Journal Proper CHAPTER 10 101
VQ-8._____ A sales of Rs. 4,000 was wrongly debited to purchase account.
Required: Rectification entry of the transaction and interpret the effect of the transaction in financial statement.
Solution,
Entries for Rectification
Date Particulars LF Debit Rs. Credit Rs.
Suspense A/c...........................................................................................................................................Dr. 8,000 4,000
To Purchase A/c 4,000
To Sales A/c
(Being rectifying the sales of Rs. 4,000 was wrongly debited on to purchase account, Now, Rectification)
Effect on Financial Statement
a. Income statement: It reduces profit by Rs. 8,000
b. Balance sheet: Assets side less amount presented by Rs. 8,000 and maintained through suspense account.
After rectification, the amount of suspense account will be zero.
VQ-9. _____ An Accountant notes two types of discrepancies upon verification of documents.
i. Ram's personal account was debited by Rs. 4,000 paid as wages to him.
ii. Rs. 1,000 incurred for transporting an equipment purchased was entered in Carriage inward account
Required: Journal entries to correct the above discrepancies.
Solution,
Journal entries
Date Particulars LF Debit Rs. Credit Rs.
i. Wages A/c................................................................................................................................................Dr. 4,000 4,000
To Ram's A/c 1,000
(Wages paid to Ram wrongly recorded to his account, now rectified) 1,000
ii. Equipment A/c..........................................................................................................................................Dr.
To Carriage inward A/c
(Transporting cost of equipment was entered on carriage inward A/c, now rectified)
VQ-10. ____ Following entries have been made by a trader: LF Debit Rs. Credit Rs.
50,000 50,000
i. Sale of Machinery costing Rs. 50,000 had been credited to sales Account. 10,000
ii. A sum of Rs. 10,000 paid as salaries had been wrongly debited to wages Account. 10,000
Required: Rectifying entries
Solution,
Rectifying Entries
Date Particulars
i. Sales A/c..................................................................................................................................................Dr.
To Machinery A/c
(Sales of machinery has been credited to sale A/c, now rectified)
ii. Salary A/c.................................................................................................................................................Dr.
To Machinery A/c
(Sales of machinery has been credited to sale A/c, now rectified)
VQ-11. ____ The following errors were detected after verification of books of accounts:
i. A computing machine costing Rs. 50,000 purchased from mercantile company was wrongly entered into the purchase book.
ii. Rs. 10,000 paid as office rent was debited to salaries account
Required: Rectifying entries
Solution,
Rectifying Entries
Date Particulars LF Debit Rs. Credit Rs.
i. Computing machine A/c ..........................................................................................................................Dr. 50,000
To Purchase A/c 50,000
(Computing machine purchased wrongly debited to purchase book, now rectified) 10,000
ii. Rent A/c ...................................................................................................................................................Dr.
To Salary A/c 10,000
(Sales rent paid was wrongly debited to salary A/c, now rectified)
VQ-12. ____ The following errors are located before the preparation of Trial Balance: LF Debit Rs. Credit Rs.
20,000 20,000
i. Salary paid to Kumar was debited to his personal account Rs. 20,000
10,000 10,000
ii. Goods sold to Ram for Rs. 10,000 has wrongly been debited Raj's account.
Required: Entries for rectification
Solution,
Entries for Rectification
Date Particulars
a. Salary A/c.................................................................................................................................................Dr.
To Kumar A/c
(Salary paid to Kumar wrongly debited to his account, now rectified)
b. Ram A/c ...................................................................................................................................................Dr.
To Raj A/c
(Goods sold to Ram wrongly posted to Raj account, now rectified)
VQ-13. ____ Give the rectifying entry for the following errors:
i. Sales of Rs. 5,400 to Hari has been recorded as Rs. 4,500 on his account.
ii. Rs. 5,000 paid for the layout of plant was debited to repair account.
102 Accounting-XI
Solution, LF Debit Rs. Credit Rs.
Rectification Entries 900 900
Date Particulars 5,000 5,000
i. Hari A/c ....................................................................................................................................................Dr.
To Suspense A/c
(Being error rectified)
ii. Plant A/c...................................................................................................................................................Dr.
To Repair
(Being errors rectified)
VQ-14. ____ Following errors were detected after preparation of trial balance.
i. Wages account was debited by Rs. 25,000 for the wages paid for the erection of machinery.
ii. Purchased goods from a trader amounting Rs. 50,000 was entered in the purchase day book as Rs. 5,000.
Required: Rectify the accounting errors
Solution,
Rectification Entries
Date Particulars LF Debit Rs. Credit Rs.
i. Machinery A/c ..........................................................................................................................................Dr. 25,000
To Wages A/c 25,000
(Being error rectified)
ii. Purchase A/c............................................................................................................................................Dr. 45,000
To Creditors 45,000
(Being errors rectified)
SHORT ANSWER QUESTIONS
SQ-1 _____ The following information are given to you:
i. Purchase book is under cast by Rs.500. ii. Purchase book is over cast by Rs.1,000.
iii. Sales book is under cast Rs.1,500. iv. Sales book is over cast Rs.2,000.
v. Credit sales Rs.2,500 to Sugarika credited to her account.
vi. Credit purchase of Rs 3,000 from Anjila credited to her account with Rs.300 only.
vii. Depreciation Rs.500 was wrongly posted as Rs.50.
Solution:
i. Purchase book is under cast with Rs 500.
Dr. Purchase A/c Cr.
Rs.
Date Particulars JF Rs. Date Particulars JF
To Rectification of under cast of purchase 500 Cr.
book Rs.
ii. Purchase book is over cast with Rs 1,000 1,000
Dr. Purchase A/c Cr.
Date Rs.
Particulars JF Rs. Date Particulars JF
By Rectification of over cast of 1,500
purchase book
Cr
iii. Sales book is under cast with Rs 1500. Rs.
Dr. Sales A/c Cr.
Date Rs.
Particulars JF Rs. Date Particulars JF
By Rectification of under cast of sales Cr.
book Rs.
iv. Sales book is over cast with Rs 2,000. 2,700
Dr.
Date Sales A/c Cr.
Rs.
Particulars JF Rs. Date Particulars JF
To Rectification of over cast of sales book 2,000
v. Credit sales Rs 2500 to Sugarika credited to her account.
Dr.
Date Sugarika's A/c
Particulars JF Rs. Date Particulars JF
To Rectification due to wrong side 5,000
posting (2500+2500)
vi. Credit purchase of Rs 3,000 from Anjila credited to her ale with Rs 300 only
Dr.
Date Anjila's A/c
Particulars JF Rs. Date Particulars JF
By Rectification of under cast
amount(3,000-300)
vii. Depreciation Rs 500 was wrongly posted as Rs 50.
Dr.
Date Depreciation A/c
Particulars JF Rs. Date Particulars JF
To Rectification of under cast posting 450
(500-50)
Rectification of one side Error(After preparation of Trial Balance)
Journal Proper CHAPTER 10 103
SQ-2._____ The following one sided errors are notified after preparing trial balance.
i. Purchase book is under cast Rs.1,000 ii. Purchase book is over cast Rs.1,500.
iii. Sales book is over cast Rs.2,000. iv. Credit sales Rs.3,000 to Ravi but credited to his account.
v. Purchase from ABC Co. Rs.5,000 but credited to his account with Rs 500 only.
Required: Rectification entries
Solution:
Rectification Entry
Date Particular JF Debit Rs. Credit Rs.
i. Purchase A/c ..........................................................................................................................................Dr. 1,000 1,000
To Suspense A/c 1,500
(Being errors rectified) 2,000 1,500
6,000 2,000
ii. Suspense A/c ..........................................................................................................................................Dr. 4,500
To purchase A/c 15,000 6,000
(Being over cast of purchase book, now rectified)
iii. Sales A/c .................................................................................................................................................Dr. 4,500
To suspense A/c 15,000
(Being sales book over cast, now rectified.)
iv. Ravi A/c ...................................................................................................................................................Dr.
To suspense A/c
(Being wrong side posting, now rectified)
v. Suspense A/c ..........................................................................................................................................Dr.
To ABC co. A/c
(Being under cast posting, now rectified)
Total
SQ-3. ____ The following errors were disclosed in the books before preparing the Trial Balance:
i. Furniture purchased for Rs. 500 was debited to purchase account.
ii. A sum of Rs. 200 paid to Tarun was debited to Barun’s account.
iii. A bills receivable for Rs. 1,000 received from Harish has been omitted to be entered.
iv. Goods worth Rs. 400 taken away by the proprietor were debited to Mr. Charanjit.
v. A Machinery purchased for Rs. 1,250 has been posted to purchases account.
Required: Pass the rectification entries
Solution, Rectification errors
Date Particulars LF Debit (Rs.) Credit (Rs.)
i. Furniture A/c...........................................................................................................................Dr. 500 500
To Purchase A/c 200
(Being furniture purchase wrongly posted in purchase A/c, now rectified) 200
ii. Tarun A/c................................................................................................................................Dr. 1,000
To Barun A/c 400 1,000
(Being paid to Tarun wrongly debited to Barun A/c, now rectified.) 400
iii. Bil receivable A/c....................................................................................................................Dr. 1,250
To Harish 3,350 1,250
(Being bill receivable received from Harish omitted to record, now recorded) 3,350
iv. Drawing A/c ............................................................................................................................Dr.
To Mr. Charanjit
(Being goods withdrawn by the proprietor was wrongly debited to Charanjit a/c, now rectified)
v. Machinery A/c.........................................................................................................................Dr.
To purchase A/c
(Being machine purchase wrongly posted in purchase a/c, now rectified)
Total
SQ-4. ____ Rectify the following errors which were located after the preparation of trial Balance.
i. Wage paid Rs. 1000 but wrongly debited to salaries Account.
ii. Plant purchased for Rs. 5000 and recorded in purchase account.
iii. Cash Received from Ramesh Rs. 2,000 recorded as cash paid to Ramesh.
iv. Credit purchase of Rs. 10,000 from Bijay Recorded as credit sales.
v. Credit sales to Suman of Rs. 4,000 recorded as credit purchase.
Required: Pass the incorrect, correct, rectifying entry.
Solution,
Date Particulars LF Debit (Rs.) Credit (Rs.)
a. i. Incorrect entry
1,000 1,000
Salaries A/c .......................................................................................................................... Dr.
To Cash A/c 1,000 1,000
ii. Correct entry 1,000 1,000
Wages A/c ............................................................................................................................ Dr.
To Cash A/c
iii. Rectifying entry
Wages A/c ............................................................................................................................. Dr.
To Salaries A/c
104 Accounting-XI
b. i. Incorrect entry 5,000 5,000
Purchase A/c ........................................................................................................................ Dr. 5,000 5,000
To Cash 5,000 5,000
2,000 2,000
ii. Correct entry 2,000 2,000
Plant A/c ............................................................................................................................... Dr. 4,000 4,000
To Cash 10,000 10,000
10,000 10,000
iii. Rectifying entry 10,000 20,000
Plant A/c ................................................................................................................................ Dr. 10,000 4,000
To Purchase A/c 4,000 4,000
4,000 4,000
c. i. Incorrect entry 4,000
Ramesh's A/c ....................................................................................................................... Dr. 8,000
To Cash A/c Credit (Rs.)
4,050
ii. Correct Entry 9,950
Cash A/c ............................................................................................................................... Dr. 5,000
To Ramesh’s A/c 19,000
iii. Rectifying Entry Credit (Rs.)
Cash A/c ............................................................................................................................... Dr. 2,500
To Ramesh's A/c 5,000
7,500
d.i. Incorrect entry
Bijay's A/c ............................................................................................................................. Dr.
To Sales A/c
ii. Correct entry
Purchase A/c ........................................................................................................................ Dr.
To Bijay A/c
iii. Rectifying entry
Purchase A/c ........................................................................................................................ Dr.
Sales A/c .............................................................................................................................. Dr.
To Bijay A/c
e. i. Incorrect entry
Purchase A/c ........................................................................................................................ Dr.
To Suman's A/c
ii. Correct entry
Suman's A/c ......................................................................................................................... Dr.
To Sales A/c
iii. Rectifying entry
Suman's A/c ......................................................................................................................... Dr.
To Sales A/c
To Purchase A/c
Mixed error
SQ-5. ____ The following transactions are given to you:
i. An amount of Rs. 4,500 received from Ram was posted to his account Rs.450
ii. A cash sale of Rs.15,500 duly entered in the cash book but posted to sales account as Rs.5,550
iii. Rs. 5,000 worth of machinery purchased on credit was debited to purchase account.
Required: Entries for rectification
Solution,
Rectification of errors
Date Particulars LF Debit (Rs.)
i. Suspense A/c .............................................................................................................................Dr. 4,050
To Ram A/c
(Being received from Ram wrongly shortcast to his account, now rectified.)
ii. Suspense A/c ...................................................................................................................Dr. 9,950
To Sales a/c
(Being sales account was wrongly shortcast, now rectified.)
iii. Machinery A/c...................................................................................................................Dr. 5,000
To Purchase A/c
(Being machinery purchased wrongly recorded in purchase account, now rectified.)
Total 19,000
SQ-6. ____ The following errors were located in books of M/S Mahesh and brothers:
i. Salary paid to Ram was debited to her personal account Rs.2,500
ii. Wages paid for the erection of plant was debited to wage account Rs.5,000
iii. Depreciation of Rs.1,450 has been wrongly posted Rs.1,540 in Machinery account.
Required: Entries for rectification
Solution,
Rectification of entries
Date Particulars LF Debit (Rs.)
i. Salary A/c....................................................................................................................................Dr. 2,500
To Ram A/c 5,000
(Being salary paid wrongly debited to personal account, now rectified.)
ii. Plant A/c ...........................................................................................................................Dr. 7,500
To Wages
(Being wages paid for the erection of plant wrongly debited to wages account, now rectified.)
iii. Being depreciation wrongly overcast in machinery account. Machinery account should be
debited by Rs. 90, to rectify the error.
Total
Journal Proper CHAPTER 10 105
SQ-7. ____ The following errors were identified in books of account of a trader:
i. An amount of Rs.5,000 received from Hare Ram, was posted into Hare Krishna’s account.
ii. An amount of Rs.10,000 paid for carriage on purchase of machinery was debited to wage account.
iii. Goods returned by a debtor of Rs.1,500 was wrongly recorded into purchase account.
Required: Entries for rectification.
Solution,
Rectification of errors
Date Particulars LF Debit (Rs.) Credit (Rs.)
i. Hare Krishna A/c.................................................................................................................................. Dr. 5,000 5,000
To Hare Ram A/c 10,000
(Being received from Hare Ram wrongly credited to Hare Krishna account, now rectified.) 10,000
ii. Machinery A/c............................................................................................................................ Dr.
To Wages 1,500
(Being carriage on purchased of machine was wrongly debited to wages account, now rectified.) 16,500
iii. Sales return A/c......................................................................................................................... Dr. 1,500
To Purchase A/c
(Being goods returned was wrongly recorded into purchases account, now rectified.)
Total 16,500
SQ-8. ____ Rectify the following errors assuming that they were detected after preparing the trial balance.
i. Cash Rs.350 paid to Ram posted as Rs.530
ii. Credit sales to Ravi of Rs.400 was posted to the credit of his account.
iii. Purchases from Sundar and Co. of Rs.400 were passed through sales book as Rs.240.
Solution
Journal Entries
Date Particulars LF Debit Rs. Credit Rs.
i. Suspense A/c .............................................................................................................................Dr. 180 180
To Ram's A/c 800
(Being rectification for debit to Ram's account)
ii. Ravi's A/c ...................................................................................................................................Dr. 800 640
To Suspense A/c
(Being a wrong credit instead of debiting Ram's A/c, now rectified)
iii. Purchase A/c .............................................................................................................................Dr. 400
Sales A/c 240
To Sundar and Co. A/c
(Being the purchase of goods from Sundar and Co. wrongly passed through now rectified.)
SQ-9. ____ Rectify the following errors. LF Debit Rs. Credit Rs.
1,000
i. Wages paid to Subash Rs.1,000 wrongly debited to his personal account. 1,000
ii. Depreciation Rs.500 written off from plant but wrongly credited to furniture account. 500
500
iii. Goods sold to Ramu Rs.2,000 wrongly debited to Nanu.
Solution, 2,000 2,000
Rectification Entry 3,500 3,500
Date Particulars
i. Wages A/c ..................................................................................................................................Dr.
To Subash A/c
(Being errors rectified)
ii. Furniture A/c ............................................................................................................................. Dr.
To Plant A/c
(Being rectification of error of depreciation)
iii. Ramu A/c ...................................................................................................................................Dr.
To Nanu A/c
(Being errors rectified)
Total
SQ-10. ___ Rectify the following errors. LF Debit Rs. Credit Rs.
i. Goods sold to Bipin Rs 10,000 but recorded as credit purchase from him 20,000
ii. Machinery purchase of Rs 20,000 but wrongly posted to purchase account. 10,000
iii. Cash Rs.5,000 received from Nitu but credited to Pitu account. 10,000
Solution, 20,000 20,000
Rectifying Entries
5,000 5,000
Date Particulars
i. Bipin's A/c ................................................................................................................................. Dr. 45,000 45,000
To sales A/c
To purchase A/c
(Being errors rectified as credit sales entered into purchase A/c)
ii. Machinery A/c .......................................................................................................................... Dr.
To purchase A/c
(Being rectification of errors of machinery purchase recorded as goods purchase)
iii. Pitu's A/c ....................................................................................................................................Dr.
To Nitu's A/c
(Being errors rectified.)
Total
106 Accounting-XI
Working Notes: Amount Wrong Entry Amount Rectifying Entry Amount
20,000
S.N. Correct Entry 10,000 Purchase A/c Dr. 10,000 Bipin's A/c Dr 10,000
Bipin's A/c Dr. 10,000 ÷ To Bioin's A/c 10,000 = To Sales A/c 10,000
To Purchase A/c 20,000
i. To Sales A/c 20,000
5,000
ii. Machinery A/c Dr 20,000 ÷ Purchase A/c Dr. 20,000 = Machinery A/c Dr 5,000
To Cash A/c 20,000 To Cash A/c 20,000 To Purchase A/c
Credit Rs.
iii. Cash A/c Dr. 5,000 ÷ Cash A/c Dr. 5,000 = Pitu's A/C Dr 5,000
To Nitu's A/c 5,000 To Pitu's A/c 5,000 To Nitu's A/c 1,000
3,000
SQ-11. ___ Rectify the following errors. LF Debit Rs.
5,000 Credit Rs.
i. Purchase of plant Rs.5000 has been debited to purchase A/c. 16,000
1,000 10,000
ii. Wages of Rs.1000 paid to Ram Bahadur has been debited to his account. 180
3,000
iii. Cash received Rs.1500 from a debtor Hari Karki has been debited to his account. Credit Rs.
250
Solution,
12,500
Journal Entries 500
Date Particulars
i. Plant A/c .....................................................................................................................................Dr.
To Purchase A/c
(Being the entry for purchase of plant debited to purchase account , now rectified)
ii. Wages A/c ..................................................................................................................................Dr.
To Ram Bahadur's A/c
(Being Wages paid to Ram Bahadur wrongly debited to his account, now rectified)
iii. Suspense A/c .............................................................................................................................Dr.
To Hari's A/c
(Being error rectified.)
SQ-12. ___ Give entry for rectifying the following errors.
i. A credit purchase of Rs.8000 from Trade Link has been recorded as credit sales in the book.
ii. General expenses of Rs.10000 has been debited to commission paid account.
iii. Cash paid to Kumar Rs.750 has been debited to his account by Rs.570.
Solution,
Entries for rectification of error
Date Particulars LF Debit Rs.
i. Purchase A/c ......................................................................................................................... Dr. 8,000
Sales A/c................................................................................................................................ Dr. 8,000
To Trade Link's A/c
(Being rectification of credit purchase wrongly entered in the sales book.) 10,000
ii. General expenses A/c ........................................................................................................... Dr.
To Commission account 180
(Being General expenses paid wrongly debited to commission account)
iii. Kumar's A/c............................................................................................................................ Dr.
To Suspense A/c
(For less amount debited to Kumar's account now rectified.)
SQ-13. ___ Give entries for rectifying the following errors :
i. A sum of Rs. 250 paid for wages has been debited to salaries account.
ii. Purchase of computer for Rs. 12,500 from computer shop has been wrongly recorded in purchase account.
iii. Wages paid for installation of machinery was debited to wages account Rs. 500
Solution,
Rectification Entries
Date Particulars LF Debit Rs.
i. Wages A/c........................................................................................................................ Dr. 250
To Salaries
(Being wages paid debited to salaries account, now rectified)
ii. Computer a/c ................................................................................................................... Dr. 12,500
To Purchase
(Being purchase of computer from computer shop recorded in purchase account, now rectified)
iii. Machinery A/c .................................................................................................................. Dr. 500
To Wage A/c
(Being wages paid for installation of machinery debited to wages account, now rectified)
SQ-14. ___ Give entries for the rectification of the following errors pointed out after preparation the trial balance.
i Furniture worth Rs. 11,000 purchased for personal use was debited to purchase a/c.
ii. Rs.300 paid for repair to building was charged to building Account.
iii. Purchase book is overcast by Rs. 3,000.
Journal Proper CHAPTER 10 107
Solution, Rectification Entries LF Debit Rs. Credit Rs.
Date 11,000
Particulars 11,000
Drawing a/c.................................................................................................................................Dr.
300
To Purchase 300
(Being furniture purchased for personal use wrongly debited to purchase account, now rectified)
Repair and maintenance a/c ......................................................................................................Dr. 3,000 3,000
To Building
(Being repair to building wrongly charged to building account, now rectified)
Suspense a/c ..............................................................................................................................Dr.
To Purchase
(Being rectification of overcasting in purchase book )
SQ-15. ___ Rectify the following errors located after the preparation of the trial balance.
i. Plant purchased for Rs. 12,520 was debited to purchase account..
ii. Rs.120 paid to Raju but debited to Raju account Rs. 102.
iii. Purchase of motor car from Syakar Co. for Rs. 10,00,000 on cash was credited to Syakar Co. account.
Solution,
Rectification Entries
Date Particulars LF Debit Rs. Credit Rs.
12,520
i. Plant a/c ......................................................................................................................................Dr. 12,520 18
To Purchase
(Being plant purchased wrongly debited to purchase account, now rectified) 10,00,000
ii. Raju's a/c ....................................................................................................................................Dr. 18
To Suspense
(Being rectification of undercasting in Raju's account)
iii. Syakar Co.'s a/c..........................................................................................................................Dr. 10,00,000
To Cash
(Being purchase of motor car from Syakar Co. on cash credited to its account, now rectified)
SQ-16. ___ Rectify the following errors disclosed after the preparation of the trial balance. LF Debit Rs. Credit Rs.
300
i. Discount allowed Rs.300 was not posted to discount account... 300
ii. Credit sales of Rs.130 to Jina, was recorded as Rs.440. 310
310
iii. Goods of Rs. 1,700 sold to Dipa but recorded in purchase book.
3,400 1,700
Solution, 1,700
Rectification Entries
Date Particulars
i. Discount a/c ...............................................................................................................................Dr.
To Suspense A/c
(Being omission of posting discount allowed, now rectified)
ii. Suspense a/c ..............................................................................................................................Dr.
To Jina A/c
(Being credit sales to Jina wrongly recorded, now rectified)
iii. Dipa's a/c ....................................................................................................................................Dr.
To Sales A/c
To Purchase A/c
(Being goods sold to Dipa wrongly recorded in purchase book, now rectified)
SQ-17. ___ Pass the journal entry to rectify the following errors located before the preparation of the trial balance.
i. Goods sold to Mohan for Rs. 1,900 were recorded in purchase book. LF Debit Rs. Credit Rs.
ii. Purchase return book has been under cast with Rs. 220. 3,800
iii. Rs. 400 spent on wages has been wrongly debited to commission account. 1,900
Solution, 1,900
Rectification Entries
Date Particulars
i. Mohan's a/c.................................................................................................................................Dr.
To Sales
To Purchase
(Being goods sold to Mohan wrongly recorded in purchase book, now rectified)
ii. Dr. Purchase Return Account Cr.
Date
Particulars JF Amount Rs. Date Particulars JF Amount Rs.
ii. By Rectification of undercasting in
purchase return book ....................................................2...2..0..................................................
iii. Rectification entries LF Debit Rs. Credit Rs.
400
Date Particulars 400
iii. Wages a/c...................................................................................................................................Dr.
To Commission
(Being wages spent wrongly debited to commission account, now rectified)
108 Accounting-XI
SQ-18. ___ Following errors were detected before the preparation of Trial Balance:
i. Salary of Rs.10,000 paid to Mr. Khanal has been debited to his personal account.
ii. Purchase of computer print paper of Rs.3,000 has been recorded through the purchase account
iii. A purchase of goods of Rs.5,000 from Sohan has been wrongly recorded as sale to Sagun.
Required: Entries for rectification
Solution,
Rectification entries
Date Particulars LF Debit (Rs.) Credit (Rs.)
i. Salary A/c .........................................................................................................................................Dr. 10,000 10,000
To Mr. Khanal A/c 3,000
(Being salary paid wrongly recorded in personal account, now rectified it.)
5,000
ii. Computer printer paper A/c................................................................................................... Dr. 3,000 5,000
To Purchase A/c 23,000
(Being purchased of computer paper wrongly recorded in purchase a/c, now rectified it) Credit (Rs.)
