Download App

Depreciation, Provisions and Reserves — Account STD 11 Commerce — Question

CBSE BoardEnglish MediumSTD 11 CommerceAccountDepreciation, Provisions and Reserves6 Marks
Question
Write short note on ‘Original Cost Method of providing depreciation with a suitable example.
✓

Answer

Straight Line Method
This method is also termed as "Original Cost Method' because under this method depreciation is charged at a fixed percentage on the original cost of the asset. The amount of depreciation remains equal from year to year
Under this method, the amount of depreciation is calculated by deducting the scrap value from the original cost of the asset and then by dividing the remaining balance by the number of years of its estimated life. The depreciation so calculated and charged annually will reduce the original cost of the asset to zero, or its scrap value, as the case may be, at the end of its estimated life. Under this method, the amount of depreciation is calculated by the following formula:-
$\text{yearly Depreciation}=\frac{\text{Original cost of the asset}-\text{Estimated scrap valu}}{\text{Estimated Life of the Asset}}$
For example, if the original cost of the asset is ₹ 1,00,000 and its scrap value is likely to be ₹ 15,000 after its estimated life of 10 years, the depreciation written off will
$\frac{1,00,000-15,000}{10}=₹\ 8,500\text{ every year.}$

Need a full question paper?

Generate a complete, print-ready paper with questions like this in minutes — across 16+ boards, with answer keys.

Start Generating Free

Explore more

More "6 Marks Question" from Depreciation, Provisions and Reserves→Depreciation, Provisions and Reserves — all question types→Account STD 11 Commerce question papers→CBSE Board STD 11 Commerce question papers→CBSE Board question paper generator→

Similar questions

Enter the following transactions in Two-column Cash Book of Reema, Chandigarh and find cash and bank balances:
2019   ₹
April 1 Cash balance ₹ 2,000, bank balance ₹ 24,500  
April 2 Cash sales ₹ 60,000 plus CGST and SGST @ 6% each  
April 5 Deposited in Bank 50,000
April 7 Issued cheque to Sohan 10,000
April 9 Sold goods for cash ₹ 10,000 plus CGST and SGST @ 6% each  
April 12 Received a cheque from National Insurance Co. Ltd. against claim lodged last year 19,800
April 14 Sold goods to Niraj of ₹ 25,000 plus CGST and SGST @ 6% each, received cash ₹ 10,000 and balance by cheque. Allowed him discount ₹ 500  
April 16 Purchased furniture for ₹ 10,000 plus CGST and SGST @ 6% each, paid for furniture by cheque  
April 18 Sold old furniture for ₹ 10,000 plus CGST and SGST @ 6% each and received cash  
April 20 Paid into bank cheque of Niraj and cash 2,500
April 22 Paid to Suman by cheque 2,500
April 26 Suman's cheque returned on technical ground and paid cash for equal amount  
April 28 Bank charged its commission of ₹ 300 plus CGST and SGST @ 6% each  
April 29 Bank paid insurance premium as per standing instructions 2,500
April 30 Nigam paid into bank directly, intimation received on the same day 5,000
→
Define Accounting Standards. What are their main objectives?
→
Rectify the following errors:
  1. Furniture purchased for ₹ 10,000 wrongly debited to Purchases Account.
  2. Machinery purchased on credit from Raman for ₹ 20,000 was recorded through Purchases Book.
  3. Repairs on machinery ₹ 1,400 debited to Machinery Account.
  4. Repairs on overhauling of second hand machinery purchased ₹ 2,000 was debited to Repairs Account.
  5. Sale of old machinery at book value of ₹ 3,000 was credited to Sales Account.
→
Pass entries in the books of Devdhar & Bros. Odisha, assuming all transactions have been entered within the state, charging CGST and SGST @ 9% each:
2018
 
