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11th Standard Accountancy - Depreciation Accounting Model Question Paper

Published on: 26/09/2019

Depreciation Accounting

Download Tamil Nadu 11th Standard Accountancy question papers, model tests, one-mark questions, important questions, and public exam papers in PDF format. Free study materials and answer keys for TN State Board students.

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Std: 11th Standard - Accountancy

chapter: - Model Question paper

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Questions:

Multiple Choice Question

8 x 1 = 8

Depreciation arises due to the following reason ____________

(a)

Wear & Tear

(b)

Fall in the market value

(c)

Effluxionof time

(d)

All the above

If the sale price of an asset is less than, the book value of the asset, it denotes _______________

(a)

Loss

(b)

Capital Profit

(c)

Expenditure

(d)

Capital gain

_________ is a non-depreciable asset.

(a)

Building

(b)

Machinery

(c)

Land

(d)

Vehicle

In every business, certain ____________ assets are usedfor the conduct' of business operations.

(a)

fixed

(b)

current

(c)

tangible

(d)

intangible

Residual value of an asset means the amount that it can fetch on sale at the ________of its useful life.

(a)

Beginning

(b)

End

(c)

Middle

(d)

None

A depreciable asset may suffer obsolescence due to______.

(a)

Passage of time

(b)

Wear and tear

(c)

Technological changes

(d)

None of the above

Depreciation is caused by ____.

(a)

Lapse of time

(b)

Usage

(c)

Obsolescence

(d)

a, b and c

Under straight line method, the amount of depreciation is ____.

(a)

Increasing every year

(b)

Decreasing every year

(c)

Constant for all the years

(d)

Fluctuating every year

Generic 2

8 x 2 = 16

Define Depreciation.

10.

State any two merits of Straight line method.

11.

Calculate the amount of depreciation and depreciation rate from the following by using ‘straight line method’. Also give journal entries for the first two years. The books are closed on 31st December every year.

January 1, 2016 Payment to vendor for purchase of machinery	Rs.2,00,000
January 1, 2016 Transportation cost	Rs.2,000
January 1, 2016 Installation cost	Rs.18,000
Estimated scrap value at the end of the life	Rs.10,000
Estimated life	10 years

12.

A furniture costing Rs 5,000 was purchased on 1.1.2016, the installation charges being Rs 1,000. The furniture is to be depreciated @10% p.a. on the diminishing balance method. Pass journal entries for the first two years.

13.

What is sinking fund method?

14.

What is annuity method?

15.

List out the various methods of depreciation.

16.

What is meant by depreciation?

Generic 3

4 x 3 = 12

17.

Write a short note on - Revaluation Method :

18.

Machinery was purchased on 1^stJanuary 2015 for Rs. 4,00,000. Rs. 15,000 was spent on its erection and Rs. 10,000 on its freight charges. Depreciation is charged at 10% per annum on straight line method. The books are closed on 31^st March each year. Calculate the amount of depreciation on machinery for the first two years.

19.

Distinguish between straight line method and written down value method of providing depreciation.

20.

What are the causes for depreciation?

Generic 5

4 x 5 = 20

21.

M/s Ramco textile mills purchased machinery on 1st April 2014 for Rs.2,00,000 on credit from M/s. Nila & Co. and spent Rs.10,000 on its installation. Depreciation is provided at 10% per annum on the written down value method. Prepare machinery account and depreciation account for the first three years. Books are closed on 31^st March every year.

22.

Ramu Brothers purchased a machine on 1st July 2016 at a cost of Rs.14,000 and spent Rs.1,000 on its installation. The firm writes off depreciation at 10% of original cost every year. The books are closed on 31st December every year. Give journal entries and prepare machinery account and depreciation account for 2 years

23.

On 1^st January 2015, a second hand machine was purchased for Rs. 58,000 and Rs. 2,000 was spent on its repairs. On 1^stJuly 2017, it was sold for Rs. 28,600. Prepare the machinery account for the years 2011 to 2013 under written down value method by assuming the rate of depreciation as 10% p.a. and the accounts are closed on 31^st December every year.

