CAPÍTULO 3: ANÁLISIS Y DISEÑO DEL SISTEMA
4.4. Conclusiones
31.03.12 Balance c/d 60,000 01.04.11 Balance b/d 30,000 31.03.12 Depreciation 30,000
60,000 60,000
31.12.12 01.04.12 Balance b/d 60,000
31.03.12 Depreciation 30,000 31.03.12 Insurance Policy 10,000
1,00,000 1,00,000
Method III: Insurance Policy Method assuming the asset destroyed in second year
Year Narration Journal Entries Debit Credit
0 Asset purchased
Plant and Machinery A/c Dr 1,20,000
To Bank A/c 1,20,000
1
Premium Paid Depreciation Insurance Policy A/c Dr 30,000
To Bank A/c 30,000
Provision created Depreciation A/c Dr 30,000
To Depreciation Provisions A/c 30,000
Depreciation transferred to P/L a/c
Profit and Loss A/c Dr 30,000
To Depreciation A/c 30,000
2
Premium Paid Depreciation Insurance Policy A/c Dr 30,000
To Bank A/c 30,000
Provision created Depreciation A/c Dr 30,000
To Depreciation Provisions A/c 30,000 Depreciation
transferred to P/L a/c
Profit and Loss A/c Dr 30,000
To Depreciation A/c 30,000
Policy realized
Bank A/c Dr 90,000
To Depreciation Insurance Policy A/c 90,000
Profit on policy transferred Depreciation Insurance Policy A/c Dr 30,000
To Depreciation Provision A/c 30,000
Asset sold
Bank A/c Dr 30,000
Depreciation Provision A/c Dr 90,000
To Asset A/c 1,20,000
[CMA RTP J11]
Question 9: M/s Suba chemicals has imported a machine on 1st July 2007 for $ 6,000 paid customs duty and freight ₹52,000 and incurred erection charges ₹20,000. Another local machinery costing ₹ 1,00,000 was purchased on January 1, 2008. On 1st July 2009, a portion of the imported machinery (value one-third) got out of order and was sold for ₹34,800. New Machinery was purchased to replace the same for ₹50,000.
Depreciation is to be calculated at 20% p.a. on straight-line method. Prepare the Machinery Account and Machinery Disposal Account for 2007, 2008 and 2009. Exchange rate is ₹38 per $
Answer:
Dr. Machinery Account – Books of M/s. Suba Chemicals Cr.
Date Particular Amount Date Particular Amount
01.07.07 To Bank – Purchase 2,28,000 31.12.07 By Depreciation –
(₹3,00,000 ×20/100×1/2)
30,000
Bank – Duty etc. 52,000 Balance c/d 2,70,000
Bank – Erection 20,000
3,00,000 3,00,000
01.01.08 Balance b/d 2,70,000 31.12.08 Depreciation
Bank – Purchase 1,00,000 i. 3,00,000 × 20/100 60,000
ii. 1,00,000 × 20/100 20,000
Balance c/d 2,90,000
3,70,000 3,70,000
01.01.09 Balance b/d 2,90,000 01.07.09 Machinery disposal A/c 60,000
Depreciation:
i. 1,00,000 × 20/100×1/2 10,000 Bank- Purchase 50,000 31.12.09 Depreciation:
i. 2,00,000 × 20/100 40,000 ii. 1,00,000 × 20/100 20,000 iii. 50,000 × 20/100× ½ 5,000
Balance c/d 2,05,000
3,90,000 3,90,000
01.01.10 2,05,000
Dr. Machinery Disposal Account Cr.
