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AccountancyClass 11CBSE

What is the formula to calculate rate of deprecation under written down method.

Formula to calculate rate of deprecation under written down method. R= [1-n√s/c] X 100Where r= Rate of Deprecation n= Expected useful life s= Scrap value c= Cost of asset

AccountancyClass 11CBSE

List out the factors that determine the useful life of asset?

Factors that determine the useful life of assetPre-determined by legal or contractual limits, e.g. in case of leasehold asset, the useful life is the period of lease.The number of shifts for which asset is to be used.Repair and maintenance policy of the business organisation.Technological obsolescence.Innovation/improvement in production method.Legal or other restrictions.

AccountancyClass 11CBSE

What are the factors of Obsolescence?

Factors of obsolescence areTechnological changesImprovements in production methodsChange in market demand for the product or service output of the asset.Legal of other description

AccountancyClass 11CBSE

On Jan 01,2001 Jain & Sons purchased a second hand plant costing Rs.2,00,000 and spent Rs.10,000 on its overhauling. It also spent Rs.50,000 on transportation and installed of the plant. It was decided to provide for depreciation @ of 20% on written down value. The plant was destroyed by fire on July 31,2004 and an insurance claim of Rs.50,000 was admitted by the insurance company. Prepare plant account, accumulated depreciation account and plant disposal account assuming that the company closes its books on December 31, every year.

Books of Jain & sonsPlant AccountDr. Cr.Date ParticularsJ.FAmountDateParticularsJ.FAmount2001Jan. 012002Jan.012003Jan.012004Jan. 01BankBalance b/dBalance b/d

AccountancyClass 11CBSE

What are the Effects of any addition or extension to the Existing Assets?

An existing assets may require some additions or extensions for being suitable for operations. Such additions/ extensions may or may not become an integral part of the asset. The amount incurred on such additions/extensions is capitalized and written off as depreciation over the life of the asset. It is important to mention here the amount so incurred is in addition to usual repair and maintenance expenses. As-6 Mentions thatAny addition or extension, which becomes an integral par

AccountancyClass 11CBSE

On April 01, 2004 following balances appeared in the books of M/s Kanishka Traders: Furniture account Rs.50,000, Provision for depreciation on furniture Rs.22,000. On October 01,2004 a part of furniture purchased for rupees 20,000 on April 01,2000 was sold for Rs.5,000. On the same date new furniture costing Rs.25,000 was purchased. The depreciation was provided @10%p.a on original cost if the assets and no depreciation was charged on the asset in the year of sale. Prepare furniture account and provision for depreciation account for the year ending March 31, 2005

Books of Kanishka TradersFurniture AccountDr. Cr.Date ParticularsJ.FAmountDateParticularsJ.FAmount2004Apr.01Oct.10Balance b/dBank50,00025,000</td

AccountancyClass 11CBSE

M/s Dalmia Textile Mills purchased machinery on April 01 2001 for Rs.2,00,000 on credit from M/s Ahuja and sons and spent Rs.10,000 for its installation. Depreciation is provided @10%p.a on written down value basis. Prepare Machinery Account for the first three years. Books are closed on March 31, every year.

Books of Dalmia Textiles mills Machinery AccountDr. Cr.Date ParticularsJ.FAmountDateParticularsJ.FAmount2001Apr.012002Arr.012003Apr.012004BankBan

AccountancyClass 11CBSE

M/s Shnghania and Bros. purchase a plant for Rs. 5,00,000 on April, 01 2002, and spent Rs. 50,000 for its installation. The salvage value of the plant after its useful life of 10 years is estimated to be Rs. 10,000. Record journal entries for the year 2002-03 and draw up Plant Account and Depreciation Account for first three years given that the depreciation is charged using straight line method if : The books of account close on March 31 every year The firm charges depreciation to the assets account

Books of Sighania and BrosJournal DateParticularsL.FDr. AmountCr. Amount2002April1Apr. 012003Mar.31Mar.31Plant A/c Dr To Bank A/c(Being purchase plant for Rs. 5,00,000)5,00,00050,00054,00054,00005,00,00050,000<br

AccountancyClass 11CBSE

Differentiate between Straight Line and Write-Down Value methods of depreciation.