5,000
iii. Purchase A/c......................................................................................................................... Dr. 5,000 5,000
Sales A/c ............................................................................................................................... Dr. 5,000 1,000
To Sohan A/c 4,000
To Sagun A/c 15,000
(Being purchase of goods from Sohan wrongly recorded sales to Sagun, now rectified it.)
Total 23,000
SQ-19. ___ Following errors were detected before the preparation of Trial Balance:
i. A credit sale of Rs.5,000 to Ram has been wrongly entered through the purchase book.
ii. Goods of the value of Rs.1,000 were returned to Shyam and was not recorded at all.
iii. Rs.4,000 worth of furniture purchased for office use was debited to purchase account.
Required: Entries for rectification
Solution,
Rectification entries
Date Particulars LF Debit (Rs.)
i. Ram A/c............................................................................................................................................. Dr. 10,000
To Sales A/c
To Purchase A/c 1,000
(Being goods sold to Ram wrongly entered through purchase book, now rectified it.) 4,000
ii. Shyam A/c...............................................................................................................................Dr. 15,000
To Purchase return A/c
(Being goods return to Shyam was not recorded, now recorded it.)
iii. Furniture A/c............................................................................................................................Dr.
To Purchase A/c
(Being furniture purchased for office use wrongly recorded in purchase account, now rectified it.)
Total
LONG ANSWER QUESTIONS
LQ- 1. ____ The following errors were located before preparing a Trial Balance:
i. Amount received from Mr. Barun Rs. 1,000 is debited to his account in the ledger.
ii. Purchase Book is overcast by Rs. 500.
iii. Rs. 2,500 paid for furniture purchased charged to purchase account.
iv. Goods returned by a customer are valued at Rs. 485 but in the returns inward book the amount is wrongly entered as Rs. 395.
v. A sum of Rs. 3,000 paid by way of rent has been debited to landlord’s personal account.
Required: Pass the rectification entries
Solution,
Rectification entry
i. My Barun account wrongly debited instead of credit to rectify this error his account should by credited as by Rs. 2,000.
ii. Purchase book wrongly over cast, to rectify this error purchase account should be credited by Rs. 500.
Date Particulars LF Debit (Rs.) Credit (Rs.)
iii. Furniture A/c.....................................................................................................................Dr. 2,500
2,500
To Purchase A/c
(Being furniture purchased wrongly recorded in purchase A/c, now rectified) 90
iv. Return inward A/c.............................................................................................................Dr. 90
To Debtor A/c 3,000 3,000
(Being good return inward account wrongly undercast, now rectified)
v. Rent A/c............................................................................................................................Dr. 5,590 5,590
To Land lord A/c
(Being rent paid wrongly recorded in landlord personal a/c, now rectified)
Total
Journal Proper CHAPTER 10 109
LQ- 2. ____ The following errors were disclosed in the books of Mr. Pradeep Gurung after preparing the trial balance:
i. The total of sales book has been overcast by Rs. 2,000.
ii. In purchase book, the total of one page Rs. 10,730 was carried forward to next page as Rs. 10,712.
iii. A sale return from Mr. Birendra Rs. 400 was entered in sales book.
iv. Cash received from Ramesh Dhital, Rs. 1,000 was posted to the account of Kamesh Dhital.
v. Purchase return Book has been undercast by Rs. 200
vi. Rs. 400 for repairs to machinery has been taken to Machinery account.
Required: Pass the rectification entries
Solution,
Rectification entry
Date Particulars LF Debit (Rs.) Credit (Rs.)
i. Sales A/c ................................................................................................................................. Dr. 2,000
To Suspense A/c 2,000
(Being sales book wrongly over recorded now rectified) 18
ii. Purchase A/c........................................................................................................................... Dr. 18
To Suspense A/c 400
(Being total of purchase book wrongly under recorded, now ratified) 400
iii. Sales Return A/c ..................................................................................................................... Dr. 800
Sales A/c ................................................................................................................................. Dr.
To Birendra 1,000 1,000
(Being sales returned from Birendra wrongly recorded in Sales account, now rectified)
200
iv. Kamesh Dhital 200
To Ramesh Dhital
400
(Being cash received from Ramesh Dhital wrongly posted to Kamesh Dhital account, now rectified.) 400
v. Suspense A/c .......................................................................................................................... Dr. 4,418 4,418
To Purchase return A/c
(Being purchase return book wrongly undercast now rectified)
vi. Repair A/c................................................................................................................................ Dr.
To Machinery A/c
(Being repair of machine wrongly recorded in machinery, now rectified)
Total
LQ-3._____ The following errors were located before the preparation of a trial balance.
i. Wages paid were wrongly debited to furniture purchased account Rs.1,000.
ii. Amount received from Krishna for settlement was debited to his account as paid Rs.5,000.
iii. Commission allowed was credited to as commission earned Rs.1,500.
iv. Goods purchased from Das Store for Rs.1,800 has been wrongly entered in the sales book.
v. A sum of Rs.750 paid for wages has been wrongly debited to salaries account.
vi. Purchase of furniture for Rs.2,000 from Furniture Shop has been wrongly recorded in purchase account.
Required: Entries for rectification of errors
Solution,
Rectification Entries
Date Particulars LF Debit Rs. Credit Rs.
1,000
i. Wages a/c.......................................................................................................................................Dr. 1,000 10,000
To Furniture 3,000
(Being wages paid wrongly debited to furniture purchase account, now rectified.)
3,600
ii. Cash a/c........................................................................................................................................Dr. 10,000 750
To Krishna's a/c
(Being amount received from Krishna wrongly debited to his account now rectified.) 2,000
iii. Commission a/c ............................................................................................................................Dr. 3,000
To cash a/c
(Being commission allowed was wrongly credited to as commission earned, now rectified.)
iv. Purchase a/c............................................................................................................................................Dr. 1,800
Sales a/c ..................................................................................................................................................Dr. 1,800
To Das Store
(Being goods purchased from Das Store wrongly entered in sales book, now rectified.)
v. Wages a/c................................................................................................................................................Dr. 750
To Salaries
(Being wages paid wrongly debited to salaries account, now rectified.)
vi. Furniture...................................................................................................................................................Dr. 2,000
To Purchase
(Being purchase of furniture from furniture shop recorded in purchase a/c, now rectified.)
LQ-4._____ Give the rectifying entries for the following wrong entries.
i. Machinery and plant purchased from ABC trading was wrongly considered as cash purchase Rs.50,000.
ii. Salary paid to Karki was debited to his personal account Rs.1,500.
iii. Wages paid for the installation of plant was debited to wages account Rs.2,500.
iv. Purchase of Rs.3,000 from Mr. A was recorded as sale to him.
v. Goods sold to Sohan for Rs.5,000 has wrongly been debited to Mohan's account.
110 Accounting-XI
vi. Amount of Rs.3,000 drawn by the proprietor for his personal use has been debited to general expenses account.
vii. Cash paid to Ram Rs.3,000 has been debited to his account by Rs.300 only.
viii. A sale of goods worth Rs.675 to Rekha was posted as Rs.576 in account.
Required: Entries for rectification
Solution,
Rectification entries
Date Particulars LF Debit Rs. Credit Rs.
i. Cash a/c...................................................................................................................................................Dr. 50,000 50,000
To ABC Trading
(Being credit purchase of machinery and plant considered as cash purchase, now rectified)
ii. Salary a/c .................................................................................................................................................Dr. 1,500
To Karki 1,500
(Being salary paid to Karki debited to his personal account, now rectified)
iii. Plant.........................................................................................................................................................Dr. 2,500 2,500
To Wages
(Being purchase of furniture from Furniture Shop recorded in purchase a/c, now rectified)
iv. Purchase a/c............................................................................................................................................Dr. 3,000
Sales a/c ..................................................................................................................................................Dr. 3,000
To Mr. A 6,000
(Being goods purchased from Mr. A wrongly recorded as sales to him, now rectified)
v. Sohan's ....................................................................................................................................................Dr. 5,000 5,000
To Mohan
Being goods sold to Sohan wrongly debited to Mohan's account, now rectified.)
vi. Drawing a/c..............................................................................................................................................Dr. 3,000
To General expenses 3,000
(Being rectification of wrong debit of general expenses a/c in place of drawing a/c)
vii. Dr. Ram's Account Cr.
Date Particulars JF Amount Rs. Date Particulars JF Amount Rs.
vii.
To Rectification undercasting 2,700
in debit side (3,000-300).................................................................................................................................................................................
viii. Dr. Rekha's Account Cr.
Date Particulars JF Amount Rs. Date Particulars JF Amount Rs.
viii.
To Rectification undercasting 99
in debit side (675-576)....................................................................................................................................................................................
LQ-5._____ The following errors were located before the preparation of Trial Balance:
i. Salary paid to Usha was debited to her personal account Rs.700.
ii. Wages paid for the erection of plant was debited to wages account Rs.2,000.
iii. An amount of Rs.550 received from Ram was posted to his account as Rs.5,500.
iv. A cash sale of Rs.12,350 duly entered in the cash book but posted to sales account as Rs. 2,350.
v. Rs.3,000 worth of machinery purchased on credit was debited to purchase account.
vi. Depreciation of Rs.450 has been wrongly posted as Rs.540 in machinery account.
Required: Entries for rectification
Solution,
Rectification Entries
Date Particulars LF Debit Rs. Credit Rs.
i. Salary a/c....................................................................................................................................Dr. 700 700
To Usha
(Being salary paid to Usha wrongly debited to her account, now rectified.) 2,000
ii. Plant............................................................................................................................................Dr. 2,000 4,950
To Wages 10,000
(Being wages paid for erection of plant debited to wages account, now rectified) 3,000
iii. Ram's A/c....................................................................................................................................Dr. 4,950
To Suspense A/c
(Being wrong posting made to Ram's account, rectified)
iv. Suspense A/c..............................................................................................................................Dr. 10,000
To Sales A/c
(Being wrong posting made to sales account, rectified)
v. Machine A/c ................................................................................................................................Dr. 3,000
To Purchase A/c
(Being machinery purchased wrongly debited to purchase account, now rectified)
vi. Dr. Machinery Account Cr.
Date Particulars JF Amount Rs. Date Particulars JF Amount Rs.
vi.
To Rectification overcast of 90
depreciation (540-450)....................................................................................................................................................................................
LQ-6._____ The following errors were located before the preparation of trial balance:
i. Goods sold to Mr. Sharma for Rs.10,000 has been written as Rs.1,000
ii. A credit sale of Rs.3,000 to Mr. Gurung has been wrongly entered through purchase Account.
Journal Proper CHAPTER 10 111
iii. Carriage on machinery Rs.1,000 had been debited to Carriage Account. LF Debit Rs. Credit Rs.
9,000 9,000
iv. Sale of old machine amounting Rs.60,000 has been credited to sales account. 6,000 3,000
3,000
v. Purchased goods from Govinda for Rs.3,000 passed wrongly through the sales book 1,000 1,000
60,000 60,000
vi. Goods worth Rs.500 distributed as free sample were not recorded at all. 3,000 6,000
3,000 500
Required: Rectification entries
500 Credit Rs.
Solution, 9,000
1,000
Rectification Entries 1,000
10,000
Date Particulars 3,000
i. Mr. Sharma's a/c.........................................................................................................................Dr. 5,000
To Sales 500
(Being goods sold to Mr. Sharma Rs.10,000 wrongly entered as Rs.1,000, now rectified)
ii. Mr. Gurung's a/c .........................................................................................................................Dr.
To Sales
To Purchase
(Being goods sold to Mr. Gurung wrongly entered through purchase account, now rectified)
iii. Machinery a/c .............................................................................................................................Dr.
To Carriage
(Being carriage on machinery wrongly debited to carriage account, now rectified)
iv. Sales A/c.....................................................................................................................................Dr.
To Machinery
(Being old machine sold credited to sales account, now rectified)
vi. Purchase A/c ..............................................................................................................................Dr.
Sales A/c.....................................................................................................................................Dr.
To Govinda's A/c
(Being goods purchased wrongly passed through the sales book, now rectified)
vii. Advertisement A/c.......................................................................................................................Dr.
To Purchase A/c
(Being goods distributed as free sample not recorded, now rectified)
LQ-7._____ Following errors are located before the preparation of trial balance:
i. Sold goods to Sharma worth Rs.10,000 wrongly entered into Barma's Account by Rs.1,000 only.
ii. Wages of Rs.1,000 paid for repair of building was charged to building account.
iii. A purchase of goods worth Rs.5,000 on credit from Lama was wrongly entered into sales Account.
iv. An amount of Rs.3,000 received from Ram Krishna, was posted into Krishna Ram’s account.
v. An amount of Rs.5,000 paid for carriage on purchase of machinery was debited to wages accounted.
vi. Goods returned of Rs.500 was wrongly recorded into purchase account.
Required: Entries for rectification
Solution,
Rectification Entries
Date Particulars LF Debit Rs.
i. Sharma's a/c...............................................................................................................................Dr. 10,000
To Sales A/c
To Barma A/c
(Being goods sold to Mr. Sharma Rs.10,000 wrongly entered as Rs.1,000, now rectified)
ii. Repair and maintenance a/c ......................................................................................................Dr. 1,000
To Building
(Being repair of building wrongly charged to building account, now rectified)
iii. Purchase a/c...............................................................................................................................Dr. 5,000
Sales a/c .....................................................................................................................................Dr. 5,000
To Lama
(Being goods purchased from Lama wrongly entered in sale book, now rectified.)
iv. Krishna Ram’s a/c.......................................................................................................................Dr. 3,000
To Ram Krishna’s a/c
(Being cash received from Ram Krishna wrongly recorded in Krishna Ram’s account, now rectified)
v. Machinery a/c .............................................................................................................................Dr. 5,000
To Wages a/c
(Being paid for carriage on purchase of machinery was debited to wages account, now rectified)
vi. Sales return a/c................................................................................................................ Dr. 500
To Purchase a/c
(Being goods returned wrongly recorded into purchase account, now rectified)
LQ-8._____ Following errors were located before the preparation of Trial Balance:
i. House rent paid Rs. 15,000 was wrongly debited to commission paid account.
ii. Wages paid to Hari Rs. 3,000 was entered into machinery account.
iii. Goods valued Rs. 30,000 sold to Anjana omitted to record in her account.
iv. Goods sold to Ananta Traders for Rs. 50,000 wrongly entered in purchase book.
v. Wages paid for the installation of machine entered in wages account Rs. 10,000.
vi. Rs. 15,000 paid for house rent omitted to posted in cash account.
Required: Entries for rectification
112 Accounting-XI
Solution, Rectification errors
Date Particulars LF Debit (Rs.) Credit (Rs.)
i. Rent A/c................................................................................................................................................Dr 15,000
To Commission A/c 15,000
(Being rent paid to house owner wrongly debited to commission account, now rectified)
ii. Wages A/c ................................................................................................................................ Dr. 3,000
To Machinery A/c 3,000
(Being wrongly entered in machinery account instate of wages account, now rectified)
iii. Anjana A/c ................................................................................................................................ Dr. 30,000
To Sales A/c 30,000
(Being good sold to Anjana now recorded)
iv. Ananta Traders a/c...................................................................................................................Dr. 1,00,000
To Purchase a/c 50,000
To Sales a/c 50,000
(Being goods sold for installation of machinery entered in wage account now rectified)
v. Machinery a/c ..........................................................................................................................Dr. 10,000
To Wages a/c 10,000
(Being wages paid for installation of machinery entered in wages account, now rectified)
vi. Rent paid to house owner omitted to post in cash account, for rectification of the error Rs. 15000 should be credited in cash account.
LQ-9._____ The following errors were disclosed in the books of Ravi before preparing the Trial Balance:
i. A purchase of goods from Madan amounting to Rs. 300 has been wrongly passed through the sales book.
ii. A credit sales of goods of Rs. 240 to Pradeep has been wrongly passed through the purchase book.
iii. Rs. 600 salary paid to Ramesh stands wrongly debited to his personal account.
iv. Rs. 200 received from Shyam & Co. has been wrongly entered as from Sam & Co.
Required: Pass the rectification entries
Solution,
Rectification errors
Date Particulars LF Debit (Rs.) Credit (Rs.)
i. Purchase A/c...................................................................................................................................Dr. 300 600
Sales A/c .........................................................................................................................................Dr. 300 240
To Madan A/c 480 240
(Being purchase from Madan wrongly passed through the sales book, now rectified) 600
ii. Pradeep A/c.....................................................................................................................................Dr. 600 200
To Sales A/c 200
To Purchase A/c 18,800 18,800
(Being sold of good to Pradeep wrongly passed through the purchase book, now rectified)
iii. Salary A/c ........................................................................................................................................Dr.
To Ramesh
(Being salary paid wrongly debited to personal account, now rectified)
iv. Sam & Co. .......................................................................................................................................Dr.
To Shyam Co.
(Being cash received from Shyam & Co has been wrongly entered as from Sam & Co, now rectified)
Total
LQ-10.____ The following errors were detected in accounts of Gyan Bahadur Ghaley for the year ended 31st December, 2016
before preparing the Trial Balance:
i. Goods purchased from Harish for Rs. 2,000 were entered in the sales book.
ii. A cheque for Rs. 600 received from Jagdeep was dishonoured and was debited to Mandeep’s account.
iii. Rs. 1,000 paid to Tanka Nath for salary was debited to his personal account.
iv. Goods valued at Rs. 400 returned by Kamal was included in stock but no entry was made in the books.
v. Sale of old furniture for Rs. 200 was entered in the sales book.
Required: Pass the rectification entries
Solution, Rectification entries
Date Particulars LF Debit (Rs.) Credit (Rs.)
i. Purchase A/c .........................................................................................................................Dr. 2,000
Sales A/c ...............................................................................................................................Dr. 2,000
To Harish A/c 4,000
(Being goods purchased from Harish were entered in sales book, now rectified)
ii. Jagdeep A/c...........................................................................................................................Dr. 600
To Mandeep A/c 600
(Being Jagdeep cheque dishonored was wrongly debited to Mandeep's account, now rectified.)
iii. Salary A/c ..............................................................................................................................Dr. 1,000 1,000
To Tanka Nath A/c
(Being salary paid to Tanka Nath wrongly debited to personal account, now rectified) 400
iv. Sales return A/c.....................................................................................................................Dr. 400
To Kamal A/c
(Being goods returned by Kamal but no entry was made in the books, now entry has been made in books.) 200
v. Sales A/c ...............................................................................................................................Dr. 200
To Furniture A/c
(Being sold of furniture wrongly recorded in sales book, now rectified.) 6,200 6,200
Total
VERY SHORT ANSWER QUESTIONS
VQ-1. ____ A Ltd. purchased a plant for Rs 1,10,000, and Rs 5,000 paid for transportation. Company also paid Rs 5,000 for
installation charge. The plant has useful life of 10 years and an estimated salvage value of Rs 10,000. Company uses the
straight-line depreciation method.
Required: Amount of annual depreciation.
Solution,
110‚000 + 5‚000 + 5‚000 – 10‚000
Annual Deprecation = 10 = Rs. 11,000
VQ-2. ____ B Ltd. purchased a plant for Rs. 400,000. The plant has 5 years of useful life and expected salvage value at the
end of useful life is Rs. 50,000. Company decided to use straight line method of depreciation.
Required: Amount of annual depreciation.
Solution,
Annual Deprecation = 400‚000 – 50‚000 = Rs. 70,000
5
VQ-3. ____ C Ltd. purchased a machinery on 1st January 2016 for Rs. 5,00,000. The rate of depreciation was @15% p.a. on
Straight line method.
Required: Machinery account for 1st year
Solution,
Machinery account
Dr. Under straight line method Cr.
Date Particulars Amount (Rs.) Date Particulars Amount (Rs.)
2016-1-1 To Bank A/c......................................................5..,.0..0...,.0..0..0.....2..0..1..6..-..1..2..-.3..1.............B..y...D...e..p..r.e..c..i.a..t.i.o..n...A../.c..........................................................7..5..,.0..0..0.......................................................
2017-1-1 " By Balance c/d..............................................................4..2..5..,.0..0..0.......................................................
To Balance b/d 5,00,000 5,00,000
425,000
VQ-4. ____ D Ltd purchased a vehicle for Rs. 700,000 on 1st Baishakh 2071. Show the vehicle account for first two years
assuming that the rate of depreciation was @20% p.a. on Diminishing Balance Method.
Solution,
Vehicle account
Dr. Diminishing Balance Method Cr.
Date Particulars Amount (Rs.) Date Particulars Amount (Rs.)
071-1-1
To Bank A/c.......................................................7..0...0..,.0..0..0.....0..7..1..-..1..2..-.3..1...............B..y...d..e..p..r.e...c.i.a..t.i.o..n...A.../.c........................................................1..4..0..,.0..0..0.......................................................
072-1-1 " By balance c/d ..............................................................5..6..0..,.0..0..0.......................................................
700,000 700,000
2073-1-1 To Balance b/d..................................................5..6...0..,.0..0..0.....0..7..2..-..1..2..-.3..1...............B..y...D...e..p..r.e..c..i.a..t.i.o..n...A../.c........................................................1..1..2..,.0..0..0.......................................................
560,000 By Balance c/d..............................................................4..4..8..,.0..0..0.......................................................
560,000
To Balance b/d 448,000
VQ-5. ____ In the book of E Ltd. Machinery A/c showed a debit balance of Rs. 90,000 as on 1st January 2016. Original cost of the
Machinery was Rs. 100,000 and expected life of 10 years. On 31st December 2016, the Machinery was sold for Rs. 85,000.
Required: Machinery a/c for the year 2016
Solution,
100‚000
Annual Deprecation = 10 = 10,000
Machinery account
Dr. Under straight line method Cr.
Date Particulars Amount (Rs.) Date Particulars Amount (Rs.)
2016-1-1 To Balance b/d ...................................................9..0...,.0..0..0.....2..0..1..6..-..1..2..-.3..1.............B..y...D...e..p..r.e..c..i.a..t.i.o..n...A../.c..........................................................1..0..,.0..0..0.......................................................
2016-12-31 To Profit on sales ..................................................5..,.0..0..0....."..............................B..y...B...a..n..k...(..s..a..le..s..)...............................................................8..5..,.0..0..0.......................................................
95,000 95,000
SHORT ANSWER QUESTIONS
Straight Line Method
SQ-1. _____ B. Ltd. purchased a plant on 1st January 2013 for Rs. 475,000 and paid Rs. 15,000 for freight and Rs. 10,000 for
installation of plant. The estimated useful life of plant is 10 years and at the end of life its scrap value would be zero. B. Ltd.
closed its book of account at 31st December every year. It uses straight line method of deprecation.
Required: a. Annual deprecation amount b. Rate of depreciation
c. Plant account for 2013 to 2016
114 Accounting-XI
Solution,
Given: Original cost (O.C) = 475,000 + 15,000 + 10,000 = Rs. 500,000
Estimated useful life (N) = 10 years
Estimated Scrape value (S.C) = 0
a. Annual depreciation = 500000 – 0 = Rs. 50,000
10
b. Rate of depreciation = Annual depreciation × 100% = 50000 × 100% = 10%
original cost 500000
c. Dr. Plant Account under SLM Cr.
Date Particulars Amount (Rs.) Date Particulars Amount (Rs.)
13-1-1 To bank A/c 500,000 13-12-31 By depreciation A/c 50,000
14-1-1 (475,000 + 15,000 + 10,000) " By balance c/d 450,000
15-1-1 To balance b/d By depreciation A/c 500,000
16-1-1 To balance b/d 500,000 By balance c/d 50,000
17-1-1 To balance b/d By depreciation A/c 400,000
To balance 450,000 14-12-31 By balance c/d 450,000
" By depreciation A/c 50,000
450,000 By balance c/d 350,000
400,000 15-12-31 400,000
" 50,000
400,000 300,000
350,000 16-12-31 350,000
"
350,000
300,000
SQ-2. _____ C. Ltd. purchased a Truck on 1st January 2013 for Rs. 205,000 and paid Rs. 10,000 for freight and Rs. 5,000 for custom
duty. C. Ltd. closed its book of account at 31st December every year. It uses straight line method of deprecation @ 10% p.a.
Required: a. Truck account for 1st four years b. Depreciation account for 1st four years
Solution,
Given: Original cost (O.C) = 205,000 + 10,000 + 5,000 = Rs. 220,000
Depreciation rate (R) = 10%
Annual depreciation = Original cost × depreciation rate = 220,000 × 10% = Rs. 22,000
Truck Account
Dr. Under straight line method Cr.
Date Particulars Amount (Rs.) Date Particulars Amount (Rs.)
2013-1-1 To bank A/c 2013-12-31 By depreciation A/c 22,000
(205,000 + 10,000 + 5,000) 220,000 " By balance c/d 198,000
22,000 220,000
2014-1-1 To balance b/d 198,000 2014-12-31 By depreciation A/c 22,000
By balance c/d 176,000
22,00,000 220,000
2015-1-1 To balance b/d 176,000 2015-12-31 By depreciation A/c 22,000
By balance c/d 154,000
176,000 176,000
2016-1-1 To balance b/d 154,000 2016-12-31 By depreciation A/c 22,000
" By balance c/d 132,000
2017-1-1 154,000 154,000
To balance b/d 132,000
Dr. Depreciation Account Cr.
Date Particulars Amount (Rs.) Date Particulars Amount (Rs.)