Date Particular ₹ Date Particular ₹
01.07.09 To Machinery 60,000 01.07.09 By Bank – Sale Proceeds 34,800 Profit & Loss A/c 25,200
60,000 60,000
Note:
1. Book value of Machinery as on July 1, 2009 will be as follows:
₹ Original Cost on July 1, 2007 (3,00,000 × 1/3) 1,00,000 Less Depreciation for 2007 (for 6 months) (1,00,000 × 20/100×1/2) 10,000
90,000 Less Depreciation for 2008 (1,00,000 × 20/100) 20,000 70,000 Less Depreciation for 2009 (for 6 months) (1,00,000 × 20/100×1/2) 10,000 60,000
2. If ‘Machinery Disposal Account’s is not kept, then Machinery account for the year 2009 will be prepared as under:
Dr. Machinery Account (for 2009) Cr.
Date Particular Amount Date Particular Amount
01.01.09 To Balance b/d 2,90,000 01.07.09 By Depreciation 10,000
Bank 50,000 Bank- Sale Proceeds 34,800
Profit & Loss A/c 25,200
Loss on Sale (60,000 – 34,800)
Depreciation 65,000
Balance c/d 2,05,000
3,40,000 3,40,000
01.01.10 Balance b/d 2,05,000
[CMA INTER SY08, J13, 5 Marks]
Question 10: On December, 2011 two machines, which were purchased on 1st October, 2008 costing
₹50,000 and ₹20,000 respectively had to be discarded and replaced by two new machines costing ₹50,000 and ₹25,000 respectively.
One of the discarded machines was sold for ₹20,000 and other for ₹10,000. The balance of Machinery Accounts as on April 1, 2011 was ₹3,00,000 against which the depreciation provision stood at ₹1,50,000.
Depreciation was provided @ 10% on Reducing Balance Method.
Prepare the Machinery A/c, Provision for Depreciation A/c and machinery Disposal A/c.
Answer:
Dr Machinery Account Cr
Date Particulars Amt. ( ₹) Date Particulars Amt. ( ₹) 1-4-2011 To Balance c/d 3,00,000 31-12-2011 By Machinery Disposal 70,000 31-12-11 Bank 75,000 31-03-2012 Balance c/d 3,25,000
3,75,000 3,75,000
1-4-2013 Balance b/d 3,25,000
Dr. Provision for Depreciation Account Cr.
Date Particulars Amt. ( ₹) Date Particulars Amt. ( ₹)
31.12.11 To Machinery Disposal a/c 20,175 01.04.11 By Balance b/d 1,50,000 [16,135+4,040] 31.12.11 P & L A/c [WN 1] 11,489 31.03.12 Balance c/d 1,41,314 31.03.12
1,61,489 1,61,489
1-4-12 Balance b/d 1,41,314
Dr. Machinery Disposal Account Cr.
Date Particulars ₹ Date Particulars ₹
31-12-11 To Machinery A/c 70,000 31-12-11 By Provision for Depreciation A/c 20,175
Bank 30,000
P & L A/c (Bal fig.) 19,825
70,000 70,000
Working Notes:
1. Depreciation on the machines till April 1, 2012 Machine 1 Machine 2 Total
01.10.08 Original Value 50,000 20,000 70,000
Depreciation [01.10.08-31.03.09] 2,500 1,000 3,500
31.03.09 Written Down Value 47,500 19,000 66,500
Depreciation [01.04.09-31.03.10] 4,750 1,900 6,650
31.03.10 Written Down Value 42,750 17,100 59,850
Depreciation [01.04.10-31.03.11] 4,275 1,710 5,985
31.03.11 Written Down Value 38,475 15,390 53,865
Depreciation [01.04.11-31.12.11]
31.12.11 Written Down Value
Total depreciation on assets sold 16,135
[3,500+6,650+5,985]
2 Depreciation on Discarded Machine
Book Value of Machine as on 01.04.2011 53,865
Less Depreciation @ 10% for 9 months [till 31.12.11] 4,040 Value of Discarded Machine as on selling date 49,825 3 Depreciation of machinery in use
Value of machinery on 1st April, 2011 3,00,000
Less Cost of discarded machines: 70,000
2,30,000 Less Provision for Depreciation on 1 April, 2011 1,50,000
Less: Depreciation on discarded machines: 16,135 1,33,865
96,135
Depreciation @ 10% on 96,135 9,614
Add Depreciation for 3 months on ₹75,000 1,875
11,489
[CMA RTP J12]
Question 11: On December, 2011 two machines, which were purchased on 1st October, 2008 costing
₹30,000 and ₹24,000 respectively had to be discarded and replaced by two new machines costing ₹40,000 and ₹30,000 respectively.
