	30,000
			Oct 1	By Profit & Loss A/c (Loss)	80,000
			2013
			March 31	By Balance c/d	1,00,000
		3,00,000			3,00,000
2013			2013
Apr 1	To Balance b/d	1,00,000	Oct 1	By Bank A/c (Sale)	85,000
Oct 1	To Bank A/c	2,50,000		By Provision for Depreciation A/c	20,000
Oct 1	To profit &Loss A/c (Profit)	5,000
			2014
			Mar 31	By Balance c/d	2,50,000
		3,55,000			3,55,000

Dr. Depreciation Account Cr.
Date	Particulars	Amount(F)	Date	Particulars	Amount()
2012			2012
Mar 31	To Provision for Depreciation A/c	25,000	Mar 31	By Profit & Loss A/c	25,000
		25,000			25,000
2012			2013
			Mar 31	By Profit & Loss A/c	20,000
Oct 1	To Provision for Depreciation A/c	10,000
2013
Mar 31	To Provision for Depreciation A/c	10,000
		20,000			20,000
2013			2014
Oct 1	To Provision for Depreciation A/c	5,000	Mar 31	By Profit & Loss A/c	17,500
2014 Mar 31	To Provision for Depreciation A/c	12,500
		17,500			17,500

Dr. Provision for Depreciation Account Cr.
Date	Particulars	Amount(Rs.)	Date	Particulars	Amount(Rs)
2012			2012
Mar 31	To Balance c/d	25,000	Mar 31	By Depreciation A/c (20,000+5,000)	25,000
		25,000			25,000
2012			2012
Oct 31	To Machinery A/c		Apr 1	By Balance A/c	25,000
	(20,000+10,000)	30,000	Oct 1	By Depreciation A/c	10,000
2013			2013
Mar 31	To Balance c/d	15,000	Mar 31	By Depreciation A/c	10,000
		45,000			45,000
2013			2013
Oct 1	To Machinery A/c		Apr 1	By Balance b/d	15,000
	(5,000+10,000+5,000)	20,000	Oct 1	By Depreciation A/c	5,000
2014			2014
Mar 31	To Balance c/d	12,500	Mar 31	By Depreciation A/c	12,500
		32,500			32,500
			Apr 1	By Balance b/d	12,500

In the Books of ...

Dr. Machinery Account Cr.
Date	Particular	Amount(Rs)	Date	Particulars	Amount(Rs)
2013			2013
April 1	To Balance b/d	26,920	April 1	By Bank A/c (Sale proceeds of machine)	800
April 1	To Bank A/c (Cost of additional machinery)	2,480
			April 1	By Profit & Loss A/c (Loss on Sale)	880
			2014	By Depreciation A/c	5,227
			Mar 31	(Depreciation on remaining machinery)
			Mar 31	By Balance c/d	22,493
		29,400			29,400
2014
April 1	To Balance b/d	22,493

Working Notes

1.Balance of Machinery as on 1 April 2013	Rs
Cost of Machinery to date	52,590
Less: Depreciation	25,670
Balance of Machinery as on 1st April, 2013	26,920
2.Loss on Sale of-Machinery:
Cost of Machinery Sold	2,800
Less: Depreciation on Machinery sold for 4 years. (i.e., 2009-10,2010-2011,2011-12 and 2012-13)
Rs 2,800\(\times\)10/100\(\times\)4	1,120
Book value or Net value as on 1.4.2013	1,680
Less: Sale Price (assumed to be sold on 1.4.2013)	800
Loss on Sale of Machinery	880
3.Calculation of Depreciation charged on 31.3.2014
Cost of Machinery as on 31.3.2014	52,590
Less: Cost of Machinery sold during 2013-14	2,800
Cost of existing Machinery	49,790
Depreciation on Rs. 49,790 @ 10%(Rs 49,790\(\times\)10/100)	4,979
Add: Depreciation on Rs. 2,480
(additional machinery) Rs.2480\(\times\)0/100	248
	5,227

In the Books of....