2013-12-31 To truck A/c 22,000 2013-12-31 By profit & loss A/c 22,000
2014-12-31 To truck A/c 22,000
2015-12-31 To truck A/c 22,000 2014-12-31 By profits loss A/c 22,000
2016-12-31 To truck A/c 22,000 2015-12-31 By profit & loss A/c 22,000
22,000 2016-12-31 By profit & loss A/c
SQ-3._____ A. Ltd. Purchase a machine on 1st Baishak 2071 for Rs 280,000. The company paid Rs. 15,000 for freight and
custom duty, Rs 10,000 for installation charge. The useful life of machine is estimated 5 years and an estimated scrap value
of Rs 5,000. The account of the company assumed to be closed at end of Chaitra every year. Company uses the straight-
line depreciation method.
Required: a. Amount of annual depreciation
b. Journal entries to record the transactions for 2071 to 2073
c. Machine account for 2071 to 2073
Solution,
Calculation of annual depreciation
Original cost (O.C) = Purchase price + Freight & custom duty + Installation charge
= 280,000 + 15,000 + 10,000 = Rs. 305,000
Estimated scrape value = Rs. 5,000
Estimated useful life (N) = 5 years
305‚000 – 5‚000
Annual depreciation = 5 = Rs. 60,000
Accounting for Fixed Assets CHAPTER 11 115
Date Journal Entries in the books of... LF Debit (Rs.) Credit (Rs.)
2071 1.1 305,000
2071-12-31 Particulars 305,000
2071-12-31 Machinery A/c..................................................................................................................... Dr.
2072-12-31 60,000 60,000
2072-12-31 To bank A/c
2073-12-31 (Being machinery purchased) 60,000 60,000
2073-12-31 Depreciation A/c ................................................................................................................. Dr.
60,000
Dr. To machinery A/c
Date (Being machinery purchased.) 60,000
071-1-1 Profit & loss A/c .................................................................................................................. Dr.
60,000 60,000
072-1-1 To depreciation A/c
(Being depreciation amount transferred to P & L A/c) 60,000 60,000
073-1-1 Depreciation A/c ................................................................................................................. Dr.
60,000 60,000
2074-1-1 To machinery A/c
(Being depreciation charged)
Profit & loss A/c .................................................................................................................. Dr.
To depreciation A/c
(Being depreciation amount transferred to P & LA/C)
Depreciation A/c ................................................................................................................. Dr.
To machinery A/c
(Being depreciation charged)
Profit & loss A/c .................................................................................................................. Dr.
To depreciation A/c
(Being depreciation amount transferred to P & L A/c
Machinery account
Under straight line method Cr.
Particulars Amount (Rs.) Date Particulars Amount (Rs.)
To bank A/c 60,000
(280,000 + 15,000 + 10,000) 305,000 071-12-31 By depreciation A/c 245,000
To balance b/d " By balance c/d 305,000
60,000
To balance b/d 305,000 185,000
239,000
To balance b/d 245,000 072-12-31 By depreciation A/c 60,000
125,000
By balance c/d 185,000
245,000
185,000 073-12-31 By depreciation P/c
" By balance c/d
185,000
125,000
SQ-4. ____ Transactions relating to machinery are given below:
Date Transactions
1-1-2065 Purchased machinery for Rs. 120,000
1-7-2067 Sold the machinery for Rs. 100,000
31-12-2067 Purchased new machinery for Rs. 120,000
Assume that the rate of depreciation is @ 15% on straight line method and accounts are closed on 31st Chaitra of each year.
Required: Machinery account for the first 3 years from 2065.
Solution,
Dr. Machinery Account under Straight Line Method Cr.
Date Particulars JF Amount (Rs.) Date Particulars JF Amount (Rs.)
1-1-2065 To Bank A/c 120,000 31.12-2065 By Depreciation A/c 18,000
31.12.2065 By Balance c/d 102,000
120,000 120,000
1-1-2066 To Balance b/d 102,000 31-12-2066 By Depreciation A/c 18,000
31-12-2066 By Balance c/d 84,000
102,000 102,000
1-1-2067 To Balance b/d 84,000 1-7-2067 By Depreciation A/c 9,000
1-7-2067 To P/L A/c (Gain) 25,000 1-7-2067 By Bank A/c 100,000
31-12-2067 To Bank A/c 120,000 31-12-2067 By Balance c/d 1,20,000
2,29,000 2,29,000
1-1-2068 To Balance b/d 1,20,000
Working notes: Calculation of profit or loss on sale of machinery Rs. 1,20,000
Purchase of machine on 1-1-2065 Rs. 45,000
Less: Deprecation for 2065 ............................................................................................................................................Rs. 18,000 Rs. 75,000
Less: Deprecation for 2066 ............................................................................................................................................Rs. 18,000 Rs. 1,00,000
Less: Deprecation for 2067 (for 6 months)....................................................................................................................... Rs. 9,000 Rs. 25,000
Book value on 1 -7-2067....................................................................................................................................................................
Sales value ........................................................................................................................................................................................
Gain on sale of machine
116 Accounting-XI
SQ-5. ____ (Addition of new assets) F Ltd. purchased a plant on 1st January 2013 for Rs. 450,000. It has also added another
plant on 1st July 2014 for Rs. 200,000 for expansion purpose. Depreciation is to be charged @ 10% p.a. The company
closed the account at the end of December every year.
Required: Plant account for first three years under straight line method
Solution,
Given
a. Original cost of 1st plant = Rs. 450,000
Annual depreciation on 1st profit = 450,000 × 10% = Rs. 45,000
b. Original cost of 2nd plant = Rs. 200,000
Annual depreciation on 2nd plant = 200,000 × 10% = Rs. 20,000
Plant Account
Dr. Under straight line method Cr.
Date Particulars Amount (Rs.) Date Particulars Amount (Rs.)
2013-1-1 To bank A/c 450,000 2013-12-31 By depreciation A/c 45,000
By balance c/d 405,000
2014-1-1 To balance b/d 450,000 By depreciation A/c (45,000 + 20,000 × 6 ) 450,000
2014-7-1 To bank A/c 405,000 2014-12-11 12 55,000
200,000
" By balance c/d 550,000
2015-1-1 To balance b/d 605,000 By depreciation A/c (45,000 + 20,000) 605,000
550,000 2015-12-31 65,000
" By balance c/d 485,000
550,000 550,000
2016-1-1 To balance b/d 485,000
SQ-6._____ (Sales of asset on book value), G. Ltd. purchased four plants on 1st January 2013 for Rs. 100,000 each. On 1st
July 2015 the company decided to sale a plant at its book value. Depreciation is to be charged @ 10% p.a. The company
closed the account at the end of December every year.
Required: Plant account for first three years under straight line method
Solution,
Given: Original cost of 4 plants = Rs. (100,000x 4) = Rs. 4,00,000
Depreciation rate = 10%
Annual depreciation of each plant = 400,000 × 10% = Rs. 40,000
Plant Account
Dr. Under straight line method Cr.
Date Particulars Amount (Rs.) Date Particulars Amount (Rs.)
2013-1-1 To bank A/c By depreciation A/c 40,000
400,000 2013-12-31 By balance c/d 360,000
" 400,000
By depreciation A/c 40,000
400,000 By balance c/d 320,000
360,000
2014-1-1 To balance b/d 360,000 2014-12-31 By bank A/c 75,000
" By depreciation on sold plant 5,000
By Depreciation on remaining plant 30,000
360,000 (10,000 × 3)
By balance c/d 210,000
2015-1-1 To balance b/d 320,000 2015-7-1 320,000
"
2016-12-31
2016-1-1 To balance b/d "
320,000
210,000
Calculation of book value of sold plant
Original cost (O.C) = Rs. 100,000
Less: Depreciation for 2013 = Rs. 10,000
= 90,000
Less: Depreciation for 2014 = 10,000
= 80,000
Less: Depreciation for 2015, 6 months = 5,000
= 75,000
SQ-7._____ (Sales of asset at profit), H. Ltd. purchased two trucks on 1st Baishakh 2071 for Rs. 500,000 each. On 1st Kartik
2073 the company decided to sale a truck at Rs. 425,000. Depreciation is to be charged @ 10% p.a. The company closed
the account at the end of Chaitra every year.
Required: Truck account for 2071 to 2073 under straight line method
Solution,
Given: Original cost of 2 trucks = Rs. (500,000x2) = Rs. 10,00,000
Depreciation rate (R) = 10%
Annual depreciation for each vehicle = 10,00,000 × 10% = Rs. 1,00,000
Accounting for Fixed Assets CHAPTER 11 117
Truck Account
Dr. Under straight line method Cr.
Date Particulars Amount (Rs.) Date Particulars Amount (Rs.)
2071-1-1 To Bank A/c (500,000 × 2) 100,000
10,00,000 2071-12-31 By Depreciation A/c 900,000
" By Balance c/d
10,00,000
10,00,000 100,000
800,000
2072-1-1 To Balance c/d 900,000 2072-12-31 By Depreciation A/c 900,000
" By Balance c/d 425,000
25,000
900,000 50,000
350,000
2073-1-1 To Balance b/d 800,000 2073-7-1 By Bank A/c 850,000
2073-7-1 To Profit on sale of truck 50,000 " By Depreciation on sold truck
2073-12-3 By Depreciation on 2nd plant
" By Balance c/d
850,000
2074-1-1 To Balance b/d 350,000
Calculation of book value
Book value = O.C – Total depreciation = 500,000 – (50,000 + 50,000 + 25,000) = 375,000
Profit = Sale value – Book value = 425,000 – 375,000 = Rs. 50,000
SQ-8._____ (Sales of asset at loss), A manufacturing company purchased a machine at a cost of Rs.64,000 on 1st Magh
2060 and incurred Rs.6,000 for its transportation and installation. The company follows the straight line method of charging
depreciation @ 10% p.a. The company closes its books on 31st Chaitra each year. On 1st Kartik 2062, the machine was
sold at Rs.50,000 and a new machine worth Rs.40,000 was purchased. Write off machine account and depreciation
account for 2060 to 2063 assuming that the accounting period ends on calendar year.
Solution,
Dr. Machine Account Cr.
Date Particulars JF Amount (Rs.) Date Particulars JF Amount (Rs.)
206010-1 To Bank..................................................................7..0..,.0..0..0......2..0..6..0..-..1..2..-..3..1..........B..y...D..e..p...r.e..c..ia..t.i.o..n....................................................................1..,.7...5..0......................................................
12-31 By Balance c/d .................................................................6..8..,.2..5...0......................................................
70,000 70,000
2061-1-1 To Balance b/d.......................................................6..8..,.2..5..0......2..0..6..1..-..1..2..-..3..1..........B..y...D..e..p...r.e..c..ia..t.i.o..n....................................................................7...,0...0..0......................................................
12-31 By Balance c/d .................................................................6..1..,.2..5...0......................................................
68,250 68,250
2062-1-1 To Balance b/d.......................................................6..1..,.2..5..0......2..0..6..2..-..7..-..1..............B..y...D..e..p...r.e..c..ia..t.i.o..n....................................................................3...,5...0..0......................................................
7-1 To Bank..................................................................4..0..,.0..0..0................7..-..1..............B..y...C..a..s..h..............................................................................5..0..,.0..0...0......................................................
7-1 By Loss on sale..................................................................7..,.7...5..0......................................................
12-31 By Depreciation..................................................................2..,.0...0..0......................................................
12-31 By Balance c/d .................................................................3..8..,.0..0...0......................................................
101,250 101,250
2063-1-1 To Balance b/d.......................................................3..8..,.0..0..0......2..0..6..3..-..1..2..-..3..1..........B..y...D..e..p...r.e..c..ia..t.i.o..n....................................................................4...,0...0..0......................................................
12-31 By Balance c/d .................................................................3..4..,.0..0...0......................................................
38,000 38,000
2064-1-1 To Balance b/d.......................................................3..4..,.0..0..0................................................................................................................................
SQ-9._____ (Sales of asset at loss), XYZ Company purchased three plants for Rs.1,20,000, Rs.1,00,000 and Rs.1,50,000 on
1st January 2001. The estimated life of all the plants was 8 years and scrape value were Rs.20,000, Rs.10,000 and 15,000
respectively. On 31st June 2002, the first plant was sold for Rs.98,500. The second plant was also sold at Rs.75,000 on
31st September 2002. Prepare the plant account for first four years, charging depreciation on the straight line method.
Ans: Loss on sale of the first machine Rs.2,750, loss on sale of the second machine Rs.5,312.50, balance Rs.82,500
Solution,
Dr. Plant account Cr.
Date Particulars JF Amount (Rs.) Date Particulars JF Amount (Rs.)
2001-1-1 To Bank 120,000 2001-12-31 By Depreciation 40,625
1-1 To Bank 100,000 12-31 By Balance c/d 329,375
1-1 To Bank 150,000
370,000 370,000
2002-1-1 To Balance b/d 329,375 2002-6-31 By Depreciation 6,250
6-31 By Cash 98,500
6-31 By Loss on sale 2,750
9-31 By Depreciation 8,438
9-31 By Cash 75,000
9-31 By Loss on sale 5,312
12-31 By Depreciation 16,875
12-31 By Balance c/d 116,250
329,375 329,375
2003-1-1 To Balance b/d 116,250 2003-12-31 By Depreciation 16,875
12-31 By Balance c/d 99,375
116,250 116,250
118 Accounting-XI
2004-1-1 To Balance b/d 99,375 2004-12-31 By Depreciation 16,875
12-31 By Balance c/d 82,500
99,375
99,375
2005-1-1 To Balance b/d 82,500
SQ-10.____ (Sales of asset at loss), Red Eye Company purchased a machine at a price of Rs.3,50,000 on 1st April 2003 and
spent Rs.2,500 for transportation and Rs.7,500 for erection. Depreciation is provided @ 15% p.a. on the straight line
method. On 1st July 2004, one fourth of the machine was found unsuitable and disposed off at Rs.72,000. On the same
date, a new machine was purchased at a cost of Rs.1,50,000. Write up machine account and depreciation account for first
3 years. The accounts are closed on 31st March each year.
Solution,
Dr. Machine account Cr.
Date Particulars JF Amount (Rs.) Date Particulars JF Amount (Rs.)
2003-4-1 To Bank................................................................3..6..0..,.0..0..0......2..0..0..4..-.3..-.3..1..............B..y...D..e..p...r.e..c..ia..t.i.o..n..................................................................5..4..,.0..0...0......................................................
3-31 By Balance c/d ...............................................................3..0..6...,0...0..0......................................................
360,000 360,000
2004- 4-1 To Balance b/d.....................................................3..0..6..,.0..0..0......2..0..0..4..-.7..-.1................B..y...D..e..p...r.e..c..ia..t.i.o..n....................................................................3...,3...7..5......................................................
7-1 To Cash ...............................................................1..5..0..,.0..0..0..............7..-.1.................B..y...C..a..s..h..............................................................................7..2..,.0..0...0......................................................
7-1 By Loss on sale..................................................................1..,.1...2..5......................................................
2005-3-31 By Depreciation................................................................5..7..,.3..7...5......................................................
3-31 By Balance c/d ...............................................................3..2..2...,1...2..5......................................................
456,000 456,000
2005-4-1 To Balance b/d.....................................................3..2..2..,.1..2..5......2..0..0..6..-.3..-.3..1..............B..y...D..e..p...r.e..c..ia..t.i.o..n..................................................................6..3...,0..0...0......................................................
3-31 By Balance c/d ...............................................................2..5..9...,1...2..5......................................................
322,125 322,125
2006-4-1 To Balance b/d.....................................................2..5..9..,.1..2..5................................................................................................................................
SQ-11.____ (Sales of asset at profit), A company purchased machinery costing Rs.75,000 on 1st October 2001. Depreciation
was provided @ 12% p.a. on the straight line method. On 1st July 2003, one third of the machinery was found unsuitable
and disposed off at Rs.20,000. On the same date, a new machinery at a cost of Rs.1,20,000 was purchased. Write up
machinery account and depreciation account for first 4 years. The accounts are closed on 31st December.
Solution,
Dr. Machinery account Cr.
Date Particulars JF Amount (Rs.) Date Particulars JF Amount (Rs.)
2001-10-1 To Bank..................................................................7..5..,.0..0..0...........2..0..0..1..-..1..2..-.3..1......B..y...D..e..p...r.e..c..ia..t.i.o..n....................................................................2..,.2...5..0......................................................
12-31 By Balance c/d .................................................................7..2..,.7..5...0......................................................
75,000 75,000
2002-1-1 To Balance b/d.......................................................7..2..,.7..5..0...........2..0..0..2..-..1..2..-.3..1......B..y...D..e..p...r.e..c..ia..t.i.o..n....................................................................9...,0...0..0......................................................
12-31 By Balance c/d .................................................................6..3..,.7..5...0......................................................
72,750 72,750
2003-1-1 To Balance b/d.......................................................6..3..,.7..5..0...............2..0..0..3...-.7..-.1......B..y...D..e..p...r.e..c..ia..t.i.o..n....................................................................1...,5...0..0......................................................
7-1 To Gain on sale ..........................................................2..5..0.........................7..-.1......B..y...C..a..s..h..............................................................................2..0..,.0..0...0......................................................
7-1 To Bank................................................................1..2..0..,.0..0..0.....................1..2..-.3..1......B..y...D..e..p...r.e..c..ia..t.i.o..n..................................................................1..3..,.2..0...0......................................................
12-31 By Balance c/d ...............................................................1..4..9...,3...0..0......................................................
184,000 184,000
2004-1-1 To Balance b/d.....................................................1..4..9..,.3..0..0...........2..0..0..4..-..1..2..-.3..1......B..y...D..e..p...r.e..c..ia..t.i.o..n..................................................................2..0...,4..0...0......................................................
12-31 By Balance c/d ...............................................................1..2..8...,9...0..0......................................................
149,300 149,300
2005-1-1 To Balance b/d.....................................................1..2..8..,.9..0..0................................................................................................................................
SQ-12.____ (Sales of asset at loss), The machine account of a company showed a debit balance of Rs.1,14,000 on 1st
January 2001. A new machine was purchased at Rs.1,80,000 on 1st October 2002 and another machine was purchased for
Rs.1,50,000 on 1st July 2003. The first machine, purchased two years ago, was become unsuitable for work and sold at a
loss of Rs.2,500 on 31st December 2004. The depreciation was provided @ 12% per annum on original cost. Prepare the
machinery account from 2001 to 2005.
Solution,
Dr. Machine account Cr.
Date Particulars JF Amount (Rs.) Date Particulars JF Amount (Rs.)
2001-1-1 To Balance b/d 114,000 2001-12-31 By Depreciation 18,000
12-31 By Balance c/d 96,000
114,000 114,000
2002-1-1 To Balance b/d 96,000 2002-12-31 By Depreciation 23,400
10-1 To Bank 180,000 12-31 By Balance c/d 252,600
276,000 276,000
2003-1-1 To Balance b/d 252,600 2003-12-31 By Depreciation 48,600
7-1 To Bank 150,000 12-31 By Balance c/d 354,000
402,600 402,600
Accounting for Fixed Assets CHAPTER 11 119
2004-1-1 To Balance b/d 354,000 2004-12-31 By Depreciation 18,000
12-31 By Cash 39,500
2005-1-1 To Balance b/d 354,000 12-31 By Loss on sale 2,500
2006-1-1 To Balance b/d 254,400 12-31 By Depreciation 39,600
254,400 12-31 By Balance c/d 254,400
214,800 354,000
2005-12-31 By Depreciation 39,600
12-31 By Balance c/d 214,800
254,400
SQ-13. ___ (Sales of asset at profit), A Ltd. Company purchased two Jeeps at Rs. 20,00,000 each on Baishakh 1, 2065. The
company purchased another Jeep on Kartik 1, 2066 at a cost of Rs. 22,00,000. On Chaitra 31, 2066 the company sold one
Jeep purchased on Baishakh 1, 2065 for Rs. 17,00,000. Depreciation is charged at 10% using fixed installment method.
Accounts are closed at the end of Chaitra each year.
Required: Vehicle Account for 2065 to 2067
Solution,
Vehicle Account
Dr. Under Fixed Installment method Cr.
Date Particulars Amount (Rs.) Date Particulars Amount (Rs.)
2065-1-1 To bank A/c (20,00,000 × 2) 40,00,000 2065-12-31 By depreciation A/c (200,000 × 2) 400,000
By balance c/d 36,00,000
40,00,000 40,00,000
2066-1-1 To balance b/d 36,00,000 2066-12-31 By depreciation A/c (400,000 + 220,000 × 510,000
7-1 To bank A/c 22,00,000 162) 1700,000
12-31 To profit & loss A/c By bank A/c 36,90,000
100,000 " By balance c/d
"
59,00,000 59,00,000
2067-1-1 To balance b/d 36,90,000 2067-12-31 By depreciation A/c (200,000 + 220,000) 420,000
" By balance c/d 32,70,000
3690,000 3690,000
2068-1-1 To balance b/d 32,70,000
Calculation of profit or loss
Book value = Original cost – Total depreciation = 20,00,000 – (200,000 + 200,000) = 1600,000
Profit = Sales – Book value = 1700,000 – 1600,000= Rs. 100,000
SQ-14.____ (Sales of asset at profit), A company purchased 3 motorcycles at Rs. 2,00,000 each on January 1, 2008. The
company purchased other two motorcycles at a cost of Rs. 6,00,000 on July 1, 2008. On December 31, 2010, the company
sold 2 motorcycles, purchased on January, 1 2008 for Rs. 3,50,000. Accounts of the company are closed at the end of
December each year and depreciation is charged at 15% per annum using fixed installment method.
Required: Motorcycle account from 2008 to 2010.
Solution, Motorcycle Account
Dr. Fixed Installment Method Cr.
Date Particulars Amount (Rs.) Date Particulars Amount (Rs.)
1-1-2008 To Bank a/c 6,00,000 31-12-2008 By Depreciation a/c (90,000 + 45,000) 1,35,000
1-7-2008 To Bank a/c 6,00,000 31-12-2008 By Balance c/d 10,65,000
12,00,000 12,00,000
1-1-2009 To Balance b/d 10,65,000 31-12-2009 By Depreciation a/c (90,000 + 90,000) 1,80,000
31-12-2009 By Balance c/d 8,85,000
10,65,000 10,65,000
1-1-2010 To Balance b/d 8,85,000 31-12-2010 By Bank a/c 3,50,000
31-12-2010 To P/ L a/c (profit) 1,30,000 31-12-2010 By Depreciation a/c 180,000
31-12-2010 By Balance c/d 4,85,000
10,15,000 10,15,000
1-1-2011 To Balance b/d 4,85,000
Working note:
i. Calculation of profit and loss on sale of motorcycle
1-1-2008 Purchase (2, 00,000 × 2) Rs. 4,00,000
Less: Depreciation for 2008 60,000
1-1-2009 Balance 3,40,000
Less: Depreciation for 2009 60,000
1-1-2010 Balance 2,80,000
Less: Depreciation for 2010 60,000
Book value on the date of sale 2,20,000
Less: Sales value 3,50,000
Profit on sale 1,30,000
ii. Total deprecation for 2010= 60,000 + 30,000 +90,000= Rs. 180,000
120 Accounting-XI
SQ-15.____ (Sales of asset at loss), Icon Ltd. purchased four machines on 1st Baishakh 2071 for Rs. 250,000 each. On 31st
Chaitra 2072 the company decided to sale a machine at Rs. 180,000. Depreciation is to be charged @ 10% p.a. The
company closed the account at the end of Chaitra every year.
Required: Machinery account for 2071 to 2073 under straight line method
Solution,
Original cost of each machine (O.C) = Rs. 250,000
Depreciation cost = 10%
Annual depreciation = 250,000 × 10% = Rs. 25,000
Machinery Account
Dr. Under straight line method Cr.
Date Particulars Amount (Rs.) Date Particulars Amount (Rs.)
2071-1-1 To bank A/c (250,000 × 4) 10,00,000 2071–12–31 By depreciation A/c (25,000 × 4) 100,000
" By balance c/d 900,000
10,00,000 10,00,000
2072-1-1 To balance b/d 900,000 2072-12-31 By depreciation A/c (25,000 × 4) 100,000
" By bank A/c 180,000
" By loss on sale of machine 20,000
" By balance c/d 600,000
900,000 900,000
2073-1-1 To balance b/d 600,000 2073-12-31 By depreciation A/c (25,000 × 3) 75,000
By balance c/d 525,000
600,000 600,000
2074-1-1 To balance b/d 525,000
Calculation of book
Book-value = O.C – Total depreciation = 250,000 – (25,000 + 25,000) = 200,000
Loss = Book value – Sales value = 200,000 – 180,000 = Rs. 20,000
SQ-16.____ (Purchase and sales of asset at profit), Jupiter Ltd. purchased a machine on 1st Baishakh 2071 for Rs. 350,000.
A new machine costing Rs. 150,000 was bought on 1st kartik 2071. On 1st kartik 2072 the company decided to sale machine
purchased on 1st Baishakh 2071 for Rs. 265,000 and on the same date a new machine was purchased for Rs. 250,000.
Depreciation is to be charged @ 20% p.a. The company closed the account at the end of Chaitra every year.
Required: Machines A/c for 2071 to 2073 under straight line method
Solution,
Machinery A/c under SLM
Dr. Under straight line method Cr.
Amount (Rs.)