One of the discarded machines was sold for ₹16,000 and other for ₹6,000. The balance of Machinery Accounts as on April 1, 2011 was ₹5,00,000 against which the depreciation provision stood at ₹2,10,000.
Depreciation was provided @ 10% on WDV method.
Prepare the Machinery A/c, Provision for Depreciation A/c and machinery Disposal A/c.
Answer:
Dr Machinery Account Cr
Date Particulars Amt. ( ₹) Date Particulars Amt. ( ₹) 1-4-2011 To Balance c/d 500000 31-12-2011 By Machinery Disposal 54000
31-12-11 Bank 70000 31-03-2012 Balance c/d 516000
570000 570000
1-4-2013 Balance b/d 516000
Dr. Provision for Depreciation Account Cr.
Date Particulars Amt. ( ₹) Date Particulars Amt. ( ₹)
31.12.11 To Machinery Disposal a/c 15,564 01.04.11 By Balance b/d 2,10,000 31.12.11 P & L A/c [WN 1] 3,116 31.03.12 Balance c/d 224147 31.03.12 P & L A/c [WN 1] 26,595
2,39,711 2,39,711
1-4-12 Balance b/d 224147
Dr. Machinery Disposal Account Cr.
Date Particulars ₹ Date Particulars ₹
31-12-11 To Machinery A/c 54,000 31-12-11 By Provision for Depreciation A/c 15,564
Bank 22,000
P & L A/c (Bal fig.) 16436
54,000 54000
Working Notes:
1. Depreciation on the two machines till April 1, 2012 ₹ ₹
01.10.08 Original Value 54,000
Depreciation [01.10.08-31.03.09] 2,700
31.03.09 Written Down Value 51,300
Depreciation [01.04.09-31.03.10] 5,130
31.03.10 Written Down Value 46,170
Depreciation [01.04.10-31.03.11] 4,617
31.03.11 Written Down Value 41,553
Depreciation [01.04.11-31.12.11] 3,116
31.12.11 Written Down Value 38,436
Total depreciation on assets sold 15,564
2 Depreciation of machinery in use
Value of machinery on 1st April, 2011 5,00,000
Less Cost of discarded machines: 54,000
4,46,000 Less Provision for Depreciation on 1 April, 2011 2,10,000
Less: Depreciation on discarded machines: 12,447 1,97,553 2,48,447
Depreciation @ 10% on 2,48,447 24,845
Add Depreciation for 3 months on ₹70000 1,750
26,595
[CMA INTER SY08, J14, 6 Marks]
Question 12: On 1st April, 2010, M/s. N. R. Sons & Co. purchased four machines for ₹2,60,000 each. On 1st April, 2011, one machine was sold for ₹2,05,000. On 1st July, 2012, the second machine was destroyed by fire and insurance claim received ₹1,75,000 on 15th July,2012. A new machine costing ₹ 4,50,000 was purchased on 1st October, 2012. Books are closed on 31st March every year and depreciation has been charged @15% per annum on diminishing balance method. You are required to prepare machinery account for 4 years till 31st March, 2014. (Calculations to be shown in nearest rupee)
Answer:
Dr Machinery Account Cr
Date Particular ₹ Date Particular ₹
01.04.10 To Bank A/c 10,40,000 31.03.11 By Depreciation A/c 1,56,000
31.03.11 Balance c/d 8,84,000
10,40,000 10,40,000
01.04.11 Balance b/d 8,84,000 01.04.11 Bank a/c (machinery sold) 2,05,000