Dr. Machinary Account Cr.
Date	Particular	Amount(Rs)	Date	Particulars	Amount(Rs)
2011			2011
Jan 1	To Cash A/c (1)	50,000	Dec 31	By Depreciation A/c
	To Cash A/c	8,000		(1) 5,800
July 1	To Cash A/c (2)	30,000		(2) 1,500
			Dec 31	By Balance c/d :	7,300
				Machine (1) 52,200
				Machine (2) 28,500	80,700
		88,000			88,000
2012			2012
Jan 1	To Balance b/d		Dec 31	By Depreciation A/c
	Machine (1) 52,200			(1) 5,800
	Machine (2) 28,500	80,700		(2) 3,000	8,800
			Dec 31	By Balance c/d
				Machine (1) 46,400
				Machine (2) 25,500	71,900
		80,700			80,700
2013	To Balance b/d		2013
Jan 1	Machine (1) 46,400		July 1	By Bank A/c (Sales)	24,000
	Machine (2) 25,500	71,900		By Depreciation A/c	2,900
				By Profit and Loss A/c (Loss on Sale)	19,500²
July 1	To Cash A/c (3)	75,000	Dec 31	By Depreciation A/c
				Machine (2) 3,000
				Machine (3) 1,875	4,875
			Dec 31	By Balance c/d
				Machine (2) 22,500
				Machine (3) 73,125	95,625
		1,46,900			1,46,900

In the Books of the

Dr. Machinery Account Cr.
Date	Particulars	Amount(Rs)	Date	Particulars	Amount(Rs)
2000			2000
Jan1	To Bank A/c (M₁)	19,400	Dec 31	By Depreciation A/c (2,000+500)	2,500
July 1	To cash A/c	600
July 1	To Bank A/c (M₂)	10,000	Dec 31	By Balance c/d	27,500
		30,000			30,000
2001			2001
Jan 1	To Balance b/d	27,500	Dec 31	By Depreciation A/c	3,000
			Dec 31	By Balance c/d	24,5000
		27,500			27,500
2002			2002
Jan 1	To Balance b/d	24,500	July 1	By Bank A/c	8,000
July 1	To Bank A/c (M₃)	15,000	July 1	By Loss on Sale of Machinery	7,000
			July 1	By Depreciation (1,000+1,000+750)	2,750
			Dec 31	By Balance c/d	21,750
		39,500			39,500

In the Book of

Dr. Machinery Account Cr.
Date	Particulars	Amount(Rs)	Date	Particulars	Amount(Rs)
2009			2009
Jan 1	To Bank A/c	50,000	Dec 31	By Depreciation A/c	5,000
			Dec 31	By Balance c/d	45,000
		50,000			50,000
2010			2010
Jan 1	To Balance b/d	45,000	Dec 31	By Depreciation A/c	5,000
			Dec 31	By Balance c/d	40,000
		45,000			45,000
2011			2011
Jan 1	To Balance b/d	40.000	Dec 31	By Depreciation A/c (5,000+550)	5,550
July 1	To Bank (Cost of Machine)	10,000	Dec 31	By Balance c/d	45,450
	To Bank A/c (Erection charges)	1,000
		51,000			51,000
2012			2012
Jan 1	To Balance b/d	45,450	Dec 31	By Depreciation A/c (5,000+1,100)	6,100
			Dec 31	By Balance c/d	39,350
		45,450			45,450
2013			2013
Jan 1	To Balance b/d	39,350	Dec 31	By Depreciation A/c	6,100
			Dec 31	By Balance c/d	313,250
		39,350			39,350
2014
Jan 1	To Balance b/d	33,250

Depreciation = \(\frac { 1,00,000-10,000 }{ 10 } \)
= \(\frac { 1,00,000 }{ 10 } \)
Depreciation = Rs 10,000 p.a.
In the Books of

Dr. Machinery Account Cr.
Date	Particulars	Amount(Rs)	Date	Particulars	Amount(Rs)
1st year	To Bank A/C	1,10,000	1st year	By Depreciation	10,000
				By Balance c/d	1,00,000
		1,10,000			1,00,000
2nd year	To Balance b/d	1,00,000	2nd Year	By Depreciation A/c	10,000
				By Balance c/d	90,000
		1,00,000			1,00,000
3rd Year	To Balance b/d	90,000	3rd Year	By Depreciation A/c	10,000
				By Balance c/d	80,000
		90,000			90,000