24.

A manufacturing company purchased on 1 April, 2010, a plant and machinery for Rs. 4,50,000 and spent Rs. 50,000 on its installation. After having used it for three years, it was sold for Rs. 3,85,000. Depreciation is to be provided every year at the rate of 15% per annum on the fixed instalment method. Accounts are closed on 31^st March every year. Calculate profit or loss on sale of machinery.

Assertion and reason

2 x 2 = 4

25.

Assertion (A): When the amount of depreciation charged over its life is plotted on a graph and the points are joined together, the graph will show a horizontal straight line.
Reason (R): Scrap value is also known as residual value.
(a) Both (A) and (R) are true and (R) is the correct explanation of (A)
(b) Both (A) and (R) are true and (R) is not the correct explanation of (A)
(c) (A) is true, but (R) is false
(d) (A) is false, but (R) is true

26.

Assertion (A): Business enterprises use certain fixed assets for the conduct of business operations.
Reason (R): The process of allocation of the relevant cost of a fixed asset over its useful life is known as depreciation.
Select the correct answer.
(a) Both (A) and (R) are true and (R) is the correct explanation of (A)
(b) Both (A) and (R) are true and (R) is not the correct explanation of (A)
(c) (A) is true, but (R) is false.
(d) (A) is false, but (R) is true.

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Answers Key:

Multiple Choice Question

8 x 1 = 8

(d)
All the above

(a)
Loss

(a)
fixed

(b)
End

(d)
a, b and c

Generic 2

8 x 2 = 16

According to spicer and pegler, "Depreciation is the measure of exhaustion of the effective life-of an asset froin any cause during a given period",

10.

(i) Simplicity
(ii) Equality of Depreciation burden

11.

Amount of depreciation per year = \({Original\ cost\ of\ the\ asset − Estimated\ scrap\ value\over Estimated\ useful\ life\ of\ the\ asset\ in\ years}\)
\(= \frac{2,20,000 - 10,000}{10} \\ =\frac{2,10,000}{10}\)
= Rs.21,000 per year
Rate of depreciation per year = \({Amount\ of\ depreciation\over Original\ cost}\times100\)
\(={21,500\over 2,20,000}\times100=9.55\%\)

12.

Journal entries
Date	Particulars		Debit Rs.	Credit Rs.
1.1.2016	furniture A/c	Dr.	6,000
	To Bank A/c			6,000
	(Furniture purchased)
31.12.2016	Depreciation A/c	Dr.	600
	To Furniture A/c			600
	(Annual depreciation)
31.12.2016	Profit and loss A/c	Dr.	600
	To Depreciation A/c			600
	(Depreciation transferred te profit and loss A/c)
31.12.2017	Depreciation A/c	Dr.	540
	To Furniture A/c			540
	(Annual depreciation)
31.12.2017	Profit and loss A/c	Dr.	540
	To Depreciation A/c			540
	(Depreciation transferred to profit and loss A/c)

13.

(i) Sinking fund method is adopted especially when it is desired not merely to write off an asset but also to provide enough funds to replace an asset at the end of its working life.
(ii) Under this method, the amount charged as depreciation is transferred to depreciation fund and invested outside the business.
(iii) This method of depreciation is suitable for assets of higher value.
(iv) This method is also known as depreciation fund method

14.

(i) Under this method, the amount spent on the purchase of an asset is regarded as an investment. As such, the interest at a certain rate is calculated on the opening balance of the asset account each year and debited to the asset account.
(ii) The amount of depreciation written off is ascertained by- referring to the annuity table. Annual depreciation is uniform throughout the working life of the asset.

15.

The following are the different methods of providing depreciation:
(i) Straight line method or Fixed instalment method or Original cost method
(ii) Written down value method or Diminishing balance method
(iii) Sum of years of digits method
(iv) Machine hour rate method
(v) Depletion method
(vi) Annuity method
(vii) Revaluation method
(viii) Sinking fund method
(ix) Insurance policy method

16.