Date Particulars Amount (Rs.) Date Particulars
2071-1-1 To bank A/c 85,000
2071-7-1 To bank A/c 350,000 2071-12-31 By depreciation P/C (70,000 + 30,000 × 6 )
150,000 12 415,000
500,000
" By balance c/d 265,000
35,000
500,000
55,000
2072-1-1 To balance b/d 415,000 2072-7-1 By bank A/c
3,30,000
2072-7-1 To profit & loss A/c 20,000 " Bydepreciationonsold machine (70,000×162)
2072-7-1 To bank A/c 250,000 685,000
80,000
2072-12-31 By depreciation A/c (30,000 + 50,000 × 250,000
" 162) 330,000
By balance c/d
685,000
2073-1-1 To balance b/d 330,000 2073-12-31 By depreciation A/c (30,000 + 50,000)
" By balance c/d
330,000
2074-1-1 To balance b/d 250,000
Calculation of book value
B.V = O.C – Total Depreciation = 350,000 – (70,000 – 35,000) = Rs. 245,000
Profit = Sales value – book value = 265,000 – 245,000 = Rs. 20,000
SQ-17.____ (Purchase and sales of asset at loss), M. Ltd. purchased machinery for Rs. 400,000 on 1st Baishak 2071. On
Baishak 1, 2073 one fourth of Machinery was found unsuitable and was sold for Rs. 70,000 and on the same date it
purchased another machine for Rs. 200,000. The company depreciated machine by using fixed instalment method of 10%
per annum. The books of accounts are closed on 30th Chaitra every year.
Required: Machinery A/c for three year from 2071 to 2073
Solution,
Machinery Account
Dr. Under SLM Cr.
Date Particulars Amount (Rs.) Date Particulars Amount (Rs.)
By depreciation A/c 40,000
2071-1-1 To bank A/c 400,000 2071-12-31 By balance c/d 360,000
" 400,000
400,000
Accounting for Fixed Assets CHAPTER 11 121
2072-1-1 To balance b/d 360,000 2072-12-31 By depreciation A/c 40,000
2073-1-1 To balance b/d " By balance c/d 320,000
2073-1-1 To bank A/c 360,000
360,000 By bank A/c 70,000
320,000 2073-1-1 By profit & loss A/c 10,000
200,000 " 3 50,000
By depreciation A/c (40,000 × 4 +
2073-12-31 390,000
20,000)
" By balance c/d 520,000
2074-1-1 To balance b/d 520,000
390,000
Working Notes:
Book–value of whole machine on 2073–1–1 = Rs. 320,000
Book–value of 1 machine on 2073–1–1 = 320,000 × 1 = Rs. 80,000
4 4
Loss = Book value – sales value = 80,000 – 70,000 = Rs. 10,000
SQ-18. ___ (Purchase and sales of asset at profit), N Ltd. purchased a machine for Rs. 250,000 on January1, 2014. The
expected working life of the machine was five years. The salvage value of the machine is expected to be 10% of its cost.
The company has followed straight line depreciation policy. At the end of the year 2016, company sold the machinery at Rs.
125,000 and purchased another machine for Rs. 500,000 on the same date.
Required: Machinery account for three years ending 31st December, 2016
Solution,
Machinery Account
Dr. Under straight line method Cr.
Date Particulars Amount (Rs.) Date Particulars Amount (Rs.)
2014-1-1 To bank A/c 250,000 2014-12-31 By Depreciation A/c 45,000
" By balance c/d 205,000
250,000 250,000
2015-1-1 To balance b/d 205,000 2015-12-31 By depreciation A/c 45,000
" By balance c/d 160,000
205,000 205,000
2016-1-1 To balance b/d 16,0000 2016-12-31 By depreciation A/c 45,000
2016-12-31 To profit & loss A/c 10,000 " By bank A/c 125,000
" To bank A/c 500,000 " By balance c/d 500,000
670,000 670,000
2017-1-1 To balance b/d 500,000
Calculation of annual depreciations
250000 – 25000
Annual depreciation = 5 = Rs. 45,000
B.V = Purchase price – Total Depreciation
= 250,000 – (45,000 × 3) = 250,000 – 135,000 = 115,000
Profit = Sale value – book value = 125,000 – 115,000 = 10,000
Diminishing Balance Method
SQ-19. ___ The following information are given below:
Date Transaction
1-1-2070
1-7-2071 Purchased first machinery for Rs. 60,000
1-10-2072 Purchased second machinery for Rs. 40,000
Purchased third machinery for Rs. 80,000
Assume the rate of depreciation is @ 10% on diminishing line method & accounts are closed on 31st Chaitra of each year.
Required: Machinery Account for the first 3 years.
Solution,
Dr. Machinery Accounts under Diminishing Balance Method Cr.
Date Particulars JF Amount (Rs.) Date Particulars JF Amount (Rs.)
1-1-2070 To Bank A/c 60,000 31-12-2070 By Depreciation A/c 6,000
By Balance c/d 54,000
60,000 60,000
1-1-2071 To Balance b/d 54,000 31-12-2071 By Depreciation A/c (5400 +2,000) 7,400
1-7-2071 To Bank A/c 40,000 31-12-2071 By Balance A/c 86,600
94,000 94,000
1-1-2072 To Balance b/d 86,600 By Depreciation A/c (8,660 +2,000) 10,660
1-10-2072 To Bank A/c 80,000 By Balance A/c 1,55,940
1,66,600 1,66,600
1-1-2073 To Balance b/d 1,55,940
122 Accounting-XI
SQ-20.____ D. Ltd. purchased a machine costing Rs. 400,000 on 1st Baishakh 2071. The useful life of machine is estimated as
5 years and after termination of life period its scrap value is estimated as Rs. zero. D Ltd. decided to implement diminishing
balance method of depreciation @ 20% p.a. The account would be closed at the end of Chaitra every year.
Required: Machinery account for first three years
Solution,
Machinery Account
Dr. Under diminishing balance method Cr.
Date Particulars Amount (Rs.) Date Particulars Amount (Rs.)
2071-1-1 To bank A/c 400,000 2071-12-31 By Depreciation A/c (400,000 × 20%) 80,000
" By balance c/d 320,000
400,000 400,000
2072-1-1 To balance b/d 320,000 2072-12-31 By Depreciation A/c (320,000 × 20%) 64,000
By bal c/d 256,000
320,000 320.000
2073-4-1 To balance b/d 256,000 2073-12-31 By Depreciation A/c (256,00 × 20%) 51,200
" By balance c/d 204,800
256,000 256,000
204,800
2074-1-1 To balance b/d
SQ-21. ___ (Purchase of new asset), F Ltd. purchased a plant on 1st January 2013 for Rs. 450,000. It has also added
another plant on 1st July 2014 for Rs. 200,000 for expansion purpose. Depreciation is to be charged @ 10% p.a. The
company closed the account at the end of December every year.
Required: Plant A/c for first three years under reducing balance method
Solution,
Plant Account
Dr. Under diminishing balance method Cr.
Date Particulars Amount (Rs.) Date Particulars Amount (Rs.)
2013-1-1 To bank A/c 450,000 2013-12-31 By Depreciation A/c 45,000
2014-1-1 To bal b/d " By balance c/d 405,000
2014-7-1 To Bank A/c 450,000 By Depreciation A/c (40,500+20,000×162 450,000
405,000 2014-12-31 50,500
200,000
)
By balance c/d 554,500
605,000 605,000
2015-1-1 To bal b/d 554,500 2015-12-31 By Depreciation A/c 55,450
" By balance c/d 499,050
554,500 554,500
2016-1-1 To bal b/d 499,050
SQ-22. ___ (Sales of asset on book value), G. Ltd. purchased three plants on 1st January 2013 for Rs. 200,000 each. On 1st
July 2015 the company decided to sale a plant at its book value. Depreciation is to be charged @ 10% p.a. The company
closed the account at the end of December every year.
Required: Plant A/c for first three years under diminishing balance method
Solution,
Dr. Plant A/c under diminishing balance method Cr.
Date Particulars Amount (Rs.) Date Particulars Amount (Rs.)
2013-1-1 To bank A/c (200,000 × 3) 600,000 2013-12-31 By depreciation A/c 60,000
2014-1-1 To bal b/d " By balance c/d 540,000
By depreciation A/c 600,000
600,000 By balance c/d 54,000
540,000 2014-12-31 486,000
540,000 540,000
2015-1-1 To bal b/d 486,000 2015-7-1 By bank A/c 153,900
" By depreciation A/c 8,100
" By depreciation on remaining plant 32,400
" (324,000 × 10%)
By bal b/d 291,600
486,000 486,000
2016-1-1 To balance b/d 291,600
Calculation of book value of sold plant = Rs. 200,000
Original cost = Rs. 20,000
Depreciation for 2013 = Rs. 180,000
Value of assets 2014 = Rs. 18,000
Depreciation for 2014 = Rs. 162,000
= Rs. 8,100
Depreciation for 2015 for 6 months = Rs. 153,900
Accounting for Fixed Assets CHAPTER 11 123
SQ-23.____ (Sales of asset at profit), H. Ltd. purchased two trucks on 1st Baishakh 2071 for Rs. 200,000 each. On 1st Kartik
2073 the company decided to sale a truck at Rs. 175,000 Depreciation is to be charged @ 10% p.a. The company closed
the account at the end of Chaitra every year.
Required: Truck A/c for 2071 to 2073 under reducing balance method
Solution,
Truck Account
Dr. Under Reducing balance method Cr.
Date Particulars Amount (Rs.) Date Particulars Amount (Rs.)
2071-1-1 To bank A/c (200,000 × 2) 400,000 2071-12-31 By Depreciation A/c (20,000 × 2) 40,000
" By bal c/d 360,000
400,000 400,000
2072-1-1 To bal b/d 360,000 2072-12-31 By Depreciation A/c (18,000 × 2) 36,000
" By bal c/d 324,000
360,000 360,000
2073-4-1 To bal b/d 324,000 2073-7-1 By bank A/c 175,000
2073- 7-1
To profit of loss A/c 21,100 " By Depreciation on sold truck 8,100
2073-12-31 By depreciation on 2nd truck 16,200
By bal c/d 145,800
345,100 345,100
2074-2-1 To balance b/d 145,800
Working Note:
Calculation of book value for sold truck
Original cost = 200,000
Depreciation for 2071 = 20,000
= 180,000
Depreciation for 2072 = 18,000
= 162,000
Depreciation for 2073 for 6 months = 8,100
= 153,900
Profit = Sale value – Book value
= 175,000 – 153,900 = Rs. 21,100
SQ-24.____ (Sales of asset at loss), Ivan Ltd. purchased four machines on 1st Baishakh 2071 for Rs. 300,000 each. On 31st
Chaitra 2072 the company decided to sale a machine at Rs. 210,000. Depreciation is to be charged @ 10% p.a. The
company closed the account at the end of Chaitra every year.
Required: Machinery A/c for 2071 to 2073 under reducing balance method
Solution,
Machines Account
Dr. Under Reducing balance method Cr.
Date Particulars Amount (Rs.) Date Particulars Amount (Rs.)
2071-1-1 To bank A/c (300,000 × 4) 12,00,000 2071-12-31 B Depreciation A/c (30,000 × 4) 120,000
" By bal c/d 10,80,000
1200,000 1200,000
2072-1-1 To balance b/d 10,80,000 2072-12-31 By Depreciation A/c (27,000 × 4) 108,000
" By bank A/c 210,000
" By profit & loss A/c 33,000
" By bal c/d 7,29,000
10,80,000 10,80,000
2073-1-1 To bal b/d 7,29,000 2073-12-31 By Depreciation A/c 72,900
" By balance c/d 656,100
729,000 729,000
2074-1-1 To bal b/d 656,100
Calculation of book value of sold machinery
Original cost = 300,000
Depreciation for 2071 = 30,000
270,000
Dep for 2072 = 27,000
243,000
Loss = Book value– Sale value = 243,000 – 210,000 = 33,000
SQ-25.____ A company purchased a machine for Rs.55,000 on 1st July 2002 and installed at a cost of Rs.5,000. Depreciation
was charged on written down value method @ 15% p.a. The machine was sold for Rs.35,000 on 31st December 2004 and
another machine was purchased for Rs.62,000. You are required to prepare a machinery account and depreciation account
for first 4 years.
124 Accounting-XI
Solution, Machinery Account Cr.
Dr.
Date Particulars JF Amount (Rs.) Date Particulars JF Amount (Rs.)
2002-7-1 To Cash 4,500
60,000 2002-12-31 By Depreciation 55,500
2003-1-1 To Balance b/d 60,000
12-31 By Balance c/d 8,325
2004-1-1 To Balance b/d 47,175
12-31 To Cash 60,000 55,500
7,076
2005-1-1 To Balance b/d 55,500 2003-12-31 By Depreciation 35,000
5,099
2006-1-1 To Balance b/d 12-31 By Balance c/d 62,000
55,500 109,175
9,300
47,175 2004-12-31 By Depreciation 52,700
62,000
62,000 12-31 By Cash
12-31 By Loss on sale
12-31 By Balance c/d
109,175
62,000 2005-12-31 By Depreciation
12-31 By Balance c/d
62,000
52,700
SQ-26.____ Lucky Duwani Service purchased a truck at a cost of Rs.4,75,000 on 1st January 2004. After using two years, the
truck was sold at Rs.3,75,000 on 31st December 2005 and another truck was purchased for Rs.5,75,000. What would be
the balance of the truck account at the end of 2006 if depreciation was charged @ 15% p.a. under diminishing balance
method?
Solution,
Dr. Truck Account Cr.
Date Particulars JF Amount (Rs.) Date Particulars JF Amount (Rs.)
2004-1-1 To Cash ...............................................................4..7..5..,.0..0..0...........2..0..0..4..-..1..2..-.3..1......B..y...D..e..p...r.e..c..ia..t.i.o..n..................................................................7..1..,.2..5...0......................................................
12-31 By Balance c/d ...............................................................4..0..3...,7...5..0......................................................
475,000 475,000
2005-1-1 To Balance b/d.....................................................4..0..3..,.7..5..0...........2..0..0..5..-..1..2..-.3..1......B..y...D..e..p...r.e..c..ia..t.i.o..n..................................................................6..0...,5..6...3......................................................
12-31 To Gain on sale .....................................................3..1..,.8..1..3.....................1..2..-.3..1......B..y...C..a..s..h............................................................................3..7..5...,0...0..0......................................................
12-31 To Cash ...............................................................5..7..5..,.0..0..0.....................1..2..-.3..1......B..y...B..a..l.a..n..c..e...c../.d.................................................................5..7..5...,0...0..1......................................................
1,010,563 1,010,563
2006–1-1 To Balance b/d.....................................................5..7..5..,.0..0..1...........2..0..0..6..-..1..2..-.3..1......B..y...D..e..p...r.e..c..ia..t.i.o..n..................................................................8..6...,2..5...0......................................................
12-31 By Balance c/d ...............................................................4..8..8...,7...5..0......................................................
575,001 575,001
2007-1-1 To Balance b/d.....................................................4..8..8..,.7..5..0................................................................................................................................
SQ-27.____ Ram and Laxman Co. purchased the machines as follows.
i. On 1-7-2001 Machine costing Rs.70,000.
ii. On 1-1-2002 Machine costing Rs.80,000.
iii. On 1-4-2003 Machine costing Rs.90,000.
A part of machine costing Rs.50,000 (purchased on 1-7-2001) was sold for Rs.40,000 on 31st December 2003. The
depreciation is charged @ 12% p.a. on written down value. The company closes the book of accounts on 31st December
every year.
Required: Machine account for the first three years
Solution,
Dr. Machine Account Cr.
Date Particulars JF Amount (Rs.) Date Particulars JF Amount (Rs.)
2001-7-1 To Cash .................................................................7..0..,.0..0..0...........2..0..0..1..-..1..2..-.3..1......B..y...D..e..p...r.e..c..ia..t.i.o..n....................................................................4..,.2...0..0......................................................
12-31 By Balance c/d .................................................................6..5..,.8..0...0......................................................
70,000 70,000
2002-1-1 To Balance b/d.......................................................6..5..,.8..0..0...........2..0..0..2..-..1..2..-.3..1......B..y...D..e..p...r.e..c..ia..t.i.o..n..................................................................1..7...,4..9...6......................................................
1-1 To Cash .................................................................8..0..,.0..0..0.....................1..2..-.3..1......B..y...B..a..l.a..n..c..e...c../.d.................................................................1..2..8...,3...0..4......................................................
145,800 145,800
2003-1-1 To Balance b/d.....................................................1..2..8..,.3..0..4...........2..0..0..3..-..1..2..-.3..1......B..y...D..e..p...r.e..c..ia..t.i.o..n....................................................................4...,9...6..3......................................................
4-1 To Cash .................................................................9..0..,.0..0..0.....................1..2..-.3..1......B..y...C..a..s..h..............................................................................4..0..,.0..0...0......................................................
7-1 To Gain on sale .......................................................3..,.6..0..3.....................1..2..-.3..1......B..y...D..e..p...r.e..c..ia..t.i.o..n..................................................................1..8..,.5..3...3......................................................
12-31 By Balance c/d ...............................................................1..5..8...,4...1..1......................................................
221,907 221,907
2004-1-1 To Balance b/d.....................................................1..5..8..,.4..1..1................................................................................................................................
SQ-28.____ A company purchased a machine on 1st Baishakh 2059 costing Rs.180,000 and spent Rs.10,000 for its repair and
Rs.10,000 for its installation. On Kartik 1, 2059 another machine costing Rs.150,000 was purchased. On Chaitra 31, 2060
the machine purchased on Baishakh 1, 2059 was sold for Rs.120,000. On 1st Baishakh 2061, another machine costing
Rs.200,000 was acquired. Depreciation has been charged @20% per annum under diminishing balance method. Accounts
are closed on 31st Chaitra each year.
Required: Machinery Account for the year 2059 Baishakh to 31st Chaitra 2061.
Accounting for Fixed Assets CHAPTER 11 125
Solution, Machinery Account
Dr.
Date Under Reducing Balance Method Cr.
Amount (Rs.)
2059-1-1 Particulars Amount (Rs.) Date Particulars
7-1 To bank A/c (180,000 + 10,000 + 55,000
10,000) 200,000 2059-12-31 By depreciation A/c (40,000 + 30,000 × 295,000
2060-1-1 To bank A/c 150,000 162)
To balance b/d 350,000
2061-1-1 By balance c/d 59,000
2062-2-1 To balance b/d 120,000
To bank A/c 350,000 8,000
To balance b/d 108,000
295,000 2060-12-31 By depreciation A/c (295,000 × 20%) 295,000
By bank A/c 61,600
By loss on sale of machinery 246,400
By balance c/d 308,000
295,000
108,000 2061-12-31 By depreciation A/c
200,000 (308,000 × 20%)
308,000
246,400
Calculation of book value of sold machine
Original cost = 200,000
Less: dep for 2059 = 40,000
160,000
Less: dep for 2060 = 32,000
128,000
Loss = Book value – Sale value = 128,000 – 120,000 = Rs. 8,000
SQ-29.____ The transactions related to Furniture are as under:
1.1.2006: Furniture purchased Rs.50,000
1.7.2007: Furniture purchased Rs.40,000
1.1.2008: Furniture purchased on 2006 was sold for Rs.40,000 and another furniture purchased for Rs.60,000
Additional information
i. Accounts are closed on 31st December each year
ii. Rate of depreciation: 10% p.a.
Required: Furniture Account from 2006 to 2008 under reducing balance method.
Solution,
Furniture Account
Dr. Under reducing balance method Cr.
Amount (Rs.)
Date Particulars Amount (Rs.) Date Particulars
2006-1-1 To bank A/c 5,000
50,000 2006-12-31 By depreciation A/c 45,000
" By balance c/d 50,000
50,000 6,500
78,500
2007-1-1 To balance b/d 45,000 2007-12-31 By depreciation A/c (4,500 + 4,000 × 162) 85,000
7-1 To bank A/c 40,000 40,000
" By balance c/d
500
85,000 9,800
88,200
2008-1-1 To balance b/d 78,500 2008-1-1 By bank A/c 138,500
1-1 To bank A/c
60,000 By loss on sale of furniture
By depreciation A/c (3,800 + 6,000)
2008-12-31 By balance c/d
138,500
2009-1-1 To balance b/d 88,200
Calculation of book value of sold furniture
Original cost = Rs. 50,000
Less: dep for 2006 = 5,000
45,000
Less: depreciation for 2007 = 4,500
40,500
Loss = Book value – Sale value = 40,500 – 40,000 = Rs. 500
SQ-30.____ (Purchase and sales of asset), Jetty Ltd. purchased a machine on 1st Baishakh 2071 for Rs. 500,000. A new
machine costing Rs. 250,000 was bought on 1st Kartik 2071. On 1st Kartik 2072 the company decided to sale machine
purchased on 1st Baishakh 2071 for Rs. 330,000 and on the same date a new machine was purchased for Rs. 300,000.
Depreciation is to be charged @ 10% p.a. The company closed the account at the end of Chaitra every year.
Required: Machines A/c for 2071 to 2073 under reducing balance method
126 Accounting-XI
Solution, Machinery Account
Dr. Under reducing balance method Cr.
Date Amount (Rs.)
2071-1-1 Particulars Amount (Rs.) Date Particulars
2071-7-1 To bank A/c 500,000 2071-12-30 By Depreciation A/c (50,000 + 25,000 × 162) 62,500
To bank A/c 250,000 By bal c/d
687,500
" 750,000
330,000
750,000 22,500
97,500
2072-7-1 To balance b/d 687,500 2072-7-1 By bank A/c
2072-7-1 To bank A/c 300,000 " By Depreciation on sold machine 38,750
By loss on sale of machinery 498,750
" By Depreciation (23,750 + 30,000 × 162) 987,500
2072-12-31 By bal c/d 49,875
" 4,48,875
498,750
987,500
2073-1-1 To balance b/d 498,750 2073-12-21 By Depreciation A/c
2074-1-1 To balance b/d " By bal c/d
498,750
448,875
Calculation of book value
O.C. = 500,000
Depreciation for 2071 = 50,000
450,000
Depreciation for 2072 for 6 month = 22,500
Book value = 4,27,500
Loss = Book value – Sale value = 427,500 – 330,000 = 97,500
SQ- 31.____ (Purchase and sales of asset), Lotus Ltd purchased a truck at Rs. 350,000 on January 1, 2014. At the end of
December, 2015, the truck was completely destroyed in an accident and Rs. 231,000 was received from the Insurance
Company in full settlement. On January 1, 2016 the Company purchased another truck for Rs. 450,000. The company writes off
20% per annum on the Diminishing Balance Method. The company closes its books of accounts on December 31st each year.
Required: Truck Account for 2014 to 2016
Solution,
Truck Account
Dr. Under reducing balance method Cr.
Date Particulars Amount (Rs.) Date Particulars Amount (Rs.)
2014-1-1 To bank A/c 350,000 2014-12-30 By Depreciation A/c 70,000
" By bal c/d 280,000
350,000 By bank A/c 350,000
2015-1-1 To balance b/d 280,000 2015-12-30 By Depreciation 231,000
2015-12-30 To profit and loss A/c 7,000 " By Depreciation A/c 56,000
2016-1-1 To bank A/c By Balance c/d 287,000
287,000 90,000
450,000 2016-12-30 360,000
" 450,000
450,000
2017-1-1 To balance b/d 360,000
Calculation of book value
O.C. = 350,000
Depreciation for 2014 = 70,000
280,000
Depreciation for 2015 = 56,000
Book value = 224,000
Profit = Sale value– Book value = 231,000 – 224,000 = 7,000
Change Method
SQ-32.____ On 1st January 2001, Bikash purchased a machine for Rs. 20,000 and provided depreciation @ 10% p.a. at the
end of 2004, the company decided to change the method of depreciation from WDV method to SLM retrospectively. The
rate of depreciation remaining the same.
Required: Excess / short depreciation
Solution:
SLM DBM
Cost of machine 1-1-2001 .............................................................................................................................................................................2.0000 20000
Less: Depreciation 10% ..................................................................................................................................................................................2000 2000
Book value on 1-1-2002 18000 18000
Less: Depreciation 10% ..................................................................................................................................................................................2000 1800
16200
Book value on 1-1-2003 16000 1620
Less: Depreciation 10% ..................................................................................................................................................................................2000 14580
Book value on 1-1-2004 14000 5480
Total depreciation 6000
Now, Depreciation under charged on WDV = 6000 - 5480 = Rs580
Accounting for Fixed Assets CHAPTER 11 127
SQ- 33.____ A Company acquired plant 3 years ago at a cost of Rs. 1,00,000. Company followed SLM of depreciation @ 10% per
annum. At the end of this year company closes its account by adopting WDV method at the same rate with retrospective effect.
Required: The amount of deprecation adjustment and depreciation for the year.
Solution:
Date Bev. Cost SLM DBM
10,000
1st year..........................................................................................................................................................................1..,.0..0..,.0..0..0..................1..0..,.0..00 9,000
2nd year............................................................................................................................................................................9..0..,.0..0..0..................1..0..,.0..00 8,100
3rd year ............................................................................................................................................................................8..1..,.0..0..0..................1..0..,.0..00 27,100
Total depreciation 72,900 30,000 2900
Depreciation over changed by = 30,000-27,100 = 2,900
SQ-34.____ On 1st January 2008, Damu and co. purchased machine I and II costing Rs.100,000 each and provided
depreciation @ 10% p.a. on straight line method at the end of 2011, the company decided to changed the method of
depreciation form SLM to DBM retrospectively, the rate of depreciation remaining to same. Accounts are closed on the
basis of calendar year.
