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11th Standard English Medium Accountancy Subject Depreciation Accounting Creative 3 Mark Questions with Solution Part - II updated Creative Questions

Published on: 13/05/2022

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Questions:

Generic 3

5 x 3 = 15

Write a note on sum of years of digits method.

Sunil & company purchased a fixed asset on 1.4.2002 for Rs. 5,00,000. Depreciation is to be provided @ 15% per annum according to straight line method. The books are closed on 31^st March every year. Prepare fixed asset account and depreciation account for three years.

A furniture costing Rs. 5,000 has been purchased on 1.1.2011, the installation charges being Rs. 1,000. The furniture is to be depreciated @10% p.a on the diminishing balance method. Show the furniture account and depreciation account for the first three years.

A Motor car was purchased on 1st January, 2013 for Rs. 25,000, depreciated at 10% on diminishing balance method. It was, sold for Rs.16,500 on 3^st December, 2015, Prepare motor car account. The accounts are closed on 31^st December every year.

Akbar & Co. purchased a Plant for Rs. 80,000 on 01-04-2001. It is Depreciated at 10% p.a. on reducing Balance method for three years. Accounts are closed on 31^st March every year. Pass the Journal Entries.

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Answers Key:

Generic 3

5 x 3 = 15

This method is similar to the diminishing balance method. The amount of depreciation goes on decreasing year after year in proportion to the unexpired life of the asset. This method is suitable for those assets having more profitability of obsolescence and increased repair charges as the assets grow older. Under this method, amount of depreciation per year is calculated by multiplying the cost of the asset and the number of remaining years of life and dividing it by the sum of the digits of all years of life of the asset.

Fixed Asset Account
Date	Particulars	Amount Rs	Date	Particulars	Amount Rs
2002 Apr 01	To Bank A/c	5,00,000	2003 Mar 31	By Depreciation A/c	75,000
				By Balance c/d	4,25,000
		5,00,000			5,00,000
2003 Apr 01	To Balance b/d	4,25,000	2004 Mar 31	By Depreciation A/c	75,000
			'''	By Balance c/d	3,50,000
		4,25,000			4,25,000
2004 Apr 01	To Balance b/d	3,50,000	2005 Mar 31	By Depreciation A/c	75,000
			''	By Balance c/d	2,75,0000
		3,50,000			3,50,000
2005 Apr 01	To Balance b/d	2,75,000

Depreciation Account
Date	Particulars	Amount Rs	Date	Particulars	Amount Rs
2003 Mar 31	To Fixed Asset A/c	75,000	2003 Mar 31	By Profit & Loss A/c	75,000
		75,000			75,000
2004 Mar 31	To Fixed Asset A/c	75,000	2004 Mar 31	By Profit & Loss A/c	75,000
		75,000			75,000
2004 Mar 01	To Fixed Asset A/c	75,000	2005 Mar 31	By Profit & Loss A/c	75,000
		75,000			75,000

Furniture Account
Date	Particulars	Amount Rs	Date	Particulars	Amount Rs
2011 Jan 01	To Bank A/c	6,000	2011 Dec 31	By Depreciation A/c	600
	(5,000 + 1,000)		''	By Balance c/d	5,400
		6,000			6,000
2012 Jan 01	To Balance b/d	5,400	2012 Dec 31	By Depreciation A/c	540
			''	By Balance c/d	4,860
		5,400			5,400
2013 Jan 01	To Balance b/d	4,860	2013 Dec 31	By Depreciation A/c	486
			''	By Balance c/d	4,374
		4,860			4,860
2014 Jan 01	To Balance b/d	4,374

Depreciation Account
Date	Particulars	Amount Rs	Date	Particulars	Amount Rs
2011 Dec 31	To Furniture A/c	600	2011 Dec 31	By Profit & Loss A/c	600
		600			600
2012 Dec 31	To Firniture A/c	540	2012 Dec 31	By Profit & Loss A/c	540
		540			540
2013 Dec 31	To Firniture A/c	486	2013 Dec 31	By Profit & Loss A/c	486
		486			486

Calculation of Profit or Loss on Sale of Motor Car
Date	Particular	Amount (Rs)
2013 Jan 01	Cost of the motor Car	25,000
2013 Dec 31	Less : Depreciation \(\left[ 25,000\times \frac { 10 }{ 100 } \right] \)	2,500
		22,500
2014 Dec 31	Less : Depreciation \(\left[ 22,500\times \frac { 10 }{ 100 } \right] \)	2,250
		20,250
2015 Dec 31	Less : Depreciation \(\left[ 20,250\times \frac { 10 }{ 100 } \right] \)	2,025
	Book Value	18,225
	Sales	16,500
	Loss	1,725

Motor Car Account
Date	Particulars	Amount (Rs)	Date	Particulars	Amount (Rs)
2013 Jan 01	To Bank A/c	25,000	2013 Dec 31	By.Depreciation A/c	2,500
			'''	By Balance c/d	22,500
		25,000			25,000
2014 Jan 01	To Balance b/d	22,500	2014 Dec 31	By Depreciation A/c	2,250
			'''	By Balance c/d	20,250
		22,500			22,500
2015 Jan 01	To Balance b/d	20,250	2015 Dec 31	By Depreciation A/c	2,025
			''	By Bank A/c	16,500
		20,250	'''	By Profit and loss A/c	20,250

Journal Entries
Date	Particulars		Debit Rs	Credit Rs
2001 Apr 01	Plant A/c	Dr	80,000
	To Bank A/c			80,000
	(Being the Plant purchased)
2002 Mar 31	Depreciation A/c	Dr	8,000
	To Plant A/c			8,000
	(Being Depreciation @ 10% provided)
2002 Mar 31	Profit and Loss A/c	Dr	8,000
	To Depreciation A/c			8,000
	(Being the closure of Depreciation Account)
2003 Mar 31	Depreciation A/c	Dr	7,200
	To Plant A/c			7,200
	(Being Depreciation @ 10% provided)
2003 Mar 31	Profit and Loss A/c	Dr	7,200
	To Depreciation A/c			7,200
	(Being the closure of'Depreciation Account)
2004 Mar 31	Depreciation A/c	Dr	6,480
	To Plant A/c			6,480
	(Being Depreciation @ 10% provided)
2004 Mar 31	Profit and Loss A/c	Dr	6,480
	To Depreciation A/c			6,480
	(Being the closure of Depreciation Account)