The process of allocation of the cost of a fixed asset oyer its useful life is known as depreciation

Generic 3

4 x 3 = 12

17.

(i) Under this method, the amount of annual depreciation is calculated by comparing the value of the assets at the end of the year and their value at the beginning of the year.
(ii) The value of the asset at the end of the year is determined with the consultation of relevant experts.
(iii) The excess of opening value over the closing value of the asset is the amount of depreciation for that year.
(iv) This method is used for live stock, loose tools, etc.

18.

Calculate the amount of depreciation
Particulars	Amount Rs	Amount Rs
Cost of the Machinery	4,00,000
Add: -Erection charges	15,000
	4,15,000
Add: Freight charges	10,000
Original cost of the Machinery		4,25,000
I^st Year depreciation
\(4,25,000\times{10\over100}\times{3\over 12}=10,625\)
II^nd Year depreciation
\(4,25,000\times{10\over 100}=24,500\)

∴ I^st Year depreciation = Rs.10,625
II^st Year depreciation = Rs.42,500
Amount of depreciation on 31.03.2015: Rs. 10,625; on 31.03.2016: Rs. 42,500)

19.

Point of difference	Straight line method	Written down value method
1. Basis of calculation	Depreciation is calculated on the original cost of the asset for all the years.	Depreciation is calculated on the written down value of the asset year after year
2. Amount of depreciation	The amount of depreciation is the same for all the years.	The amount of depreciation goes on decreasing year after year.
3. Book value of the asset at the end of its life	The book value of the asset becomes zero when there is no scrap value or is equal to its scrap value at the end of its life.	The book value of the •asset never becomes zero.
4. Computation of rate of depreciation	It is easy to calculate the rate of depreciation.	It is very difficult to calculate the rate of depreciation.
5. Order of calculation of depreciation amount.	Amount of depreciation is calculated first, followed by the rate of depreciation.	Rate of depreciation is calculated first followed by the amount of depreciation

20.

(i) Wear and tear: The normal use of a tangible asset results in physical deterioration which is called wear and tear. When there is wear and tear, the value of the asset decreases proportionately.
(ii) Efflux of time: Certain assets whether used or not become potentially less useful with the passage of time.
(iii) Obsolescence: It is a reduction in the value of assets as a result of the availability of updated alternative assets. This happens due to new inventions and innovations. Though the original asset is in a usable condition, it is not preferred by the users and it loses its value.
(iv) Inadequacy for the purpose: Sometimes, the use of assets may be stopped due to their inadequacy for the purpose. These may become inadequate due to expansion in the capacity of a firm.
(v) Lack of maintenance: A good maintenance will naturally increase the life of the asset. When there is no proper maintenance, there is a possibility of more depreciation.
(vi) Abnormal factors: Decline in the usefulness of fixed asset may be caused by abnormal factors like damage due to fire accidents, natural calamities, etc.

Generic 5

4 x 5 = 20

21.

Machinery Account
Date	Particulars		Date	Particulars
2014 April 1	To Nila & Co. A/c	2.00,000	2015 March 31	By Depreciation A/c	21,000
April 1	To Bank A/c	10,000		(2,10,000 ×10%)
			March 31	By Balance c/d	1,89,000
		2,10,000			2,10,000
2015 April 1	To Balance b/d	1,89,000	2016 March 31	By Depreciation A/c	18,900
				(1,89,000 ×10%)
			March 31	By Balance c/d	1,70,100
		1,89,000			1,89,000
2016 April 1	To Balance b/d	1,70,100	2017 March 31	By Depreciation A/c	17,010
				(1,70,100 ×10%)
			March 31	By Balance c/d	1,53,090
		1,70,100			1,70,100
2017 April 1	To Balance b/d	1,53,090

Depreciation Account
Date	Particulars		Date	Particulars
2015 March 31	To MachineryA/c	21,000	2015 March 31	By Profit & Loss A/c	21,000
		21,000			21,000
2016 March 31	To MachineryA/c	18,900	2016 March 31	By Profit & Loss A/c	18,900
		18,900			18,900
2017 March 31	To MachineryA/c	17,010	2017 March 31	By Profit & Loss A/c	17,010
		17,010			17,010

22.