Required: Machinery account up to 2011
Solution:
Machinery Account
Dr. Depreciation under SLM to WDV Cr.
Amount
Date Particulars Amount Date Particulars
1-1-2008 To bank b/d (100000 × 2) 20000
200000 31-12-2008 By depn. a/c 180000
'' By bal. c/d 200000
20000
200000 160000
180000
1-1-2009 To balance b/d 180000 31-3-2009 By depn a/c 20000
'' By bal. c/d 140000
160000
180000 14580
131220
1-1-2010 To balance. b/d 160000 31-12-2010 By depn a/c 145800
'' By bal. c/d
WDV
160000 200000
20000
1-1-2011 To balance b/d 140000 31-12-2011 By depn a/c (10% of 145800) 180000
31-12-2011 To depn written back (Over charged) 5800 By bal.c/d 18000
1-1-2012 To balance b/d 162000
145800 16200
145800
131220
Rs 54200
Working Note:
Cost of machine 1-1-2008 SLM
Less: depreciation 200000
B.V 1-1-2009 20000
Less: depreciation 180000
B.V 1-1-2010 20000
Less: depreciation 160000
B.V. 1-1-2011 20000
Total depreciation 140000
Rs 60000
∴ Excess depreciation written back = 60000 – 54200 = Rs 5800
SQ-35.____ Janakpur Ltd. company purchased a car for Rs. 3,50,000 on Baishakh 1, 2067. It was charging depreciation at the
rate 15 per cent p.a. on the basis of fixed installment method. At the end of 2069, the firm decided to change the method of
depreciation from the fixed installment method to the diminishing balance method effective from Baishakh, 1 2067. The rate
of depreciation @ 20% p.a.
Required: The car account for 3 years ending on Chaitra 31, 2069 (Retrospective effect)
Solution:
Dr. Car Account Cr
Date
Particulars Amount Date Particulars Amount
01/01/2067
To Bank A/c............... 3,50,000 31/12/2067 By Depreciation A/c ..................................................................5..2..,.5..0..0......................................................
01/01/2068 31/12/2067 By Balance c/d .........................................................................2..9..7..5..0..0......................................................
01/01/2069 To Balance b/d........... 3,50,000 31/12/2068 3,50,000
297500 31/12/2068 By Depreciation A/c ...................................................................5..2..5..0..0......................................................
01/01/2070 By Balance c/d .......................................................................2..,.4..5..,.0..0..0......................................................
To Balance b/d. .......... 297500 01/01/2069 297500
2,45,000 31/12/2069 By P/L A/c (Dep" undercharged) .............................................2..1..,.0..0..0......................................................
31/12/2069 By Depreciation A/c ...................................................................4..4..8..0..0......................................................
By Balance c/d .........................................................................1..7..9..2..0..0......................................................
245000 245000
To Balance b/d...........................................1..7..9..2..0..0......................................................................................................................................................
128 Accounting-XI
Working Note: For Depreciation Adjustment:
Depreciation undercharged by Rs. 2,45,000 – 2,24,000 = Rs. 21,000
For depreciation adjustment 20% @p.a. under DBM
OC on 01/01/2067 .................................................................................................................................................................................................... 3,50,000
Less: Depreciation 31/12/2067 ........................................................................................................................................................................... 70,000
B.V. 01/01/2068 ....................................................................................................................................................................................................... 2,80,000
Less: Depreciation 31/12/2068 ........................................................................................................................................................................... 56,000
BV. 01/01/2069 2,24,000
LONG ANSWER QUESTIONS
Straight Line Method
LQ-1. _____ A plant was purchased for Rs.60,000 on Baisakh 1, 2052. The scrap value was estimated to be Rs.6,000 at the end of
plant's life of nine years. The straight line method of depreciation was used for providing depreciation. The accounting year
ends on Chaitra end each year. The plant has been sold out on Chaitra end 2054 for Rs.39,000 and bought another machine
on same day for Rs.35,000. The new machine has a useful life of seven years with no salvage value.
Required: Plant and machinery account for Baisakh 1, 2052 to Chaitra end 2054 showing amount of profit and loss on
sales of machine.
Solution,
Dr. Plant and Machinery Account Cr.
Date Particulars JF Amount (Rs.) Date Particulars JF Amount (Rs.)
2052-1-1 To Cash .................................................................6..0..,.0..0..0...........2..0..5..2..-..1..2..-.3..1......B..y...D..e..p...r.e..c..ia..t.i.o..n....................................................................6..,.0...0..0......................................................
12-31 By Balance c/d .................................................................5..4..,.0..0...0......................................................
60,000 60,000
2053-1-1 To Balance b/d.......................................................5..4..,.0..0..0...........2..0..5..3..-..1..2..-.3..1......B..y...D..e..p...r.e..c..ia..t.i.o..n....................................................................6...,0...0..0......................................................
12-31 By Balance c/d .................................................................4..8..,.0..0...0......................................................
54,000 54,000
2054-1-1 To Balance b/d.......................................................4..8..,.0..0..0...........2..0..5..4..-..1..2..-.3..1......B..y...D..e..p...r.e..c..ia..t.i.o..n....................................................................6...,0...0..0......................................................
12-31 To Cash .................................................................3..5..,.0..0..0.....................1..2..-.3..1......B..y...C..a..s..h..............................................................................3..9..,.0..0...0......................................................
12-31 By Loss on sale..................................................................3..,.0...0..0......................................................
12-31 By Balance c/d .................................................................3..5..,.0..0...0......................................................
83,000 83,000
2055-1-1 To Balance b/d.......................................................3..5..,.0..0..0................................................................................................................................
LQ-2._____ The transactions related to the furniture are as below:
1 January, 2001 Purchased furniture Rs.50,000
1 July, 2001 Additional furniture purchased Rs.10,000
1 April, 2002 Further addition of furniture Rs.40,000
1 January, 2003 Furniture purchased on January, 2001 has been disposed for Rs.35,000.
Depreciation has been charged @ 10% per annum using straight line method. The accounts are closed on 31st December
each year.
Required: Furniture account from 2001 to 2003
Solution,
Dr. Furniture Account Cr.
Date Particulars JF Amount (Rs.) Date Particulars JF Amount (Rs.)
2058-7-1 To Cash .................................................................5..0..,.0..0..0...........2..0..5..8..-..1..2..-.3..1......B..y...D..e..p...r.e..c..ia..t.i.o..n....................................................................5..,.5...0..0......................................................
7-1 To Cash .................................................................1..0..,.0..0..0.....................1..2..-.3..1......B..y...B..a..l.a..n..c..e...c../.d...................................................................5..4..,.5..0...0......................................................
60,000 60,000
2059-1-1 To Balance b/d.......................................................5..4..,.5..0..0...........2..0..5..9..-..1..2..-.3..1......B..y...D..e..p...r.e..c..ia..t.i.o..n....................................................................9...,0...0..0......................................................
4-1 To Cash .................................................................4..0..,.0..0..0.....................1..2..-.3..1......B..y...B..a..l.a..n..c..e...c../.d...................................................................8..5..,.5..0...0......................................................
94,500 94,500
2060-1-1 To Balance b/d.......................................................8..5..,.5..0..0...............2..0..6..0...-.1..-.1......B..y...D..e..p...r.e..c..ia..t.i.o..n............................................................................-......................................................
1-1 By Cash............................................................................3..5..,.0..0...0......................................................
1-1 By Loss on sale..................................................................5..,.0...0..0......................................................
12-31 By Depreciation..................................................................5..,.0...0..0......................................................
12-31 By Balance c/d .................................................................4..0..,.5..0...0......................................................
85,500 85,500
2061-1-1 To Balance b/d 40,500
LQ-3._____ A company has followed straight line depreciation policy. Depreciation is provided at 10% per annum. The
accounts are closed on 31st December each year. On 1st January 2002, the company purchased a machinery for
Rs.2,00,000. Addition was made to the extent of Rs.1,00,000 on 1st July 2003. On 30th June 2004, machinery purchased on
January 1, 2002 was sold for Rs.1,60,000 and on the same date a new machine costing Rs.1,50,000 was purchased.
Required: Machinery Account from 2002 to 2004
Accounting for Fixed Assets CHAPTER 11 129
Solution, Machinery Account using Straight Line Method Cr.
Dr.
Date Particulars JF Amount (Rs.) Date Particulars JF Amount (Rs.)
2002-1-1 To Bank A/c .........................................................2..0..0..,.0..0..0......2..0..0..2..-.1..2..-.3..1............B..y...D..e..p...r.e..c..ia..t.i.o..n..................................................................2..0..,.0..0...0......................................................
2003-1-1 02-12-31 By Balance c/d ...............................................................1..8..0...,0...0..0......................................................
2003-7-1 200,000 200,000
2004-1-1 To Balance b/d.....................................................1..8..0..,.0..0..0......2..0..0..3..-.1..2..-.3..1............B..y...D..e..p...r.e..c..ia..t.i.o..n...a../.c..(.2...0..,.0..0..0..+..5..,.0..0..0..)..................................2..5...,0..0...0......................................................
2004-6-30
2004-6-30 2003-12-31 By Balance c/d ...............................................................2..5..5...,0...0..0......................................................
2005-1-1 To Bank A/c .........................................................1..0..0..,.0..0..0................................................................................................................................
280,000 280,000
To Balance b/d.....................................................2..5..5..,.0..0..0......2..0..0..4..-.6..-.3..0..............B..y...D..e..p...r.e..c..ia..t.i.o..n...a../.c............................................................1..0...,0..0...0......................................................
To Bank A/c .........................................................1..5..0..,.0..0..0......2..0..0..4..-.6..-.3..0..............B..y...B..a..n..k...A.../.c..(..s..a..le..)...........................................................1..6...0..,0...0..0......................................................
To P/L A/c (gain)....................................................1..0..,.0..0..0......2..0..0..4..-.1..2..-.3..1............B..y...D..e..p...r.e..c..ia..t.i.o..n...a../.c..(.1...0..,.0..0..0..+..7..,.5..0..0..)..................................1..7..,.5..0...0......................................................
2004-12-31 By Balance c/d ...............................................................2..2..7...,5...0..0......................................................
415,000 415,000
To Bal. b/d............................................................2..2..7..,.5..0..0................................................................................................................................
LQ-4._____ Following information relating to machine are given:
2062 Baishakh 1 Purchased machine for Rs.4,00,000
2063 Ashwin 1 Purchased another machine for Rs.4,00,000
2064 Baishakh 1 Machinery installed on Baishakh 1, 2062 is disposed off for Rs.3,60,000. A third machine of
Rs.4,00,000 purchased and installed in same day. Installation cost Rs.20,000
Chaitra end each year: Account closing date
Rate of depreciation: 10% per annum
Required: Machinery account from 2062 to 2064 under straight line method.
Solution,
Dr. Machine Account Cr.
Date Particulars JF Amount (Rs.) Date Particulars JF Amount (Rs.)
2062-1-1 To bank a/c (i)......................................................4..0..0..,.0..0..0......2..0..6..2..-.1..2..-.3..1............B..y...D..e..p...r.e..c..ia..t.i.o..n...a../.c............................................................4..0..,.0..0...0......................................................
2062-12-31 By balance c/d................................................................3..6..0...,0...0..0......................................................
400,000 400,000
2063-1-1 To Balance b/d.....................................................3..6..0..,.0..0..0......2..0..6..3..-.1..2..-.3..1............B..y...D..e..p...r.e..c..ia..t.i.o..n...a../.c...(.i.).......................................................4..0...,0..0...0......................................................
2063-12-31 By Depreciation a/c (ii).....................................................2..3..,.3..3...3......................................................
2063-6-1 To Bank a/c (ii).....................................................4..0..0..,.0..0..0......2..0..6..3..-.1..2..-.3..1............B..y...B..a..l.a..n..c..e...c../.d.................................................................6..9...6..,6...6..7......................................................
760,000 760,000
2064-1-1 To Balance b/d.....................................................6..8..6..,.6..6..7......2..0..6..4..-.1..-.1................B..y...B..a..n..k...a../.c......................................................................3..6...0..,0...0..0......................................................
2064-1-1 To P/L a/c (gain) ....................................................4..0..,.0..0..0......2..0..6..4..-.1..-.1................B..y...D..e..p...r.e..c..ia..t.i.o..n...a../.c...(.i.i.)......................................................4..0..,.0..0...0......................................................
2064-1-1 To Bank a/c (iii)....................................................4..2..0..,.0..0..0......2..0..6..4..-.1..2..-.3..1............B..y...D..e..p...r.e..c..ia..t.i.o..n...a../.c...(.i.i.i.).....................................................4..2..,.0..0...0......................................................
2064-12-31 By Balance c/d ...............................................................7..1..4...,6...6..7......................................................
1,156,667 1,156,667
2065-1-1 To Balance b/d 714,667
LQ-5._____ (Purchase and sales of asset), ABC Company purchased machinery on 1st July 2014 costing Rs. 450,000. On
the same date the company spent Rs. 25,000 for its erection. On 1st October 2015, additional Machinery was purchased for
Rs. 450,000. On 1st October 2016, the machine which was purchased on 1st July 2014 was sold for Rs. 265,000. The
machinery is being depreciated @10% under original cost method. The accounts are closed on 30th June every year.
Required: Machinery A/c & Depreciation A/c for first three years
Solution,
Machinery Account
Dr. Under straight line method Cr.
Date Particulars Amount (Rs.) Date Particulars Amount (Rs.)
2014-July 1 To bank A/c (450,000 + 25,000) 475,000 2015 June 30 By depreciation A/c 47,500
" By balance c/d 427,500
475,000 475,000
2015 July 1 To balance b/d 427,500 2016 June 30 By depreciation A/c (47,500 + 45,000 × 192) 81,250
Oct. 1 To bank A/c 450,000 By balance c/d 796,250
"
877,500 877,500
2016 July 1 To balance b/d 796,250 2016 Oct 1 By bank A/c 265,000
2017 June-30 By depreciation A/c for 3 month (47,500 × 132) 11,875
" By profit & loss A/c (loss) 103,125
By depreciation on 2nd machine 45,000
By balance c/d 371,250
796,250 796,850
2017 July 1 To balance b/d 3,71,250
130 Accounting-XI
Calculation of book value of sold machine
a. Book value = Original cost – Total dep. = 475,000 – (47,500 + 47,500 + 11,875) = Rs. 368,125
b. Loss = Book value – Sale value = 368,125 – 265,000 = Rs. 103,125
LQ-6._____ (Finding original cost and Purchase and Sales of assets), In the book of Karun Ltd. the balance value of plant
as on 1st January 2014 was shown as Rs. 420,000. This plant was purchased on 1st January 2012. On 1st July 2014 second
plant was purchased for Rs. 250,000. On 1st July 2015, the plant purchased on 1st January 2012 was disposed of for Rs.
375,000 and on the same date third plant was purchased for Rs. 550,000. The rate of depreciation provided by the
company was 10% p.a. The company closed the account at the end of December every year. The company adopted the
fixed installment method of deprecation.
Required: a. Original cost of first plant b. Plant account for 2014 to 2016
Solution,
Calculation of original cost of plant
Plant purchased on 1st January 2004 = ?
Book value of plant on 1st Jan. 2006 = Rs. 420,000
Depreciation charged on plant for 2004 and 2005 = 10% + 10% = 20%
420000
Original cost of plant = 100 – 20% × 100% = Rs. 525,000
Karun Ltd.
Dr. Plant Account under straight line method Cr.
Date Particulars Amount (Rs.) Date Particulars Amount (Rs.)
2014 -1-1 To balance b/d 420,000 2014 -12-31 By depreciation A/c (52,500 + 25,000 × 65,000
2014 -7-1 To bank A/c 250,000 162) 605,000
" By balance c/d 670,000
375,000
2015 -1-1 To balance b/d 670,000 By bank A/c 26,250
2015 -7-1 To profit & loss A/c (profit) 605,000 2015-7-1 By depreciation on sold plant for 6
2015 -7-1 To bank A/c 33,750 6 52,500
550,000 months (52,500 × 12 ) 735,000
11,88,750
By depreciation A/c (25,000 + 55,000 × 6 ) 80,000
12 655,000
735,000
11,88,750 By balance c/d
735,000 2016-12-31
2016-1-1 To balance b/d " By depreciation A/c (25,000 + 55,000)
2017-1-1 To balance b/d 735,000 By balance c/d
655,000
Working Note:
Calculation book value of sold plant Calculation of profit of loss
Book value = Original cost – Total depreciation Profit = Sale value – Book value= 375,000 – 341,250= Rs. 33,750
= 525,000 – (52,500 + 52,500 + 52,500 + 26,250) = Rs. 341,250
LQ-7._____ (Finding original cost and Purchase and Sales of assets at profit) In the book of K. Ltd. the balance value of
plant as on 1st January 2014 was shown as Rs. 480,000. This plant was purchased on 1st January 2012. On 1st July 2014
second plant was purchased for Rs. 250,000. On 1st July 2015, the plant purchased on 1st January 2012 was disposed of
for Rs. 410,000 and on the same date third plant was purchased for Rs. 200,000. The rate of depreciation provided by the
company was 10% p.a. The company closed the account at the end of December every year. The company adopted the
fixed installment method of deprecation.
Required: a. Original cost of first plant b. Plant account for 2014 to 2016
Solution,
Plant Account
Dr. Under Fixed Installment method Cr.
Date Particulars Amount (Rs.) Date Particulars Amount (Rs.)
2014-1-1 To balance b/d 480,000 2014-12-31 6 72,500
2014-7-1 To bank A/c 250,000 By Depreciation A/c (60,000 + 25,000 × 12 657,500
" )
By balance c/d
730,000 By bank A/c 730,000
2015-1-1 To balance b/d 657,500 2015-7-1 By Depreciation on sold plant 410,000
2015-7-1 To bank P/c 200,000 " By Depreciation on remaining plant 30,000
2015-7-1 To profit on sale of plant 20,000 2015-12-31 (25,000 + 20,000 × 162) 35,000
By balance c/d 402,500
"
2016-7-1 To balance b/d 877,500 877,500
402,500 2016-12-31 By Depreciation A/c (25,000 + 20,000) 45,000
By balance c/d 357,500
402,500 402,500
2017-1-1 To balance b/d 357,500
Accounting for Fixed Assets CHAPTER 11 131
Calculate on of original cost of 1st plant Calculation of book value of sold machine
Book value of 1st plant on 2014-1-1 = Rs. 480,000 Book value = Original cost – Total Depreciation
Depreciation charged on 2012 and 2013 = 10% + 10% = 20%
Balance value of 1st plant = 100% - 20% = 80% = 600,000 – (60,000 + 60,000 + 60,000 + 30,000)
480‚000 = Rs. 390,000
Original cost of 1st plant on 2012-1-1 = 80 × 100 Profit = Sale value – Book value = 410,000 – 390,000 = Rs. 20,000
= Rs. Rs. 600,000
Diminishing Balance Method
LQ-8._____ The transactions related to Machinery are given below:
1 January 2003 Opening balance of machinery Rs.80,000
1 July 2003 Machinery purchased of Rs.30,000
30 December 2004 The first machine became obsolete and sold for Rs.60,000
1 January 2005 A new machinery was purchased for Rs.50,000
Required: Machinery account from 2003 to 2005 by providing depreciation at 10% p.a. on reducing balance method
Solution,
Dr. Truck Account Cr.
Date Particulars JF Amount (Rs.) Date Particulars JF Amount (Rs.)
2003-1-1 To Balance b/d.......................................................8..0..,.0..0..0..........2..0..0..3...–..1..2..-.3..1......B..y...D..e..p...r.e..c..ia..t.i.o..n....................................................................9...,5...0..0......................................................
7-1 To Cash .................................................................3..0..,.0..0..0.....................1..2..-.3..1......B..y...B..a..l.a..n..c..e...c../.d.................................................................1..0..0...,5...0..0......................................................
110,000 110,000
2004-1-1 To Balance b/d.....................................................1..0..0..,.5..0..0...........2..0..0..4..-..1..2..-.3..1......B..y...D..e..p...r.e..c..ia..t.i.o..n....................................................................7...,2...0..0......................................................
12-31 By Cash............................................................................6..0..,.0..0...0......................................................
12-31 By Loss on sale..................................................................4..,.8...0..0......................................................
12-31 By Depreciation..................................................................2..,.8...5..0......................................................
12-31 By Balance c/d .................................................................2..5..,.6..5...0......................................................
100,500 100,500
2005-1-1 To Balance b/d.......................................................2..5..,.6..5..0...........2..0..0..5..-..1..2..-.3..1......B..y...D..e..p...r.e..c..ia..t.i.o..n....................................................................7...,5...6..5......................................................
1-1 To Cash .................................................................5..0..,.0..0..0.....................1..2..-.3..1......B..y...B..a..l.a..n..c..e...c../.d...................................................................6..8..,.0..8...5......................................................
75,650 75,650
2006-1-1 To Balance b/d.......................................................6..8..,.0..8..5................................................................................................................................
LQ-9._____ Following transactions are related to machinery.
Shrawan 1, 2058 A machinery was purchased for Rs.3,00,000
Chaitra 30,2058 Second machinery was purchased for Rs.2,00,000.
Paush 30, 2060 First machinery became absolute and sold for Rs.2,00,000.
Shrawan 1, 2061 Third machinery was purchased for Rs.3,00,000.
Depreciation charged @ 10% p.a. on reducing balance method, and machinery account is closed on Ashadh end each year.
Required: Machinery account from FY 2058/59 to 2061/62
Solution,
Dr. Machine Account Cr.
Date Particulars JF Amount (Rs.) Date Particulars JF Amount (Rs.)
2058-4-1 To Cash ...............................................................3..0..0..,.0..0..0............2..0...5..9..–..3..-.3..1......B..y...D..e..p...r.e..c..ia..t.i.o..n..................................................................3..5..,.0..0...0......................................................
12-30 To Cash ...............................................................2..0..0..,.0..0..0.......................3..-.3..1......B..y...B..a..l.a..n..c..e...c../.d.................................................................4..6..5...,0...0..0......................................................
500,000 500,000
2059–4-1 To Balance b/d.....................................................4..6..5..,.0..0..0............2..0...6..0..–..3..-.3..1......B..y...D..e..p...r.e..c..ia..t.i.o..n..................................................................4..6...,5..0...0......................................................
3-31 By Balance c/d ...............................................................4..1..8...,5...0..0......................................................
465,000 465,000
2060–4-1 To Balance b/d.....................................................4..1..8..,.5..0..0.............2..0..6..0..-..9..-.3..0......B..y...D..e..p...r.e..c..ia..t.i.o..n..................................................................1..2...,1..5...0......................................................
9-30 By Cash..........................................................................2..0..0...,0...0..0......................................................
9-30 By Loss on sale................................................................3..0..,.8...5..0......................................................
2061
3-31 By Depreciation................................................................1..7..,.5..5...0......................................................
3-31 By Balance c/d ...............................................................1..5..7...,9...5..0......................................................
418,500 418,500
2061-4-1 To Balance b/d.....................................................1..5..7..,.9..5..0.............2..0..6..2..-..3..-.3..1......B..y...D..e..p...r.e..c..ia..t.i.o..n..................................................................4..5...,7..9...5......................................................
4-1 To Cash ...............................................................3..0..0..,.0..0..0.......................3..-.3..1......B..y...B..a..l.a..n..c..e...c../.d.................................................................4..1..2...,1...5..5......................................................
457,950 457,950
2062–4-1 To Balance b/d.....................................................4..1..2..,.1..5..5................................................................................................................................
LQ-10.____ The following information of purchase and sale of assets of a company is provided to you:
Date Particulars
1 January 2013 Machinery purchased for Rs.250,000
1 July 2014 Second Machinery purchased for Rs.200,000
31 December 2014 The first Machine sold for Rs.139,000
1 July 2015 The third Machine purchased for Rs.100,000
Accounts are closed on 31st December each year. The company charges depreciation at the rate of 10% on Diminishing
balance method.
Required: Machinery account for the first four years
132 Accounting-XI
Solution, Machinery Account
Dr. Under Diminshing balance method Cr.
Amount (Rs.)
Date Particulars Amount (Rs.) Date Particulars
25,000
2013 -1-1 To bank A/c 250,000 2013 -12-31 By depreciation A/c 225,000
" By balance c/d 250,000
139,000
250,000
32,500
2014 -1-1 To balance b/d 225,000 2014 -12-31 By bank A/c 63,500
2014- 7-1 To bank A/c 200,000 " By depreciation A/c (22,500 + 20,000 × 190,000
162)
425,000
By P & L A/c (Loss)
By balance b/d 24,000
266,000
4,25,000
290,000
2015 -1-1 To balance b/d 190,000 2015 -12-31 By depreciation A/c (19,000 + 10,000 × 26,600
2015 - 7-1 To bank A/c 100,000 162) 239,400
266,000
"
By balance c/d
290,000
2016-1-1 To balance b/d 266,000 2016 -12-31 By dep A/c
" By balance c/d
266,000
2017-1-1 To balance b/d 239,400
Calculation of book – Value
Original cost = Rs. 250,000
Less: depreciation for 2013 = 25,000
225,000
Less: dep for 2014 = 22,500
202,500
Loss = Book value – Sale value = 202,500 – 139,000 = 63,500
LQ-11.____ (Finding original cost and Purchase and Sales of assets), In the book of Kabin Ltd. the balance value of plant
as on 1st January 2014 was shown as Rs. 320,000. This plant was purchased on 1st January 2012. On 1st July 2014 second
plant was purchased for Rs. 250,000. On 1st July 2015, the plant purchased on 1st January 2012 was disposed off for Rs.