31.03.12 Depreciation 99,450
31.03.12 P& L A/c (Loss on sale) 16,000
Balance c/d 5,63,550
8,84,000 8,84,000
01.04.12 Balance b/d 5,63,550 01.07.12 Insurance claim 1,75,000 P&L A/c (Loss on destroy) 5,806
Depreciation A/c 7,044
01.10.12 Bank 4,50,000 31.03.13 Depreciation A/c 90,106
31.03.13 Balance c/d 7,35,595
10,13,550 10,13,550
01.04.13 Balance b/d 7,35,595 31.03.14 Depreciation 1,10,339
31.03.14 Balance c/d 6,25,256
7,35,595 7,35,595
01.04.14 Balance b/d 6,25,256
Workings
Particulars M-1 M- 2 M-3 M- 4 M- 5
01.04.2010 Purchased of Machinery 2,60,000 2,60,000 2,60,000 2,60,000 -
Less Depreciation@15% p. a 39,000 39,000 39,000 39,000 - W.D.V. on 31.03.11 2,21,000 2,21,000 2,21,000 2,21,000 -
Less Sold of machinery on 01.04.11 2,05,000 - - - -
Loss on Sale 16,000 - - - -
Less Depreciation @ 15% P.a. - 33,150 33,150 33,150 -
W. D. V. on 31.03.12 1,87,850 1,87,850 1,87,850 -
Less Depreciation @ 15% for 3 months i.e. 01.04.12- 01.07.12
- 7,044 - - -
1,80,806 1,87,850 1,87,850 Less Amount recd from Insurance claim 1,75,000
Loss on fire 5,806
On 10.10.12 Purchased of machinery 4,50,000
Less Depreciation of 2 machines for full years 28,178 28,177
1,59,672 1,59,673
Less Depreciation for 6th months of new machinery - - 33,750
W.D.V. for 31.03.13 1,59,672 1,59,673 4,16,250
Less Depreciation for full year @ 15% p.a. 23,951 23,950 62,438 1,35,721 1,35,723 3,53,812
[CMA INTER J10, 5 Marks]
Question 13: From the following information prepare.
1. Fixed Assets Account and
2. Accumulated Depreciation Account :
Opening Balance ₹ Closing Balance ₹
Fixed Assets 4,00,000 5,50,000
Accumulated Depreciation 80,000 1,35,000
Additional Information: A part of a machine costing ₹60,000 has been sold for ₹30,000 on which accumulated depreciation was ₹15,000.
Answer:
Dr Fixed Assets A/c Cr
To Balance b/d 4,00,000 By Accu. Depreciation 15,000
Bank A/c 2,10,000 Bank A/c 30,000
Loss on sale of Asset 15,000 Balance c/d 5,50,000
6,10,000 6,10,000
Dr Accumulated Depreciation A/c Cr
To Fixed Assets A/c 15,000 By Balance b/d 80,000 Balance c/c 1,35,000 Profit and Loss A/c 70,000
1,50,000 1,50,000
CHANGE IN METHODS OF DEPRECIATION AND ESTIMATION
Question 14: Change In Estimated Useful Life: Plant has useful life of 10 years. Depreciable amount is
₹40 lakhs. The company has charged SLM depreciation. At the end of 6th year, the balance useful life was re-estimated at 8 years. What is the depreciation will be charged from 7th year?
Answer: =
= 2
Question 15: A plant was depreciated under two different methods as under:- SLM WDVM
I year 3.90 10.69 II year 3.90 7.90 III year 3.90 5.84 IV year 3.90 4.32 15.60 28.75 V year 3.90 3.19 Required:
1. If the company followed WDV for first four years and decides to switch over to SLM, what would be the amount of resultant surplus/deficiency?