Cost of the asset = Purchase price + Installation cost
= 14,000 + 1,000 = Rs.15,000
Journal entries

Date	Particulars		Debit	Credit
2016	Machinery A/c	Dr	14,000
July 1	To Bank A/c			14,000
	(Machinery bought)
July 1	Machinery A/c	Dr	1,000
	To Bank A/c			1,000
	(Installation expenses on machinery incurred)
December 31	Depreciation A/c	Dr	750
	To Machinery A/c			750
	(15,000 × 10/100 × 6/12)
	(Depreciation provided)
December 31	Profit and Loss A/c Dr.	Dr	750
	To Depreciation A/c			750
	(Depreciation transferred to profit and loss account)
2017 December 31	Depreciation A/c (15,000 × 10/100)	Dr	1,500
	To Depreciation A/c			1,500
	(Depreciation transferred to profit and loss account)
December 31	Profit and Loss A/c	Dr	1,500
	To Depreciation A/c (Depreciation transferred to profit and loss account)			1,500

Ledgers

Dr Machinery Account Cr
Date	Particulars	Rs	Date	Particulars	Rs
2016			2016
July 1	To Cash A/c	15,000	Dec 31	By Depreciation A/c	750
				By Balance c/d	14,250
		15,000			15,000
2017	To Balance b/d	14,250	2017
Jan 1			Dec 31	By Depreciation A/c	1,500
				By Balance c/d	12,750
		14,250			14,250
2018
Jan 1	To Balance b/d	12,750

Dr. Depreciation Account Cr
Date	Particulars	Rs	Date	Particulars	Rs
2016			2016
Dec 31	To Machinery A/c	750	Dec 31	By Profit and Loss A/c	750
		750			750
2017			2017
Dec 31	To Machinery A/c	1,500	Dec 31	By Profit and Loss A/c	1,500
		1,500			1,500

23.

Calculation of Profit or Loss on Sale of Machinery
Date	Particulars	Amount Rs.
2015 Jan 01	Cost Price (58,000 + 2,000)	60,000
2015 Dec 31	Less: Depreciation\([60,000\times\frac{10}{100}]\)	6,000
		54,000
2016 Dec 31	Less: .Depreciation\([54,000\times\frac{10}{100}]\)	5,400
		48,600
2017 July 01	Less: Depreciation\([48,600\times\frac{10}{100}\times\frac{6}{12}]\)	2,430
	Book Value of the Machinery	46,170
	Sales	28,600
	Loss on sale	17,570

Dr. Machinery Account Cr.
Date	Particulars	Amount Rs.	Date	Particulars	Amount Rs.
2015 Jan 01	To Bank A/c	60,000	2015 Dec 31	By Depreciation A/c	6,000
			2015 Dec 31	By Balance c/d	54,000
		60,000			60,000
2016 Jan 01	To Balance b/d	54,000	2016 Dec 31	By Depreciation A/c	5,400
			2016 Dec 31	By Balance c/d	48,600
		54,000			54,000
2016 Jan 01	To Balance b/d	48,600	2017 Dec 31	By Depreciation A/c	2,430
			2017 Dec 31	By Bank A/c	28,600
			2017 Dec 31	By Profit & LossA/c	17,570
		48,600			48,600

24.

Calculation of profit or loss on sale of machinery
Particulars	Amount Rs.
Cost price	4,50,000
Add : Installation charges	50,000
	5,00,000
Less : Depreciation for 2010 - 11	75,000
\(\left(5,00,000\times{15\over 100}\right)\)
	4,25,000
Less: Depreciation for 2011 - 12	75,000
\(\left(5,00,000\times{15\over 100}\right)\)
	3,50,000
Less: Depreciation for. 2012 - 13	75,000
\(\left(5,00,000\times{15\over 100}\right)\)
Book value on the date of sale	2,75,000
Less: Selling price	3,85,000
Profit on sale	1,10,000