175,000 and on the same date third plant was purchased for Rs. 600,000. The rate of depreciation provided by the
company was 20% p.a. The company closed the account at the end of December every year. The company adopted the
diminishing balance method of deprecation.
Required: a. Original cost of first plant b. Plant account for 2014 to 2016
Solution, Plant Account
Dr. Under DBM Cr.
Date Particulars Amount (Rs.) Date Particulars Amount (Rs.)
2014 -1-1 To balance b/d
2014- 7-1 To bank A/c 320,000 2014 -12-31 By depreciation A/c (64,000 + 50,000 × 6 89,000
250,000 12 481,000
) 570,000
By balance c/d 175,000
25,600
2015 -1-1 To balance b/d 570,000 By bank A/c 55,400
2015- 7-1 To bank A/c By dep A/c on sold plant
481,000 2015 -7-1 By P & C A/c (Loss) 105,000
600,000 " By depreciation A/c (45,000 + 120,000 × 162) 720,000
10,81,000
2015 -12-31 By balance c/d 144,000
" 576,000
720,000
2016 -1-1 To balance b/d 10,81,000 By depreciation A/c
2017 -1-1 To balance b/d 720,000 2016 -12-31 By balance c/d
"
720,000
576,000
Calculation of original cost
a. Book value of plant on 2014-1-1 = Rs. 320,000 b. Calculation of book value
Book value of plant on 2013-1-1 = 320000 × 100% = Rs. 400,000 Book value on 2014-1-1 = 320,000
100 – 20 = 64,000
= 256,000
Less dep. 2015 for = 256,000 Less: Dep. of for 2014
= 25,600
Book Value on 1-1-2015 = 2,30,400
Again original cost of plant on 2012-1-1 = 400000 × 100%Less: Depreciation (6 months)
100 – 20
= 500,000 Book value on 1-7-2015
c. Loss = Book value – Sale value = 230,400 – 175,000 = Rs. 55,400
Accounting for Fixed Assets CHAPTER 11 133
LQ-12.____ A business firm purchased an equipment for Rs.1,00,000 on 1st April 2002. On 1st October 2004, one fourth of the
equipment was found unsuitable and disposed off at Rs.15,000. On the same day, a new equipment costing Rs.80,000 was
purchased. Depreciation is provided at the rate of 20% on written down value. Draw machinery account for 2002 to 2005
assuming that the annual closing day is last day of the calendar year.
Solution:
Machinery Account
Dr. under written down value method Cr.
Date Particulars JF Amount (Rs.) Date Particulars JF Amount (Rs.)
2002-4–1 To Bank A/c 1,00,000 2002-12–31 By Depreciation A/c 15,000
(price of the first machine)
'' By Balance c/d 85,000
1,00,000 1,00,000
2003-1–1 To Balance b/d 85,000 2003-12-31 By Depreciation A/c (dep. of the year) 17,000
'' By Balance c/d 68,000
2004-1–1 85,000 85,000
10–1 To Balance b/d 68,000 2004-10-1 By Depreciation A/c 2,550
To Profit and loss account 550 '' By Bank A/c 15,000
(gain on sale of machine)
'' To Bank A/c ..........................................................8..0..,.0..0..0......1..2..–..3..1....................B..y...D..e..p...r.e..c..ia..t.i.o..n...A.../.c...........................................................2..2..,.2..0...0......................................................
(price of the first plant)
By Balance c/d .............................................................1..,.0..8..,.8..0...0......................................................
1,48,550 1,48,550
2005 1–1 To Balance b/d....................................................1..,.0..8..,.8..0..0......2..0..0..5..-.1..2..-.3..1............B..y...D..e..p..r.e..c..i.a..t.io..n...A.../.c..(..d..e..p...o..f..t.h..e...y..e..a..r.)................................2..1...,7..6...0......................................................
'' By Balance c/d ................................................................8..7..,.0..4...0......................................................
1,08,800 1,08,800
2006-1–1 To Balance b/d.......................................................8..7..,.0..4..0................................................................................................................................
Working notes:
i. Calculation of depreciation @ 20% on written down value
Particulars Whole First machine Remaining Second machine
One fourth 75,000
11,250 -
Original value in 2002 1,00,000 25,000 63,750 -
12,750 -
Less: dep. for 9 months 15,000 3,750 51,000 -
10,200 80,000
Book value for 2003 85,000 21,250 40,800 12,000
8,160 68,000
Less: dep. of the year 17,000 4,250 32,640 13,600
54,400
Book value for 2004 68,000 17,000
Less: dep. for 2004 12,750 2,550
Book value remained/ for 2005 55,250 14,450
Less: dep. for the year
Book value for 2006
ii. Calculation of gain on sale of machine
Gain on sale of machine = sale value – book value = 15,000 – 14,450 = Rs.550
LQ-13.____ The machinery account of a company showed debit balance of Rs.75,000 on 1st Baisakh 2061. The company
provides depreciation at the rate of 10% under the diminishing balance method. The company added a new machine for
Rs.50,000 on 1st Shrawan 2061. On 1st Kartik 2062, a part of machinery purchased on 1st Shrawan 2061 at Rs.30,000
was sold for Rs.25,300. On the same date a new machine costing Rs.30,000 was installed at a cost of Rs.2,000.
Required: Machinery account from 1st Baisakh 2061 to last Chaitra 2063.
Solution,
Machinery Account
Dr. under diminishing balance method Cr.
Date Particulars JF Amount (Rs.) Date Particulars JF Amount (Rs.)
2061-1-1 To balance b/d 75,000 2061-12–31 By depreciation A/c (dep. of the year) 11,250
4–1 To bank A/c 50,000 '' By balance c/d (balancing figure) 1,13,750
(price of the new machine)
1,25,000 1,25,000
2062-1-1 To balance b/d 1,13,750 2062-7-1 By depreciation A/c 1,387.5
(dep. of sold machine)
7-1 To bank A/c 32,000 '' By bank A/c 25,300
(cost of second new machine) (sale value of the sold machine)
'' By profit and loss account 1,062.5
(loss on sale of machine)
12-31 By depreciation A/c (dep. of the year) 10,200
'' By balance c/d (balancing figure) 1,07,800
1,45,750 1,45,750
2063-1-1 To balance b/d 1,07,800 2063-12-31 By depreciation A/c (dep. of the year) 10,780
'' By balance c/d (balancing figure) 97,020
1,07,800 1,07,800
2064-1-1 To balance b/d 97,020
134 Accounting-XI
Working notes:
i. Calculation of depreciation @ 10% on diminishing balance
Particulars First new machine Second new machine Old machine
Part Remaining
75,000
Original value in 2061...................................................................................3..0..,.0..0..0...............................2..0..,.0..0..0.................................................. 7,500
67,500
Less: dep. for 9 months..................................................................................2..,.2..5..0.................................1..,.5..0..0.................................................. 6,750
60,750
Book value for 2062 ...................................................................................2..7..,.7..5..0...............................1..8..,.5..0..0...................................3..2..,.0..0...0..... 6,075
54,675
Less: dep. of the year..................................................................................1..,.3..8..7...5.................................1..,.8..5..0.....................................1..,.6...0..0.....
Book value for 2063 ................................................................................2..6..,.3..6..2...5...............................1..6..,.6..5..0...................................3..0..,.4..0...0.....
Less: dep. for 2063.................................................................................................................................1..,.6..6..5.....................................3..,.0...4..0.....
Book value remained for 2005 ..........................................................................................................1..4..,.9..8..5...................................2..7..,.3..6...0.....
ii. Calculation of loss on sale of machine
Loss on sale of machine = book value – sale value = 26,362.5 – 25,300 = Rs.1,062.5
LQ-14.____ (Finding original cost and Purchase and Sales of assets), In the book of K. Ltd. the balance value of plant as
on 1st January 2014 was shown as Rs. 486,000. This plant was purchased on 1st January 2012. On 1st July 2014 second
plant was purchased for Rs. 450,000. On 1st July 2015, the plant purchased on 1st January 2012 was disposed of for Rs.
410,000 and on the same date third plant was purchased for Rs. 200,000. The rate of depreciation provided by the
company was 10% p.a. The company closed the account at the end of December every year. The company adopted the
diminishing balance method of deprecation.
Required: a. Original cost of first plant b. Plant account for 2014 to 2016
Solution,
Book value of plant on 2014-1-1 = Rs. 486,000
" " 486000
" " " 2015-1-1 = 90 × 100 = 540,000
Again: " 540000
" " " 2012-1-1 = 90 × 100 = Rs. 600,000
Dr. Plant Account under diminishing balance method Cr.
Date Particulars Amount (Rs.) Date Particulars Amount (Rs.)
By Depreciation A/c (48,600 + 45,000 × 162) 71,100
2014-1-1 To Balance b/d 486,000 2014-12-31 By Balance c/d 864,900
2014-7-1 To Bank A/c 450,000
By Bank A/c 936,000
" By Depreciation for 6 month 410,000
By Profits and loss A/c 218,70
936,000 By Depreciation A/c (42,750 + 10,000)
By Balance c/d 5,530
2015-1-1 To Bal b/d 864,900 2015-7-1 52,750
2015-7-1 To Bank A/c 200,000 By Depreciation A/c 574,750
By balance c/d 10,64,900
" 57,475
517,275
2016-1-1 To Bal b/d 10,64,900 574,750
574,750 2016-12-31
2017-1-1 To Bal b/d "
574,750
517,275
Working Notes:
Book value of sold plant on 2014-1-1 = 486,000
Less: depreciation for 2014 48,600
437,400
Less: Depreciation for 2015for 6 months = 21,870
415,530
Loss = Book value – Sales value = 415,530 – 410,000 = 5,530
Change method
LQ-15.____ A company has been using a plant manufactured in its workshop since July 1, 2007. The manufacturing of the
plant in the workshop consumed materials costing Rs. 150,000 wages Rs. 30,000 and chargeable expenses of Rs. 20,000.
Depreciation at 10% per annum has been charged under the original cost method. The company closes its account on 31st
December every year. The company decided in 2010 end to change the method of depreciation to diminishing balance
method at 15% per annum with retrospective effective from 2007.
Required: Plant account for the first 4 year
Accounting for Fixed Assets CHAPTER 11 135
Solution:
Plant Account
Dr. Depreciation under SLM to WDV Cr.
Date Particulars Amount Date Particulars Amount
1-1-2007 To bank b/d 10000
200000 31-12-2007 By depn a/c 190000
'' By bal. c/d 200000
20000
200000 170000
190000
1-1-2008 To balance b/d 190000 31-12-2008 By depn a/c 20000
'' By bal. c/d 150000
170000
190000
20049.37
1-1-2009 To balance b/d 170000 30-12-2009 By depn a/c 16337.50
113613.13
'' By bal/ c/d
150000
170000
WDV
1-1-2010 To balance b/d 150000 31-12-2010 By depn (15% of 133662.50) 200000
By depn adj. (Under charged) 15000
By balance c/d 185000
27750
150000 157250
1-1-2011 To balance b/d 113613.13 23587.50
133662.50
Working note: Rs 66337.50
SLM
Cost on 1-7-2007 ...................................................................................................................................................................2..0..0..0..0..0...............
Less: depreciation....................................................................................................................................................................1..0..0..0..0...............
B.V 1-1-2008..........................................................................................................................................................................1..9..0..0..0..0...............
Less: depreciation....................................................................................................................................................................2..0..0..0..0...............
B.V 1-1-2009..........................................................................................................................................................................1..7..0..0..0..0...............
Less: depreciation....................................................................................................................................................................2..0..0..0..0...............
B.V 1-1-2010..........................................................................................................................................................................1..5..0..0..0..0...............
Total depreciation Rs 50000
Excess depreciation to be charged = 66337.50 - 50000 = Rs 16337.50
LQ-16.____ Plant account of a company has debit balance of Rs. 680,000 on 1-1-2005. The plant were purchased on 1-7-2003.
Depreciation of 10% p.a. was charged on original cost. The company has sold a plant costing Rs. 200,000 for Rs. 144,000
on 01-07-2005. The company has been using calendar year and decided to close the plant account on 31-12-2005 by
applying reducing balance method with retrospective effects from 1-7-2003 using same rate.
Required: Plant Account for 2004 and 2005
Solution:
Working Note: Original cost of machine on 1-7-2003 = 680000 × 100 = Rs 800000
85
Book value on 1-1-2004 = 800000 – 10% of 800000 × 6 = 800000 – 40000 = Rs 760000
12
Book value of sold machine = 200000 – 10000 – 20000 – 10000 = Rs 160000
Loss on sale = 160000 – 144000 = Rs 16000
Calculation of difference in depreciation
SLM WDV
600000
Remaining cost 1-7-2003 600000 30000
570000
Less: depreciation(6 m) 30000 57000
B.V 1-1-2004 570000 513000
Less: depreciation 60000
B.V 1-1-2005 510000 Rs 87000
Total depreciation Rs 90000 Cr.
Amount
Depreciation over charged on SLM = 90000 - 87000 = Rs 3000
80000
Now, 680000
760000
Plant Account 10000
144000
Dr. Depreciation under SLM to WDV 16000
51300
Date Particulars Amount Date Particulars 461700
683000
1-1-2004 To balance b/d 760000 31-12-2004 By depn a/c (10%)
'' By bal. c/d
760000
1-1-2005 To balance b/d 680000 1-7-2005 By depn on sold machine
31-12-2005 To depn overcharged a/c 3000 '' By Bank a/c
'' By loss on sale a/c
31-12-2005 By depn a/c (10% of 513000)
'' By balance c/d
683000
1-1-2006 To balance b/d 461700
136 Accounting-XI
LQ-17.____ On Kartik 1, 2066, X Ltd. purchased a plant for Rs. 52,000. On Sharwan 1 2067 another plant was purchased for
Rs. 30,000. Depreciation was provided @ 10% p.a. on the original cost on Chaitra 31 every year. With effect from Baishakh
1, 2069, the company decided to change the method of depreciation to diminishing balance method @ 12%. On Marg 1,
2069, a plant was sold for Rs. 18,300 which was installed on Shrawan 1, 2067.
Required: Plant a/c for the year 2066 to 2069 (prospective effect)
Solution:
Dr. Plant Account (Prospective Effect) Cr.
Date Particulars Amount Date Particulars Amount
01/07/2066 To Bank A/c (I) ...........................................5..2..,.0..0..0.........3..1../.1..2../.2..0..6..6.........B...y...D..e..p..r.e..c..i.a..t.i.o..n...A.../.c......................................................................2..,.6..0..0......................................................
31/12/2066 By Balance c/d ..........................................................................4..9..,.4..0..0......................................................
01/01/2067 52,000 52,000
01/04/2067 To Balance b/d (I).......................................4..9..,.4..0..0.........3..1../.1..2../.2..0..6..6.........B...y...D..e..p..r..e.c..i.a..t.i.o..n...A.../.c..(..5..,.2..0..0...+...2..,.2..5..0..)............................................7..,.4..5..0......................................................
To Bank (II).................................................3..0..,.0..0..0.........3..1../.1..2../.2..0..6..6.........B...y...B..a..l.a..n..c..e...c../.d...(.4..4..,.2..0..0...+...2..7..,.7..5..0..)..............................................7..1..,.9..5..0......................................................
79,400 79,400
01/01/2068 To Balance b/d ...........................................7..1..,.9..5..0.........3..1../.1..2../.2..0..6..8.........B...y...D..e..p..r.e..c..i.a..t.i.o..n...A.../.c..(..5..2..0..0...+...3..0..0..0..)..............................................8..,.2..0..0......................................................
31/12/2068 By Balance c/d (39,000 + 24,750) ...........................................6..3..,.7..5..0......................................................
01/01/2069 To Balance b/d ...........................................67..13..,,.97..55..00.........0300..1111..////.0010..8828..////.2222..0000..6666..9999.........BBBBB...yyyyy...BPBDD..raaee.o.lnpp.af.kirr.ntee..cAacc..enii/.aac.d.ctt.ii../ooL..d..nno.....s...oo...s...nn......A...sr...e/...oc...m...l...d(...al...o...p...ins...a...si...rn...)t...g....(....I....(I....)I....)............................................................................................................................................................................................4....1371....,....471847........,1,,,3....6933....72....2508..........050500........................................................................................................................................................................................................................
63,750 63,750
01/01/2070 To Balance b/d ...........................................3..4..,.3..2..0......................................................................................................................................................
VERY SHORT ANSWER QUESTIONS
VQ-1._____ The provision for doubtful debts accounting in the beginning of the year showed a credit balance of Rs. 5,000 and
after provision of Rs. 4,000 the ending balance on the same account showed credit balance of Rs. 7,000
Required: Provision for doubtful debt account
Solution,
Provision for Doubtful Debt Account
Particulars Amount Rs. Particulars Amount Rs.
To Bad debts a/c (Balancing figure).........................................................8..,.0..0..0.....B...y...B..a..l.a..n..c..e...b../.d...........................................................................................5..,.0...0..0......................................................
To Balance c/d..........................................................................................4..,.0..0..0.....B...y...P..r.o..f.i.t..a..n..d...l.o..s..s...a../.c...(.B..a...l..F...ig...)................................................................7..,.0...0..0......................................................
12,000 12,000
VQ-2. _____ The following information is extracted from the Trial Balance of a trader.
Particulars Debit Rs. Credit Rs.
–
Sundry debtors ........................................................................................................................................................................................4..0..,.0..0. 0 –
Bad debts...................................................................................................................................................................................................1..,.0..0. 0
Opening provision for bad debts ..................................................................................................................................................................... – 1,500
The firm has a policy to maintain a provision for bad debt at 5% of the debtors.
Required: Provision for bad debts account
Solution,
Dr. Provision for Bad Debts Account Cr.
Date Particulars JF Amount Date Particulars JF Amount
To Bad debts a/c...............................................................1..,.0..0..0..........................B...y...B..a..l.a..n..c..e...b../.d..........................................................................1..,.5...0..0......................................................
To Balance c/d ..................................................................2..,.0..0..0..........................B...y...P..r.o..f.i.t..a..n..d...l.o..s..s...a../.c................................................................1..,.5...0..0......................................................
3,000 3,000
VQ-3. _____ On Baishakh 20X1, provision for bad and doubtful debt account of a firm showed a credit balance of Rs. 3,500.
Bad debts during the year 20X1 was Rs. 2,000. The debtors on 31st Chaitra, 20X1 was Rs. 60,000. The firm decided to
maintain 5% provision for bad and doubtful debt.
Required: Provision for bad and doubtful debt account.
Solution,
Dr. Provision for Doubtful Debt Account Cr.
Date Particulars JF Amount Rs. Date Particulars JF Amount Rs.
To Bad debt a/c.................................................................2..,.0..0..0..........................B...y...B..a..l.a..n..c..e...b../.d..........................................................................3..,.5...0..0......................................................
To Balance c/d ..................................................................3..,.0..0..0..........................B...y...P..r.o..f.i.t..a..n..d...l.o..s..s...a../.c................................................................1..,.5...0..0......................................................
5,000 5,000
VQ-4._____ The following information are provided to you:
i. Closing balance of debtors Rs. 32,000
ii. Bad debts written off during the year Rs.800
iii. Opening provision for bad debts Rs.1,200
iv. The provision of bad debts has been maintained at 5% of the debtors
Required: Provision for doubtful debts account
Solution,
Dr. Provision for doubtful debts account Cr.
Date Particulars JF Amount (Rs.) Date Particulars JF Amount (Rs.)
To bad debts ...............................................................8..0..0.................................B...y...B..a..l.a..n..c..e...b../.d.....................................................................1..,.2...0..0......................................................
To balance c/d .........................................................1..,.6..0..0.................................B...y...P..r.o..f.i.t..&...L...o..s.s...A.../.c.............................................................1...,2...0..0......................................................
2,400 2,400
VQ-5. ____ The Following information are given
i. Opening provision for bad debts Rs. 1,000
ii. Bad debts written off during the year Rs.2,000
iii. Closing balance of debtors Rs. 50,000
iv. The provision of bad debts has been maintained at 5% of the debtors
Required: Provision for bad debts account
Solution,
Dr. Provision for doubtful debts account Cr.
Date Particulars JF Amount (Rs.) Date Particulars JF Amount (Rs.)
To bad debts ...........................................................2..,.0..0..0.................................B...y...B..a..l.a..n..c..e...b../.d.....................................................................1..,.0...0..0......................................................
To balance c/d .........................................................2..,.5..0..0.................................B...y...P..r.o..f.i.t..&...L...o..s.s...A.../.c.............................................................3...,5...0..0......................................................
4,500 4,500
138 Accounting-XI
VQ-6._____ The following are the extracts of the Trial Balance as on 31st Chaitra 2073.
Particulars Debit (Rs.) Credit (Rs.)
4,000
Bad debts ....................................................................................................................................................................................................6..0..0
Provision for bad debt......................................................................................................................................................................................
Debtors ................................................................................................................................................................................................2..5..0..,.0..0..0
Adjustment: Create a provision for doubtful debts @ 5% on debtors.
Required: Provision for doubtful debt Account.
Solution,
Dr. Provision for doubtful debts Accounts Cr.
Date Particulars JF Amount Rs. Date Particulars JF Amount Rs.
2073-12-1 To Bad debts A/c ........................................................6..0..0......2..0..7..3..-.1..-.1...............B...y...B..a..l.a..n..c..e...b../.d.....................................................................4..,.0...0..0......................................................
To Balance c/d .................................................................................................B...y...P../.L...A../.c...(..B..a..l.a..n..c..e...f.i.g..u..r.e..).................................................9...,1...0..0......................................................
(Now provision 5% of 250,000) 12,500
13100 13100
2074-1-1 By Balance b/d 12,500
SHORT ANSWER QUESTIONS
SQ-1._____ Following are the balances taken from the trial balance of a trader as on 31st Chaitra.
Debit Rs. Credit Rs.
Debtors 55,000 –
Provision for bad debts..................................................................................................................................................................................2..,000 500
Bad debts.........................................................................................................................................................................................................
Additional information:
i. Further bad debts Rs. 5,000
ii. Provision for bad debts on debtor to be created @ 10%
Required: Provision for bad debts account
Solution,
Dr. Provision for bad debt Cr.
Date Particulars JF Amount Date Particulars JF Amount
To Bad debts a/c ............................................................2..,.0..0..0...............................B..y...B..a..l.a..n..c..e...b../.d.........................................................................5...0..0......................................................
To Further bad debts a/c .................................................5..,.0..0..0...............................B..y...P../.L...a../.c...(.B...a..l.a..n..c..in..g....f.ig..u..r..e..).............................................1..1..,.5..0...0......................................................
To Balance c/d.................................................................5..,.0..0..0.........................................................................................................................
(55,000 –5,000) ×10%
12,000 12,000
SQ-2. ____ The following extracts and the additional information are provided from the book of Tulsa Trading Concern for the
year ended December 31st 2016.
Particulars Debit (Rs.) Credit (Rs.)
Bad debts .................................................................................................................................................................................................5..,.5..0..0
Trade debtors ......................................................................................................................................................................................1..0..0..,.0..0..0
Additional Information:
a. Create 10% provision for doubtful debts b. Amount credited in profit and loss account Rs. 4,000.
Required: Provision for bad doubtful debt Account.
Solution,
Dr. Provision for bad doubtful debt Account Cr.
Particulars Amount (Rs.) Particulars Amount (Rs.)
To Bad debts (old) .......................................................................................5..,.5..0..0......B..y...B...a..la..n..c..e...b../.d..(...B..a..l.a..n..c..i.n..g...f.i.g..u..r.e..).......................................................1..9...,.5..0..0......................................................
To Profit and loss A/c (given) .....................................................................4..,.0..0..0.............................................................................................
To Balance c/d (100,000 × 10%)...............................................................1..0..,.0..0..0.............................................................................................
19,500 19,500
SQ-3._____ Following is the extract of trial balance as on 31st December 2006.
Particulars Debit Credit
Sundry debtors ........................................................................................................................... 1,00,000
Provision for bad debts............................................................................................................... 6,000
Additional information: Make provision for bad debts @ 10% on debtors.
Required: a. Journal entries b. Provision for bad debts A/c
Solution,
Journal entries
Date Particulars Dr. LF Debit (Rs.) Credit (Rs.)
2006-12-31 Profit and loss A/c Dr..................................................................................................................................................4..,.0..0..0.............................
To provision for bad debts ...........................................................................................................................................................................4..,.0. 00
(Being provision for bad debts created) ..........................................................................................................................................................
Total 4,000 4,000
Reserve and Provisions CHAPTER 12 139
Dr. Provision for bad debts account Cr.
Date Particulars Amount Date Particulars Amount
2006-12-31
To Balance c/d (100,000x10%)....................1..0..,.0..0..0.....2..0..0..6..-..1..-.1..................B..y...B...a..la..n..c..e...b../.d..........................................................................6..,.0..0. 0
2006-12-31 By Profit and loss a/c 4,000
Total 10,000 Total 10,000
SQ-4._____ The following is extract of trial balance as on 31st December 2005.