Bases of DifferenceStraight Line MethodWritten Down Value Basis of charging depreciationAnnual depreciationTotal charge against profit and loss account in respect of depreciation and repairRecognition by income TaxSuitabilityOriginal CostFixed yearUnequal year after year.Not recognizedIt is suitable for assets in which repair charges are l

AccountancyClass 11CBSE

What is written down Method and its advantages?

Under this method, depreciation is charged on the book value of the asset. Since book value keeps on reducing by the annual charge of depreciation, it is also known as reducing balance method. This method involves the application of a pre-determined proportion/percentage of the book value of the asset at the beginning of every accounting period, so that the amount of depreciation reduces year after year.Advantages of Written Down Value MethodThis method is based on a more r

AccountancyClass 11CBSE

What are the limitations of Straight Line Method?

Limitations of Straight line Method This method is based on the faulty assumption of same utility of the asset in different accounting years.With the passage of time, work efficiency of the assets decreased and repair and maintenance expense increases. Hence, under this method total amount charged against profit on account of depreciation and repair taken together will not be uniform throughout the life of the asset, rather it will keep on increasing from year to year.</l

AccountancyClass 11CBSE

Explain Straight Line Methods and its Advantages.

This method is based on the assumption of equal usage of the assets over its entire useful life. It is called straight line for a reason that if the amount of depreciation and corresponding time period is plotted on a graph it will result in a straight line.It is also called fixed installment method because the amount of depreciation remains constant from year to year over the useful life of the asset. According to this method, a fixed and an equal amount is charged as depreciation in

AccountancyClass 11CBSE

What are the methods of Calculating Depreciation Amount?

There are two methods are Straight Line Methods Written Down Methods

AccountancyClass 11CBSE

Describe the need of Deprecation.

Need for DeprecationMatching of Cost and Revenue:- The rationale of the acquisition of fixed assets in business operations is that these are used in the earning of revenue. Every asset is bound to undergo some wear and tear, and hence lose value, once it is put to use in business. Therefore, depreciation is as much the cost as any other expense incurred in the normal course of business.Consideration of tax: - Depreciation is a deductible

AccountancyClass 11CBSE

Explain the causes of Depreciation.

Causes of Depreciation Wear and Tear due to use or passage of time:- Wear and tear means deterioration, and the consequent diminution in an assets value, arising from its use in business operations for earning revenue. It reduces the asset’s technical capacities to serve the purpose for, which it has been meant. Another aspect of wear and tear is the physical deterioration.Expiration of legal Rights :- Certain categories of assets lose th

AccountancyClass 11CBSE

What is Amortisation?

Amortisation refers to writing-off the cost of intangible assets like patents, copyright, trade marks, Franchise, leasehold mines which have entitlements to use for a specified period of time.

AccountancyClass 11CBSE

What is Depletion?

The term depletion is used in the context of extraction of natural resources like mines, quarries, etc. that reduce the availability of the quantity of the material of asset.

AccountancyClass 11CBSE

What are the Features of depreciation?

Features of DepreciationIt is declined in the book value of fixed assets.It includes loss of value due to efflux ion of time, usage or obsolescence.It is continuing process.It is an expired cost and hence must be deducted before calculating taxable profits.It is non-cash expense.

AccountancyClass 11CBSE

What is Depreciation?

Depreciation may be described as a permanent, continuing and gradual shrinkage in the book value of fixed assets. It is based on the cost of assets consumed in the business and not on its market value.

AccountancyClass 11CBSE

What are fixed Assets?

Fixed Assets are those assets that are acquired for continued use and are not ment for resale. Fixed Assets May be i) Tangable and ii) Intangible.Tangible Fixed Assets: refers to those fixed assets which can be seen and touched, e.g., Land and Building, Machinery etc.Intangible Fixed Assets: refers to those fixed assets which are not in physical form i.e., they can nither be seen nor touched, e.g., goodwill of a firm, trade mark etc.

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