2. It the company followed SLM for first four years and decides to switch over to WDV, what would be amount of resultant surplus/deficiency?
Answer: The change should be treated as a change in accounting policy and its effects should be quantified and disclosed. The effect
1. Surplus of ₹13.15 will be written back to profit and loss account.
2. Deficiency of ₹13.15 should be charged to profit and loss account.
[CMA FOUNDATION J02, 16 Marks]
Question 16: Depreciation has been charged for the years 1998 to 2001 at 10% on reducing balance method on opening balance of each item of plant and machinery in use. The balance of Plant and Machinery Account on 31st December, 2001 was ₹54,000. There were no sales during these years and purchases were ₹16,800 on September, 1998 and ₹11,400 in December 2000.
The management decided that depreciation should be charged at 20% on the same method but calculate on the closing balance of each year with retrospective effect from 1998.
You are required to pass journal entry for giving effect to the revised basis at the end of 2001, and prepare Plant and Machinery Account and Revised Plant and Machinery Account for all the years.
Answer: The Balance of Plant & Machinery accounts as on January 1998 is not given. This balance is to be ascertained by working reversed way from 2001, by following original rate of depreciation i.e. 10% WDV.
Plant & Machinery Account
Particulars Amount Particulars Amount
01.01.98 To Balance b/d 48,000 31.12.98 By Depreciation 4,800
Sept Bank 16,800 ( ₹60,000 – ₹16,800)
31.12.98 Balance c/d 60,000
64,800 64,800
01.01.99 Balance b/d 60,000 31.12.99 Depreciation 6,000
(1/9 of 54,000)
31.12.99 Balance c/d 54,000
60,000 60,000
01.01.00 Balance b/d 54,000 31.12.00 Depreciation 5,400
Dec Bank A/c 11,400
31.12.00 Balance c/d 60,000
65,400 65,400
01.01.01 Balance b/d 60,000 31.12.01 Depreciation ( ₹54,000) 6,000
31.12.01 Balance c/d 54,000
60,000 60,000
When depreciation is calculated on the revised basis, the Plant & Machinery Account will be as under:
Revised Plant & Machinery
Particulars Amount Particulars Amount
01.01.98 To Balance b/d 48,000 31.12.98 By Depreciation 12,960
Sept Bank 16,800 (20% on 64,800)
Balance c/d 51,840
64,800 64,800
01.01.99 Balance b/d 51,840 31.12.99 Depreciation 10,368
(20% on 51,840)
Balance c/d 41,472
51,840 51,840
01.01.00 Balance b/d 41,472 31.12.00 Depreciation 10,574
Dec Bank A/c 11,400 (20% on 52,872)
Balance c/d 42,298
52,872 52,872
01.01.01 Balance b/d 42,298 31.12.01 Depreciation 8,460
(20% on ₹42,298)
Balance c/d 33,838
42,298 42,298
The resultant impact on Profit and Loss A/c of ₹20,162 to be disclosed in notes to accounts Depreciation
@ 10%
Residual Value
Depreciation
@ 20%
Residual Value
31.12.01 6,000 54,000 8,460 33,838
31.12.00 5,400 60,000 10,574 42,298
31.12.00 --- 65,400 -- --
31.12.99 6,000 54,000 10,368 41,472
31.12.98 4,800 60,000 12,960 51,840
31.12.98 -- 64,800 -- --
01.01.98 -- 48,000 -- --
22,200 42,362
Difference (42,362 – 22,200) ₹20,162
Journal Entry
31.12.01 Depreciation A/c Dr 2,460
Prior Period Adjustment A/c (Depreciation for Previous years) Dr 17,702
To Plant & Machinery A/c 20,162
[Being arrear provision of Depreciation chargeable at the revised rate of 20% and charged @ 10% for the year 1998 to 2000 (₹33, 902 – ₹16,200) and for the year 2001 (₹8,460 - ₹6,000) charged]