Particulars Debit Credit
2,500
Sundry debtors ...............................................................................................................................................................5..0..,.0..0..0........................
Provision for bad debts....................................................................................................................................................................................
Bad debts..........................................................................................................................................................................3..,.0..0..0........................
Additional information:
i. Further bad debts Rs. 2,000
ii. Maintain provision for bad debts @10% on debtors.
Required: a. Provision for doubtful debts account b. Show the effect on final accounts
Solution,
a. Dr. Provision for bad debts account Cr.
Date Particulars Amount Date Particulars Amount
2005-12-31 To Bad debts (3,000+2,000)...............................5..,.0..0..0......2..0..0..5..-.1..-.1..............B..y...B...a..la...n..c.e...b.../.d.........................................................................2..,.5...0..0......................................................
2005-12-31 To Balance c/d (50,000-2,000)x10%.................4..,.8..0..0......2..0..0..5..-.1..2..-.3..1..........B..y...P...r.o..f.i.t..a..n..d...l.o..s..s..a.../.c...............................................................7..,.3...0..0......................................................
Total 9,800 Total 9,800
b. Amount Effect on Balance Sheet Assets Amount
Capital and liabilities 43,200
Debtors
Less: New bad debts 50,000
2,000
Less: New prov. for bad debts 48,000
4,800
SQ-5._____ On 1st Baishakh, reserve for bad and doubtful debts account showed a credit balance of Rs. 2,500 and bad debts
during the year Rs.325. The debtors on 31st Chaitra are Rs. 9,200. Reserve for bad and doubtful debts is to be maintained
at 10% on debtors.
Required: Provision for bad and doubtful debts account showing amount transferred to profit and loss account
Solution,
Dr. Provision for bad debts account Cr.
Date Particulars Amount Date Particulars Amount
Chaitra 31 To Bad debts .........................................................................................3..2..5.....B...a..i.s.h...a..k.h...1................B..y...B..a..l.a..n..c..e...b../.d.......................................2..,.5. 00
Chaitra 31 To Balance c/d (9,200)x10%................................................................9..2..0......................................................................................................
Chaitra 31 To Profit and loss a/c .........................................................................1..,.2..5..5......................................................................................................
Total 2,500 Total 2,500
SQ-6._____ The following are the extracts of the Trial Balance as on 31st Chaitra 2073.
Particulars Debit Rs. Credit Rs.
4,000
Bad debts ....................................................................................................................................................................................................6..0..0
Provision for bad debt......................................................................................................................................................................................
Debtors ................................................................................................................................................................................................2..5..0..,.0..0..0
Adjustment: Create a provision for doubtful debts @ 5% on debtors.
Required: Provision for doubtful debt Account.
Solution,
Dr. Provision for doubtful debts Accounts Cr.
Date Particulars JF Amount (Rs.) Date Particulars JF Amount (Rs.)
2073-12-1 To Bad debts A/c ........................................................6..0..0......2..0..7..3..-.1..-.1...............B...y...B..a..l.a..n..c..e...b../.d.....................................................................4..,.0...0..0......................................................
To Balance c/d .................................................................................................B...y...P../.L...A../.c...(..B..a..l.a..n..c..e...f.i.g..u..r.e..).................................................9...,1...0..0......................................................
(Now provision 5% of 250,000) 12,500
13100 13100
2074-1-1 By Balance b/d 12,500
SQ-7._____ The following information is given to you.
i. Provision for doubtful debts Rs. 500. ii. Bad debts written off during the year Rs. 400.
iii. Debtors at the end of the year Rs. 10,000.
iv. The provision for bad and doubtful debts has been maintained at 5% of the closing debtors.
Required: Provision for bad and doubtful debts account and effects on P/L account
Solution,
Dr. Provision for bad debts account Cr.
Date Particulars Amount Date Particulars Amount
To Bad debts...........................................................4..0..0.....................................B..y...B..a..l.a..n..c..e...b../.d........................................................................5...0..0......................................................
To Balance c/d (10,000 x 5%) ...............................5..0..0.....................................B..y...P..r..o..f.it..a..n..d....lo..s..s...a../.c..............................................................4...0..0......................................................
Total 900 Total 900
140 Accounting-XI
Dr. Effect on Profit and loss account Cr.
Particulars Amount Particulars Amount
To Bad debts ......................................................................................4..0..0....................................B...y...P..r.o..v....f.o..r...b..a..d...d..e..b..t.s...(.o..l.d..)...................................................5...0..0......................................................
Add: New provision for bad debts 500 900
SQ-8._____ The following are extracts of trial balance as on 31st December 2005.
Particulars Debit Credit
2,500
Bad debts..................................................................................................................................................................................................1..,.0..0..0
Provision for bad debts....................................................................................................................................................................................
Sundry debtors .......................................................................................................................................................................................5..0..,.0..0..0
Additional information:
i. Write off further bad debts Rs. 1,500.
ii. Provision for bad debts @ 6% on debtors is to be maintained.
Required: Provision for bad debts account
Solution,
Dr. Provision for bad debts account Cr.
Date Particulars Amount Date Particulars Amount
To Bad debts (1,000+1,500) ........................................................2..,.5..0...0................................B...y..B...a..l.a..n..c..e...b../.d.................................................2..,.5...0..0......................................................
To Balance c/d (50,000-1,500)x6% ............................................2..,.9..1..0.................................B...y..P...r.o..f.i.t..a..n..d...l.o..s..s...a../.c.......................................2..,.9...1..0......................................................
Total 5,410 Total 5,410
SQ-9._____ The following are the extracts of trial balance as on 31st December 2039.
Particulars Debit Credit
800
Sundry debtors .......................................................................................................................................................................................2..0..,.0..0..0
Bad debts.....................................................................................................................................................................................................5..0..0
Provision for bad debts....................................................................................................................................................................................
Additional information:
i. Further bad debts write off Rs. 500
ii. Provision for bad debts is to be maintained @ 5% on debtors.
Required: provision for bad debts account
Solution,
Dr. Provision for bad debts account Cr.
Date Particulars Amount Date Particulars Amount
To Bad debts (500+500) ....................................................................1..,.0..0..0....................................B...y...B..a..l.a..n..c..e...b../.d.................8..0..0................................................................................
To Balance c/d (20,000-500)x5% ........................................................9..7..5....................................B...y...P..r.o..f.i.t..a..n..d...l.o..s..s...a../.c.......1..,.1..7..5...................
Total 1,975 Total 1,975
SQ-10.____ The following information is provided to you.
i. Provision for bad debts at the end of 2006 Rs. 1,400.
ii. Bad debts during the year 2007 Rs. 800.
iii. Closing balance of debtors on 2007Rs. 2,10,000.
iv. 5% of ending debtors is required to be maintained as reserve for bad and doubtful debts.
Required: Provision for bad and doubtful debts account
Solution,
Dr. Provision for bad debts account Cr.
Date Particulars Amount Date Particulars Amount
2006-12-31 To Bad debts.........................................................................................8..0..0......2..0..0..6..-.1..-.1...................B...y..B...a..l.a..n..c..e...b../.d......................................1..,.4...0..0......................................................
2006-12-31 To Balance c/d (210,000)x5% ........................................................1..0..,.5..0..0......2..0..0..6..-.1..2..-..3..1..............B...y..P...r.o..f.i.t..a..n..d...l.o..s..s...a../.c............................9..,.9..00
Total 11,300 Total 11,300
SQ-11.____ The following extracts and the additional information are provided from a book of a trading business as on 31st
Chaitra, 2065.
Trial Balance on 31st Chaitra, 2065
Particulars Debit Credit
5,000
Sundry debtors ........................................................................................................................... 1,00,000
3,000
Bad debts....................................................................................................................................
Provision for doubtful debts........................................................................................................
Additional information:
Provision for doubtful debts is maintained @ 10% on debtors.
Required: Provision for doubtful debts account
Solution,
Dr. Provision for doubtful debts account Cr.
Date Particulars Amount Date Particulars Amount
2065-12-31 To Bad debts............................................3..,.0..0..0..........2..0..6..5...-.1..-.1..................B..y...B...a..la..n...c.e...b../.d....................................................................5..,.0...0..0........................................................
2065-12-31 To Balance c/d 10,000 2065-12-31 By Profit and loss a/c........................................................8..,.0...0..0........................................................
(100,000x10%)
Total 13,000 Total 13,000
Reserve and Provisions CHAPTER 12 141
SQ-12.____ The following details are provided regarding debtors:
On 1.1.2067 Provision for doubtful debts balance Rs. 15,000
On 31.12.2067 Debtors Rs. 1,50,000.
Bad debt during the year, Rs. 9,000. Provision for doubtful debt is to be maintained at the rate of 5% of debtors.
Required: Provision for doubtful debts account.
Solution,
Provision for Doubtful Debts Account
Particulars Amount Rs. Particulars Amount Rs.
To Bad debt .................................................................................................9..,.0..0..0......B..y...B...a..la..n..c..e...b../.d......................................................................................1..5..,.0..0...0......................................................
To Balance c/d(5% of Rs. 1,50,000) ...........................................................7..,.5..0..0......B..y...P...r.o..f.i.t..a..n..d...l.o..s.s...a../.c..............................................................................1..,.5...0..0......................................................
16,500 16,500
SQ-13.____ The following extracts and the additional information are provided from the books of Mr. Hari Nath as on 31
December 2016:
Trial Balance as on 31st December 2016
Particulars Debit Rs. Credit Rs.
Accounts Receivables( Debtors) .........................................................................................................................................................2..5..0..,.0..0..0
Bad Debts .................................................................................................................................................................................................5..,.0..0..0
Provision for Doubtful Debts ........................................................................................................................................................................... 10,000
Additional Information: Create 5 % provision for doubtful debts.
Required: Provision for doubtful debts account
Solution,
Dr. Provision for doubtful debts account Cr.
Date Particulars JF Amount (Rs.) Date Particulars JF Amount (Rs.)
To bad debts ...........................................................5..,.0..0..0.................................B...y...B..a..l.a..n..c..e...b../.d...................................................................1..0..,.0..0...0......................................................
To balance c/d .......................................................1..2..,.5..0..0.................................B...y...P..r.o..f.i.t..&...L...o..s.s...A.../.c............................................................7..,.5..0..0..*......................................................
17,500 17,500
SQ-14.____ The trial balance before adjustment of Hishan Company reports the following balances:
Particulars Debit Rs. Credit Rs.
Sundry debtors ....................................................................................................................................................................................2..0..0..,.0..0..0 5,500
750,000
Provision for doubtful accounts ......................................................................................................................................................................
Sales (all on credit) .........................................................................................................................................................................................
Bade debts ..............................................................................................................................................................................................4..,.0..0..0
Additional information:
Provision for Doubtful debt is assuming to be 1% of sundry debtors and 0.25% of credit sales.
Required: Provision for doubtful debts account
Solution,
Dr. Provision for doubtful debts account Cr.
Date Particulars JF Amount (Rs.) Date Particulars JF Amount (Rs.)
To bad debts ...........................................................4..,.0..0..0.................................B...y...B..a..l.a..n..c..e...b../.d.....................................................................5..,.5...0..0......................................................
To balance c/d .........................................................3..,.8..7..5.................................B...y...P..r.o..f.i.t..&...L...o..s.s...A.../.c............................................................2..,.3..7..5..*......................................................
7,875 7,875
Note: Closing provision of doubtful debts = 1% of 200,000 + 0.25% of 750,000= 2,000 + 1,875= 3,875
SQ-15.____ The following extracts and further information are provided to you from a book of trading concern for the year
ended 31st December, 1998.
Trail Balance as on 31st December, 1998
Particulars Debit Rs. Credit Rs.
Trade debtors ......................................................................................................... 50,000
Bad debts................................................................................................................. 2,000
Provision for doubtful debts..................................................................................... 4,000
Additional information:
Create 10% provision for doubtful debts.
Required: Provision for doubtful debts account
Solution,
Dr. Provision for doubtful debts account Cr.
Date Particulars Amount Date Particulars Amount
To Bad debts.....................................................3..,.0..0..0......................................B...y...B..a..l.a..n..c..e...b../.d..................................................................5..,.0..0..0........................................................
To Balance c/d (100,000x10%) 10,000 By Profit and loss a/c ......................................................8..,.0..0..0........................................................
Total 13,000 Total 13,000
SQ-16.____ The following extracts are provided for the year ended on 31st December, last year:
Descriptions Debit Rs. Credit Rs.
15,000
Sundry Debtors...................................................................................................................................................................................3..,.0..0..,.0..0..0.
Opening provision for bad debts .....................................................................................................................................................................
Bad debts.................................................................................................................................................................................................6..,.0..0..0.
142 Accounting-XI
Additional information:
i. Further bad debts Rs.15,000. ii. Make a provision for doubtful debts at 4%.
Required: Provision for doubtful debts account
Solution,
Dr. Provision for doubtful debts account Cr.
Date Particulars Amount Date Particulars Amount
15,000
Dec. 31 To Bad debts (6,000+15,000) 21,000 Jan. 1 By Balance b/d 17,400
32,400
Dec. 31 To Balance c/d (300,000-15,000)x4% 11,400 Dec. 31 By Profit and loss a/c
Total 32,400 Total
LONG ANSWER QUESTIONS
LQ-1._____ The following information is extracted from the book of a Trader.
Trial Balance as on 31st of Ashadh
Particulars Debit (Rs.) Credit (Rs.)
–
Sundry debtors ......................................................................................................................................................................................1..2..0..,.0..0. 0
Provision for doubtful debts............................................................................................................................................................................. – 8,000
Bad debts.................................................................................................................................................................................................1..0..,.0..0. 0 –
Additional Information:
i. Additional bad debts to be written off Rs. 5,000
ii. Maintain provision for bad debts at 10% on debtors.
Required: a. Provision for bad debts account b. Effect on profit and loss account
Solution:
a. Dr. Provision for Doubtful Debt Account Cr.
Date Particulars JF Amount Date Particulars JF Amount
To Bad debt..........................10,000 By Balance b/d ........................................................................8..,.0...0..0......................................................
Add: New bad debt ................5,000 15,000 By Profit and loss a/c ............................................................1..8..,.5..0...0......................................................
To Balance c/d ................................................................1..1..,.5..0..0.......................................................................................................................
26,500 26,500
By Balance b/d ......................................................................1..1..,.5..0...0......................................................
ii. Dr. Effect on Profit and Loss Account Cr.
Amount
Particulars Amount Particulars
To Bad debt a/c ........................................................10,000
Add: Further bad debts a/c......................................... 5,000
Add: New provision for bad debt a/c ........................11,500
26,500
Less: Old provision for bad debt a/c.......................... 8,000 18,500
LQ-2. _____ The relevant transactions extracted from the trial balance of a company are as under:
Trial Balance
Particulars Debit (Rs.) Credit (Rs.)
15,000
Provision for bad debts.................................................................................................................................................................................... – –
Bad debts.................................................................................................................................................................................................1..0..,.0..0. 0 –
Sundry debtors ......................................................................................................................................................................................1..2..0..,.0..0. 0
Additional information:
i. Bad debts to be increased to Rs. 15,000 ii. Provisions for bad debts to be created at 2.5% on debtors.
Required: a. Provision for bad debts account b. Effect on profit and loss account
Solution,
a. Dr. Provision for Doubtful Debt Account Cr.
Date Particulars JF Amount Date Particulars JF Amount
To Bad debt...........................10,000 By Balance b/d ......................................................................1..5..,.0..0...0......................................................
Add: New bad debt ...............15,000 25,000 By Profit and loss a/c ............................................................1..2..,.6..2..5.......................................................
To Balance c/d ..................................................................2..,.6..2..5..........................(.B...a..l.a..n..c..e...f.ig...u..r.e..)....................................................................
27,625 27,625
b. Dr. Effect on Profit and Loss Account Cr.
Amount
Particulars Amount Particulars
To Bad debt a/c ........................................................10,000
Add: Further bad debts a/c.......................................15,000
Add: New provision for bad debt a/c .......................... 2,625
27,625
Less: Old provision for bad debt a/c........................15,000 12,625
LQ-3. _____ The following information is provided to you.
Particulars Debit Rs. Credit Rs.
20,000
Sundry debtors ......................................................................................................................................................................................2..2..0..,.0..0. 0
Bad debts.................................................................................................................................................................................................1..0..,.0..0. 0
Provision for doubtful debts.............................................................................................................................................................................
Reserve and Provisions CHAPTER 12 143
Adjustment:
i. Additional bad debts to be written off is Rs. 20,000
ii. New provision for doubtful debts required to be maintained is @ 10% on debtor
Required: Provision for doubtful debt account and effect on income statement.
Solution, Provision for Doubtful Debt Account Cr.
a. Dr.
Date Particulars JF Amount Rs. Date Particulars JF Amount Rs.
To Bad debt..............................10,000 By Balance b/d..................................................................2..0..,.0..0...0......................................................
Add: New bad debt ..................20,000 30,000 By Profit and loss a/c ........................................................3..0..,.0..0...0......................................................
To Balance c/d ....................................................................2..0..,.0..0..0...................................................................................................................
50,000 50,000
b. Dr. Effect on profit and Loss Account Cr.
Particulars Amount Rs. Particulars Amount Rs.
To Bad debt a/c ........................................................10,000 30,000
Add: Further bad debts a/c.......................................20,000
Add: New provision for bad debt a/c ........................20,000
50,000
Less: Old provision for bad debt a/c........................20,000
LQ-4._____ The ending balance of sundry debtors was Rs. 60,000 and beginning credit balance of provision for doubtful debts
of a firm was Rs. 1,800.
The firm decided to write off Rs. 2,000 as bad debts and maintain provision for doubtful debts equal to 5% on sundry debtors.
Required: a. Journal entries b. Provision for doubtful debts account
Solution,
Journal Entry
Date Particulars LF Debit Rs. Credit Rs.
Bad debt a/c ............................................................................................................................................ Dr. 2,000 5,000
Provision for doubtful debt a/c................................................................................................................. Dr. 3,000
To Sunday debtors a/c
(Record bad debt and provision for doubtful debts from debtors)
b. Dr. Provision for bad and doubtful debt a/c Cr.
Date Particulars JF Amount Date Particulars JF Amount
To Bad debt.......................................................................2..,.0..0..0..........................B...y...B..a..l.a..n..c..e...b../.d..........................................................................1..,.8...0..0......................................................
To Balance c/d ..................................................................3..,.0..0..0..........................B...y...P...&...L...a../.c...(..b..a..l..f.i.g...)...............................................................3...,2...0..0......................................................
5,000 5,000
LQ-5. _____ A company's closing debit balance of account receivables was Rs. 40,000 and opening credit balance of provision for
doubtful debts was Rs. 1,200. The company decided to write off 2% on receivables for bad debts and create 5% for provision
for doubtful debts.
Required: Journal entries and provision for doubtful debts account
Solution,
Journal Entries
Date Particulars LF Debit Rs. Credit Rs.
i. Bad debt a/c............................................................................................................................................. Dr. 800 800
To Debtor a/c
(Being bad debt written off)
ii. Provision for bad debt a/c........................................................................................................................ Dr. 800
To Bad debt a/c 800
(Being bad debt transfer to provision for bad debt account)
iii. Profit and loss a/c................................................................................................................................... Dr. 1,560 1,560
To Provision for bad debt a/c
(Being provision for bad debt transfer to PL account)
Dr. Provision for bad debt Cr.
Date Particulars JF Amount Date Particulars JF Amount
To Bad debts a/c (40,000 2%).........................................8..0..0..........................B...y...B..a..l.a..n..c..e...b../.d..........................................................................1..,.2...0..0......................................................
To Balance c/d..................................................................1..9..6..0..........................B...y...P../.L...a../.c....(.B...a..la...n..c.i.n..g...f.i.g..u..r.e...)..................................................1..,.5...6..0......................................................
(40,000 – 800) × 4%
2,760 2,760
LQ-6. _____ Following are the balances taken from the Trial balance of a trader as on 31stChaitra Credit Rs.
5,000
Debit Rs.
Debtors ...................................................................................................................................................................................................5..0..,.0..0. 0
Provision for bad debts....................................................................................................................................................................................
Bad debts...................................................................................................................................................................................................2..,.0..0. 0
Additional Information ii. Provision for bad debts on debtors to be created @ 10%
i. Further bad debts Rs. 3,000 b. Effect on income statement
Required: a. Provision for bad debt Account
c. Effect on balance sheet
144 Accounting-XI
Solution,
Dr. Provision for bad debt Cr.
Date Particulars JF Amount Rs. Date Particulars JF Amount Rs.
To Bad debts a/c...................................................................2..,.0..0..0...........................B..y...B..a..l.a..n..c..e...b../.d......................................................................5..,.0...0..0......................................................
To Further bad debts a/c 3,000 By P/L a/c............................................................................4..,.7...0..0......................................................
To Balance c/d .......................................................................4..7..0..0...................................................................................................................
(50,000 – 3,000)×10%
9,700 9,700
Effect on Income Statement
Particulars Amount Rs.
Bad debts................................................................................................................................................................................................................. 2,000
Add: Further bad debts .................................................................................................................................................................................................... 3,000
Add: Provision for bad debts ........................................................................................................................................................................................... 4,700
9,700
Less: Old Provision for bad debts .................................................................................................................................................................................... 5,000
Profit and Loss ................................................................................................................................................................................................................. 4,700
Effects on Balance Sheet
Liabilities Amount Rs. Assets Amount Rs.
42,300
Debtors .................................................................... 50,000
Less: Further bad debts .............................................3,000
47,000
Less: Provision for bad debts ..................................4700
LQ-7._____ The trial balance before adjustment of Prem Company reports the following balances:
Particulars Debit (Rs.) Credit (Rs.)
Sundry debtors ....................................................................................................................................................................................1..0..0..,.0..0..0 4,500
600,000
Provision for doubtful accounts ......................................................................................................................................................................
Sales (all on credit) .........................................................................................................................................................................................
Bad debts ................................................................................................................................................................................................2..,.0..0..0
Additional information;
Further for bad debt is assuming to be 1% of sundry debtors and provision for doubtful debts 0.5% of credit sale.
Required: a. Necessary journal entries
b. Provision for doubtful debts account
c. Treatment of Sundry debtors in balance sheet.
Solution,
a. Journal entries
Date Particulars LF Debit (Rs.) Credit (Rs.)
i. Bad debts A/c ..................................................................................................................................................................1..,.0..0..0....................Dr.
To Debtors A/c 1,000
(Being bad debts provided on debtors of Rs. 100.000 @ 1%)
ii Provision for doubtful debts A/c ......................................................................................................................................3..,.0..0..0....................Dr.
To bad debts A/c 3,000
(Being bad debts transferred to provision for doubtful debts)
iii. Profit and loss A/c .........................................................................................................................................................1..,.5..0..0..*....................Dr.
To Provision for doubtful debts A/c 1,500
(Being provision for doubtful debts transferred to P/L account)
b. Provision for doubtful debts account
Date Particulars JF Amount (Rs.) Date Particulars JF Amount (Rs.)
4,500
To bad debts (2,000+1,000) 3,000 By Balance b/d 1,500*
To balance c/d 3,000 By Profit & Loss A/c 6,000
6,000
c. Balance Sheet as on.....
Particulars
Amount Rs. Amount Rs. Particulars Amount Rs. Amount Rs.
Sundry debtors........................................................1..0..0..,.0..0..0....................................................................................
Less: Bad debts (new) .............................................(..1..,.0..0..0..)...................................................................................
Less: Prov. for doubtful debt (new) ...................................(.3...,.0..0...0..).......................9..6...,.0..0...0...............................................................
LQ-8._____ The following extracts and the additional information are provided from the books of Ms. Roshani as on 31
December 2016:
Trial Balance as on 31st December 2016
Particulars Debit (Rs.) Credit (Rs.)
Accounts Receivables (Debtors)..........................................................................................................................................................5..0..3..,.0..0..0
Net Sales (all credit) ........................................................................................................................................................................................ 1,000,000
Provision for doubtful debts............................................................................................................................................................................. 15,000
Bad debts .................................................................................................................................................................................................6..,.0..0..0
Reserve and Provisions CHAPTER 12 145
Additional Information: There were further bad debts of Rs 3,000 not yet written off from the accounts receivable. The
provision for doubtful debts for the year has been estimated as 1% of credit sales.
Required: a. Journal entries b. Provision for doubtful debts account
c. The treatment of account receivable in balance sheet.
Solution,
a. Journal entries
Date Particulars LF Debit (Rs.) Credit (Rs.)
i. Bad debts A/c ......................................................................................................................................... Dr. 3,000 3,000
To Account Receivable A/c
(Being bad debts provided on account receivable)
ii Provision for doubtful debts A/c .............................................................................................................. Dr. 9,000
To bad debts A/c 9,000
(Being bad debts transferred to provision for doubtful debts)
iii. Profit and loss A/c ................................................................................................................................... Dr. 4,000*
To Provision for doubtful debts A/c 4,000
(Being provision for doubtful debts transferred to P/L account)
b. Provision for doubtful debts account
Date Particulars JF Amount (Rs.) Date Particulars JF Amount (Rs.)
To bad debts (6,000+ 3,000) ...................................9..,.0..0..0.................................B...y...B..a..l.a..n..c..e...b../.d...................................................................1..5..,.0..0...0......................................................
To balance c/d .......................................................1..0..,.0..0..0.................................B...y...P..r.o..f.i.t..&....L..o..s..s..A.../.c............................................................4..,.0..0..0..*......................................................
19,000 19,000
c. Balance Sheet as on .....
Particulars
Amount (Rs.) Amount (Rs.) Particulars Amount (Rs.) Amount (Rs.)
Account receivable 5,03,000 490,000
Less: Bad debts (new) (3,000)
Less: Prov. for doubtful debt (new (10,000)
LQ-9._____ The following extracts and the additional information are provided from the books of Mr. Lek Nath as on 31
December 2016:
Trial Balance as on 31st December 2016
Particulars Debit (Rs.) Credit (Rs.)
Accounts Receivables (Debtors) .........................................................................................................................................................1..5..0..,.0..0..0
Bad Debts .................................................................................................................................................................................................4..,.0..0..0
Provision for Doubtful Debts ........................................................................................................................................................................... 10,000
Additional Information: Create 10 % provision for doubtful debts.
Required: a. Journal entries b. Provision for doubtful debts account
c. Treatment of Account Receivable in balance sheet.
Solution,
a. Journal entries
Date Particulars LF Debit(Rs.) Credit (Rs.)
i Provision for doubtful debts A/c ............................................................................................................. Dr. 4,000 4,000
To Bad debts A/c 9,000
ii Profit and loss A/c ................................................................................................................................... Dr. 9,000*
To Provision for doubtful debts A/c
(Being provision for doubtful debts transferred to P/L account)
b. Provision for doubtful debts account
Date Particulars JF Amount (Rs.) Date Particulars JF Amount (Rs.)
To bad debts ...........................................................4..,.0..0..0.................................B...y...B..a..l.a..n..c..e...b../.d...................................................................1..0..,.0..0...0......................................................
To balance c/d .......................................................1..5..,.0..0..0.................................B...y...P..r.o..f.i.t..&...L...o..s.s...A.../.c............................................................9..,.0..0..0..*......................................................
19,000 19,000
c. Balance Sheet as on .....
Particulars
Amount (Rs.) Amount (Rs.) Particulars Amount (Rs.) Amount (Rs.)
Account receivable ............................................1..,.5..0..,.0..0..0....................................................................................
Less: Prov. for doubtful debt (new.....................(..1..5..,.0..0..0..)..................1..3..5..,.0..0..0......................................................
LQ-10. ___ At the beginning of 2010, Amrit's company Accounts Receivable balance was Rs 100,000 and the balance in the
Provision for Doubtful debts was Rs 2,000 (Cr). The company wrote off Rs 3,000 as bad debts during the year. Further
doubtful debt is estimated to be 5% of account receivable.
Required: a. Necessary journal entries b. Provision for doubtful account
c. Show the amounts of receivables in the Balance sheet
Solution,
a. Journal entries
Date Particulars LF Debit (Rs.) Credit (Rs.)
i Provision for doubtful debts A/c .......................................................................................... Dr. 3,000
To Bad debts A/c 3,000
ii Profit and loss A/c ................................................................................................................ Dr. 6,000*
To Provision for doubtful debt A/c 6,000
(Being provision for doubtful debts transferred to P/L account)
146 Accounting-XI
b. Provision for doubtful debts account
Date Particulars JF Amount (Rs.) Date Particulars JF Amount (Rs.)
To bad debts ...........................................................3..,.0..0..0.................................B...y...B..a..l.a..n..c..e...b../.d.....................................................................2..,.0...0..0......................................................
To balance c/d .........................................................5..,.0..0..0.................................B...y...P..r.o..f.i.t..&...L...o..s.s...A.../.c............................................................6..,.0..0..0..*......................................................
8,000 8,000
c. Balance Sheet as on.....
Particulars
Amount (Rs.) Amount (Rs.) Particulars Amount (Rs.) Amount (Rs.)
Account receivable 1,00,000
Less: Prov. for doubtful debt (new (5,000) 95,000
LQ-11. ____The following extracts and the additional information are provided from the books of Mr. Sabin as on 31st Chaitra 2073:
Trial Balance as on 31st Chaitran2073
Particulars Debit (Rs.) Credit (Rs.)
Sundry debtors ........................................................................................................................................................... 250,000
Net Sales (all credit) .................................................................................................................................................... 12,00,000
Provision for doubtful debts......................................................................................................................................... 12,000
Bad debts .................................................................................................................................................................... 5,000
Additional Information:
There were further bad debts of Rs 5,000 not yet written off from Debtors. The provision for doubtful debts for the year has
been estimated as 1% of credit sales.
Required: a. Journal entries b. Provision for doubtful debts account
c. The treatment of sundry debtors in balance sheet.
Solution,
a. Journal entries
Date Particulars LF Debit (Rs.) Credit (Rs.)
i. Bad debts A/c ......................................................................................................................................... Dr. 5,000
To Debtors A/c 5,000
(Being bad debts provided on debtors )
ii Provision for doubtful debts A/c ............................................................................................................. Dr. 10,000
To bad debts A/c (5,000+5,000) 10,000
(Being bad debts transferred to provision for doubtful debts)
iii. Profit and loss A/c ................................................................................................................................... Dr. 10,000* 10,000
To Provision for doubtful debts A/c
(Being provision for doubtful debts transferred to P/L account)
b. Provision for doubtful debts account
Date
Particulars JF Amount (Rs.) Date Particulars JF Amount (Rs.)
To bad debts .........................................................1..0..,.0..0..0.................................B...y...B..a..l.a..n..c..e...b../.d...................................................................1..2..,.0..0...0......................................................
To balance c/d .......................................................1..2..,.0..0..0.................................B...y...P..r.o..f.i.t..&...L...o..s.s...A.../.c..........................................................1..0..,.0..0..0..*......................................................
22,000 22,000
c. Balance Sheet as on .....
Particulars
Amount Rs. Amount Rs. Particulars Amount Rs. Amount Rs.
250,000 2,33,000
Sundry debtors (5,000)
Less: Bad debts (new) (12,000)
Less: Prov. for doubtful debt (new)
VERY SHORT ANSWER QUESTIONS
VQ-1._____ Classify whether the following are Revenue or Capital item:
i. Carriage on goods purchased ii. Wages paid on installation of machinery
iii. Purchase of second hand vehicles iv. Repairs of furniture
Solution,
a. Revenue expenditure b. Capital expenditure
c. Capital expenditure d. Revenue expenditure
VQ-2._____ Classify whether the following items of expenditure are Revenue or Capital item
a. Carriage on goods purchased b. Wages paid on installation of machinery
c. Purchase of second hand vehicles d. Repairs of furniture
Solution:
a. Revenue expenditure; b. Capital expenditure; c. Capital expenditure; d. Revenue expenditure
SHORT ANSWER QUESTIONS
SQ-1._____ Show whether the following are capital or revenue items.
1. A paper advertisement expenses of Rs. 5,000
2. Installation of telephone Rs. 8,000
3. Rs. 60,000 incurred for repair that increased the life of assets for another ten years.
4. Insurance premium paid Rs. 2,000
5. Rs. 30,000 was incurred on whitewashing of factory building
Solution,
1. Revenue 2. Capital
3. Capital 4. Revenue
5. Revenue
SQ-2._____ Show whether the following items of expenditure are capital or revenue items.
1. A paper advertisement expenses of Rs. 5,000
2. Installation of telephone Rs. 8,000
3. Rs. 60,000 incurred for repair that increased the life of assets for another ten years.
4. Insurance premium paid Rs. 2,000
5. Rs. 30,000 was incurred on whitewashing of factory building
Solution,
1. Revenue; 2. Capital; 3. Capital; 4. Revenue; 5. Revenue
SQ-3._____ Classify whether the following items of expenditure are Revenue or Capital item.
a. Legal expenses incurred for purchasing of building.
b. A second hand car purchase for Rs. 400,000 and Rs. 40,000 was spent for overhauling and denting and painting.
c. Carries paid for new fixed assets purchase.
d. Wages paid to employees for setting of Machinery.
Solution,
Capital expenditure; capital expenditure; capital expenditure; capital expenditure
SQ-4._____ Classify whether the following items of expenditure are Revenue or Capital item.
a. Expenses paid for while washing the factory.
b. Repair and maintenance of machine.
c. Interest on loan paid.
d. Custom duty paid on imported machine Rs. 20,000.
Solution,
a. Revenue expenses; b. Revenue expenses; c. Revenue expenses; d. Capital expenditure
VERY SHORT ANSWER QUESTIONS
VQ-1. ____ The following financial information of Mr. Arun is provided to you for the year ended 30th Chaitra 2073:
Opening stock ................................................................................ Rs. 25,000 Coal, coke, water ...............................................................................Rs.7,500
Purchase ....................................................................................... Rs.125,450 Motive power....................................................................................Rs.10,000
Carriage on purchase..................................................................... Rs. 10,000 Gas and fuel......................................................................................Rs. 4,500
Custom duty...................................................................................... Rs. 4,000 Factory rent . ....................................................................................Rs.12,500
Clearing charge ................................................................................ Rs. 3,600 Sale revenue ..................................................................................Rs.425,500
Wage paid ....................................................................................... Rs.34,400 Closing stock ...................................................................................Rs.45,000
Plant ......................................................................................... Rs. 200,000 Salary .............................................................................................Rs. 75,000
Required: Trading account
Solution,
Trading Account Cr.
Dr. for the year ended 30th Chaitra 2073
Particulars Amount Rs. Particulars Amount Rs.
To Opening stock .....................................................................................2..5..,.0..0..0......B..y...S...a..le..s...r.e...v.e..n..u..e................................................................................4..2..5...,5...0..0......................................................
To Purchases..........................................................................................1..,.2..5..,.4..5..0......B..y...C...l.o..s.i.n..g...s..t.o..c..k...................................................................................4..5..,.0..0...0......................................................
To Carriage on purchase...........................................................................1..0..,.0..0..0.............................................................................................
To Custom duty ...........................................................................................4..,.0..0..0.............................................................................................
To Cleaning charge .....................................................................................3..,.6..0..0.............................................................................................
To Wage paid ............................................................................................3..4..,.4..0..0.............................................................................................
To Coal, coke, water....................................................................................7..,.5..0..0.............................................................................................
To Motive power ........................................................................................1..0..,.0..0..0.............................................................................................
To Gas & fuel...............................................................................................4..,.5..0..0.............................................................................................
To Factory rent ..........................................................................................1..2..,.5..0..0.............................................................................................
To Gross profit c/d ..................................................................................2..,.3..3..,.5..5..0.............................................................................................
4,70,500 4,70,500
VQ-2._____ The following financial information of Mr. Bimal is provided to you for the year ended 30th Chaitra 2073:
Gross profit b/d ............................................................................. Rs. 225,000 Carriage outward........................................................................Rs.3,500
Salary ............................................................................................ Rs.25,450 Advertisement ............................................................................Rs.4,000
Telephone expenses .........................................................................Rs. 5,000 Discount allowed .......................................................................Rs. 4,500
Email and internet .............................................................................Rs. 4,000 Commission received ................................................................Rs.2,500
Rent ........................................................................................... Rs. 12,000 Discount received.......................................................................Rs.2,500
Printing and stationery .......................................................................Rs.4,400 Audit fee .....................................................................................Rs.5,000
Insurance ..........................................................................................Rs. 3,000 Legal charge..............................................................................Rs. 5,000
Travelling expenses.......................................................................... Rs. 3,600 Repairs and maintenance.........................................................Rs. 5,250
Bad debts.......................................................................................... Rs. 2,000 Commission to salesman..........................................................Rs. 2,250
Packaging expenses ........................................................................ Rs. 3,000 Freight outward .........................................................................Rs. 5,000
Loss on sale of plant..........................................................................Rs. 2,500 Depreciation ...........................................................................Rs. 15,000
Required: Profit and loss account
Solution,
Profit & Loss Account
Dr. for the year ended 30th Chaitra 2073
Cr.
Particulars Amount Rs. Particulars Amount Rs.
To Salary....................................................................................................2..5..,.4..5..0......B..y...G...r.o..s..s...p..r.o..f.i.t..b../.d.............................................................................2..,.2..5..,.0..0...0......................................................
To Telephone expenses..............................................................................5..,.0..0..0......B..y...C...o..m...m...i.s..s.i.o..n...r.e..c..e..i.v..e..d........................................................................2..,.5...0..0......................................................
To Email & internet ......................................................................................4..,.0..0..0......B..y...D...i.s.c..o..u..n..t..r..e..c.e..i.v..e..d..............................................................................2..,.5...0..0......................................................
To Rent ......................................................................................................1..2..,.0..0..0.............................................................................................
To Printing & stationery ...............................................................................4..,.4..0..0.............................................................................................
To Insurance................................................................................................3..,.0..0..0.............................................................................................
To Travelling expenses ...............................................................................3..,.6..0..0.............................................................................................
To Bad debts ...............................................................................................2..,.0..0..0.............................................................................................
To Packaging expenses ..............................................................................3..,.0..0..0.............................................................................................
To Loss and sale of plant ............................................................................2..,.5..0..0.............................................................................................
To Carriage outwards..................................................................................3..,.5..0..0.............................................................................................
To Advertisement ........................................................................................4..,.0..0..0.............................................................................................
To Discount allowed ....................................................................................4..,.5..0..0.............................................................................................
To Audit fee .................................................................................................5..,.0..0..0.............................................................................................
To Legal charge...........................................................................................5..,.0..0..0.............................................................................................
To Repairs & maintenance..........................................................................5..,.2..5..0.............................................................................................
To Commission to sales man......................................................................2..,.2..5..0.............................................................................................
To Fright outward ........................................................................................5..,.0..0..0.............................................................................................
To Depreciation .........................................................................................1..5..,.0..0..0.............................................................................................
To Net profit c/d ......................................................................................1..1..5..,.5..0..0.............................................................................................
2,30,000 2,30,000
Preparation Financial Statement CHAPTER 14 149
VQ-3. _____ Consider the following information of xyz sole trading compay Ltd. for the year ending 31st December 2013.
Sales revenue............................................................................R..s....3..5..7..,.5..0..0......I.n..t.e..r.e..s..t..r.e..v..e..n..u..e........................................................................................R...s...1..,.5...0..0......................................................
Cost of goods sold...........................................................................2..1..8..,.3..0..0......D..e..p..r..e..c.i.a..t.i.o..n...o..n...s..t.o..r.e...f.u..r..n..i.t.u..r.e.......................................................................4..,.2...0..0......................................................
Advertising expenses ........................................................................1..3..,.7..5..0......S..a..l.a..r.i.e..s...a..n..d...w...a..g..e..s...o..f..s..a..le..s...e..m...p..l.o..y..e..e..s......................................................2..2..,.0..0...0......................................................
Depreciation on building......................................................................6..,.0..0..0......T..r.a..d..e...m...a..r..k..w...r.i.t.t.e..n...o..f.f....................................................................................4..,.0...0..0......................................................
Salaries and wages of office staff ...................................................1..5..0..,.0..0..0......I.n..s..u..r.a..n..c..e...e..x..p..e..n..s..e..s.......................................................................................3..,.6...0..0......................................................
Supplies ...............................................................................................1..,.0..5..0......I.n..t.e..r.e..s..t..e..x..p..e..n..s..e..s...........................................................................................1..,.6...9..0......................................................
Income tax expenses ........................................................................1..7..,.2..0..0.....................................................................................................
Required: Single and multiple step income statement
Solution,
XYZ sole trading co. Ltd.
Income statement (Multi Step)
For the year ended ....
Particular Detail (Rs.) Subtotal (Rs.) Total (Rs.)
139,200
Sales revenue .......................................................................................................................................................................................3..5..7..,.5..0. 0
Less: Cost of goods sold 218,300 69,600
69,600
Gross profit (15,400)
Less: Operating expenses 54,200
Office and Administrative expenses 17,200
37,000
Depreciation on building..................................................................................................................................6..,.0..0..0............................
Trademark written off.......................................................................................................................................4..,.0..0..0............................
Salaries and wages of office staff..................................................................................................................1..5..,.0..0..0............................
Insurance ........................................................................................................................................................3..,.6..0..0............................
Supplies ..........................................................................................................................................................1..,.0..5..0............................
Total office and Advertisement expenses 29,650
Selling and distribution expenses
Depreciation of store furniture......................................................................................................................................4..,.2..0..0............................
Advertising ..................................................................................................................................................................1..3..,.7..5..0............................
Salaries and wages of sales employees ...................................................................................................................2..2..,.0..0..0............................
Total Selling expenses 39,950
Total operating expenses
Income from operating
Add/Less: Other revenue and expenses
Interest revenues..........................................................................................................................................................................1..,.5..0. 0
Interest expenses ....................................................................................................................................................................(.1..6..,.9..0..0)
Excess of other expenses than other revenue
Net income before tax
Less: Income tax expenses
Net Income
VQ-4._____ The following information of Mr. Hari are provided to you for the year ending 31st December 2013. 30,000
30,000
Sales revenues................................................................................4..0..0...,0...0..0.................................................................................................... 20,000
Other business income......................................................................3..0..,.0..0...0.................................................................................................... 80,000
Income from subsidiary Co................................................................5..0..,.0..0...0.................................................................................................... 110,000
Depreciation expenses......................................................................2..0..,.0..0...0.................................................................................................... 12,000
Administrative expenses ...................................................................6..0..,.0..0...0.................................................................................................... 30,000
Purchase return ...................................................................................6..,.0...0..0....................................................................................................
Sales return ......................................................................................1..0..,.0..0...0....................................................................................................
Selling expenses ...............................................................................3..0..,.0..0...0....................................................................................................
Beginning inventory ..........................................................................2..0..,.0..0...0....................................................................................................
Additional information: Ending inventory Rs. 24,000
Required: Multi step income statement as per the company act 2063
Solution,
Income Statement (As per the Company Act 2063)
For the year ending 31st December 2013
Particulars Amount Rs. Amount Rs.
390,000
Sales revenue (Net).........................................................................................................................................................................................
Les: Cost of goods sold: 190,000
Beginning inventory ........................................................................................................................................................................2..0..,000 200,000
Add: Purchase (Net)..............................................................................................................................................................................1..7..4..,000 30,000
Freight.............................................................................................................................................................................................2..0..,000 230,000
Total cost of goods available for sale 214,000
Less: Ending inventory ............................................................................................................................................................................2..4..,000
Cost of goods sold
Gross profit
Add: Other business incomes ...................................................................................................................................................................
150 Accounting-XI
Less: Operating expenses 90,000
Selling expenses.............................................................................................................................................................................3..0..,000 140,000
Administrative expenses ................................................................................................................................................................6..0..,000
30,000
Total operating expenses 110,000
Operating profit
Less: Interest expenses ..........................................................................................................................................................................1..0..,000 80,000
190,000
Depreciation expenses ..................................................................................................................................................................2..0..,000 30,000
220,000
Add: Income from subsidiary company...................................................................................................................................................5..0..,000 30,000
Other investment incomes .............................................................................................................................................................3..0..,000 190,000
110,000
Add: Gain on sales of equipments.............................................................................................................................................................. 300,000
80,000
Less: Loss from discounted operations ...................................................................................................................................................... 220,000
Add: Extra ordinary income ........................................................................................................................................................................
Net income before tax
Less: Income tax expenses .........................................................................................................................................................................
Net income after tax
VQ-5._____ The following information are given:
Net profit ......................................................................................R...s....1..,.7..5..,.0..0..0.....V...e..h..i.c..le..s....................................................................................................7..5..,.0..0...0......................................................
Capital..................................................................................................6..,.5..0..,.0..0..0.....P...l.a..n..t..a..n..d...M...a..c..h..i.n..e..r.y.............................................................................1..,.5..0..,.0..0...0......................................................
Drawing...................................................................................................7..5..,.0..0..0.....F...u..r.n..i.t.u..r.e...a..n..d...F..i.x..t.u..r.e................................................................................9..0..,.0..0...0......................................................
Reserve and surplus...............................................................................2..5..,.0..0..0.....P...a..t.e..n..t......................................................................................................3..5..,.0..0...0......................................................
12% Mortgage loan .............................................................................2..,.0..0..,.0..0..0.....I.n..v..e..s..t.m...e..n..t..i.n...g..o..v..t..s..e..c..u..r.i.t.i.e..s................................................................1..,.0..0..,.0..0...0......................................................
Bank overdraft .....................................................................................1..,.5..0..,.0..0..0.....A...c..c.r..u..e..d...i.n..c.o...m...e.......................................................................................3..0..,.0..0...0......................................................
Sundry creditors...................................................................................1..,.2..0..,.0..0..0.....S...u..n..d..r.y...d..e..b..t.o..r.s.........................................................................................8..0..,.0..0...0......................................................
Bill payable .............................................................................................5..0..,.0..0..0.....B...i.ll..r.e..c..e..i.v..a..b..l.e...........................................................................................3..5...,0..0...0......................................................
Outstanding expenses............................................................................6..0..,.0..0..0.....A...c..c.o..u...n..t..r.e..c..e..i.v.a..b..l.e...................................................................................4..0..,.0..0...0......................................................
Advance income .....................................................................................5..0..,.0..0..0.....C...a..s..h...i.n...h..a..n..d............................................................................................4..5..,.0..0...0......................................................
Account payable .....................................................................................4..0..,.0..0..0.....C...a..s..h...a..t..b..a..n..k............................................................................................6..5..,.0..0...0......................................................
Provision for taxation..............................................................................2..5..,.0..0..0.....P...r.e..p..a..i.d...i.n..s..u..r.a..n..c..e....................................................................................2..5..,.0..0...0......................................................
Provision for dividend .............................................................................3..0..,.0..0..0.....D...e..p..o..s..i.t.e..d...w...it.h...S...u..p..p..l.i.e..s..........................................................................3..0..,.0..0...0......................................................
Good will .................................................................................................5..0..,.0..0..0.....C...l.o..s..in...g...s.t.o..c..k.........................................................................................1..,.5..0..,.0..0...0......................................................
Land and Building................................................................................5..,.0..0..,.0..0..0................................................................................................
Required: Balance Sheet Sapkota Business Concern
Solution,
Balance Sheet
Liabilities As on 31st December 2010
Capital ..................................................................... 6,50,000
Add: Net profit........................................................... 1,75,000 Rs. Assets Rs.
Good will.................................................................................................5..0..,.0..0...0......................................................
..................................................................... 8,25,000 Land and Building ..............................................................................5..,.0..0..,.0..0...0......................................................
Less: Drawing ............................................................. 75,000 Vehicles .................................................................................................7..5..,.0..0...0......................................................
Reserve and surplus............................................................... 7,50,000 Plant and Machinery ...........................................................................1..,.5..0..,.0..0...0......................................................
12% Mortgage loan ................................................................ 25,000 Furniture and fixture...............................................................................9..0..,.0..0...0......................................................
Bank overdraft ........................................................................ 2,00,000 Patent.....................................................................................................3..5..,.0..0...0......................................................
Sundry creditors...................................................................... 1,50,000 Investment in government securities ..................................................1..,.0..0..,.0..0...0......................................................
Bill payable ............................................................................. 1,20,000 Accrued income .....................................................................................3..0..,.0..0...0......................................................
Outstanding expenses ...........................................................
Advance income ..................................................................... 50,000 Sundry debtors.......................................................................................8..0..,.0..0...0......................................................
Account payable ..................................................................... 60,000 Bill receivable .........................................................................................3..5..,.0..0...0......................................................
Provision for taxation.............................................................. 50,000 Closing stock.......................................................................................1..,.5..0..,.0..0...0......................................................
Provision for dividend ............................................................ 50,000 Account receivable.................................................................................4..0..,.0..0...0......................................................
Total 40,000 Cash in hand ..........................................................................................4..5..,.0..0...0......................................................
25,000 Cash at bank ..........................................................................................6..5..,.0..0...0......................................................
30,000 Prepaid insurance ..................................................................................2..5..,.0..0...0......................................................
Deposited with Supplies ......................................................................3..0..,.0..0...0......................................................
15,00,000 Total 15,00,000
VQ-6. _____ The following ledger balance of XYZ Co. Ltd. provided to you at 31st December 2013.
Rs. Rs.
Fixed assets .........................................................................................2..0..0..,.0..0..0.....I.n..v..e..s..t.m...e..n..t.............................................................................................1..0...0..,0...0..0......................................................
Inventories ............................................................................................1..4..0..,.0..0..0.....T...r.a..d..e...r.e..c..e..i.v..a..b..l.e..s....................................................................................6..0..,.0..0...0......................................................
Prepaid expenses...................................................................................3..2..,.0..0..0.....T...r.a..d..e...p..a..y..a..b..l.e..........................................................................................4..8..,.0..0...0......................................................
Short term loan .........................................................................................6..,.0..0..0.....C...a..s..h...a..t..b..a..n..k............................................................................................2..0..,.0..0...0......................................................
Capital...................................................................................................2..6..0..,.0..0..0.....P...r.o..v..i.s..io..n...................................................................................................4..0..,.0..0...0......................................................
Reserve and retained profit ...................................................................8..6..,.0..0..0.....M....e..d..iu..m....a...n..d...lo..n..g...-.t.e..r.m....l.o..a..n................................................
Unamortized preliminary expenses .......................................................2..0..,.0..0..0.....S...e..c..u..r.e..d....................................................................................................6..0..,.0..0...0......................................................
Unsecured .............................................................................................5..2..,.0..0...0......................................................
Required: Balance sheet as per company Act, 2063
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Accounting XI Manual 2020
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