March 4
Purchased goods for ₹ 5,00,000 from Sunil Bros.
March 7
Goods returned to Sunil Bros. for ₹ 20,000
March 10
Sold goods to Mehta & Co. for ₹ 8,00,000
March 12
Goods returned by Mehta & Co. for ₹ 30,000
March 20
Goods withdrawn by Proprietor for personal use ₹ 10,000
March 25
Goods distributed as free samples ₹ 5,000
March 26
Paid advertisement expenses by cheque ₹ 20,000
March 31
Payment made of balance amount of GST.
→
Journalise the following transactions in the books of Bhushan Agencies:
  1. Received from Bharat cash ₹ 20,000, allowed him discount of ₹ 500.
  2. Received from Vikas ₹ 35,000 by cheque, allowed him discount of ₹ 750.
  3. Received from Akhil ₹ 38,000 in settlement of his dues of ₹ 40,000 in cash.
  4. Received from Amrit ₹ 50,000 by cheque on account against dues of ₹ 60,000.
  5. Paid cash ₹ 40,000 to suresh, availed discount of 2%.
  6. Paid by cheque ₹ 25,000 to Mehar and settled her dues of ₹ 26,000.
  7. Paid ₹ 25,000 to Yogesh by cheque on account.
  8. Purchased goods costing ₹ 1,00,000 against cheque and availed discount of 3%.
  9. Purchased goods costing ₹ 60,000 from Akash & Co., paid 50% immediately availing 3% discount.
  10. Sold goods of ₹ 30,000 against cheque allowing 2% discount.
  11. Sold goods of ₹ 60,000 to Vimal received 50% of due amount allowing 2% discount.
→
On 1st January 2017, Hari drew on Gopal, who is his debtor for ₹ 60,000 three bills of exchange: First for ₹ 15,000 at one month, Second for ₹ 20,000 at two months and third for ₹ 25,000 at three months. Gopal accepted all the three bills.
On 5th January 2017, Hari endorsed the first bill to his creditor Satish in full settlement of his account of ₹ 15,200. This bill was duly met on maturity.
On 1st February 2017, the second bill was discounted from the bank @ 12% p.a. This bill was dishonoured on the due date and bank paid ₹ 120 as noting charges. On Gopal's request, Hari drew a fourth bill on Gopal for 2 months for the amount due plus interest @ 15% p.a.
Third bill was paid under a rebate of 12% p.a. one month before maturity. The fourth bill was sent to bank for collection on 4th May 2017 and was duly met on maturity.
Pass Journal entries in the books of Hari, Gopal and Satish.
→
Rectify the following errors which were detected before preparing the Trial Balance:
  1. The total of Sales Book carried forward ₹ 5,000 less.
  2. A credit sale to Sita ₹ 6,300 posted as ₹ 3,600.
  3. A credit sale to Radha ₹ 2,400 posted as ₹ 4,200.
  4. A credit sale to Parbati ₹ 3,000 credited to her account.
  5. A credit sale to Laxmi ₹ 5,600 credited as ₹ 6,500.
→
Enter the following transactions in the petty cash book with appropriate analysis columns:
2017
 
(₹)
Feb. 1
Received from cashier ₹ 9,250, the amount required to make up the amount of the 'imprest' viz.
10,000
Feb. 3
Chowkidar's Wages
500
Pencils, Pens etc.
250
Feb. 5
Bus fare to workmen sent to customer's premises
600
Feb. 7
Paid for wages
200
Feb. 10
Postage
800
Feb. 12
Three Wheeler's charges for manager's trip to the city
100
Feb. 12
Wages to casual labourer
850
Feb. 14
Repair of furniture
300
Feb. 14
Repair of scooter
400
Feb. 18
Taxi fare to assistant manager
750
Feb. 20
Refreshment to Customers
450
Feb. 22
Paid for cartage
1,500
Feb. 25
Locks purchased
1,200
Feb. 25
Conveyance
250
Feb. 26
Paid for writing pads and registers
900
Feb. 28
Courier Charges
 550
→
On 17th April, 2016, X sold goods to Y for ₹ 80,000 and draws a bill for 2 months upon Y for the amount due. Y accepted the bill and returned it to X. On due date the bill became dishonoured and X paid ₹ 400 as Noting Charges. Fifteen days later Y pays the amount due to X. Pass Journal entries in the books of both the parties.
→
Babu purchased on 1st April, 2017, a machine for ₹ 6,000. On 1st October, 2017, he also purchased another machine for ₹ 5,000. On 1st October, 2018, he sold the machine purchased on 1st April, 2017 for ₹ 4,000.
It was decided that Depreciation @ 10% p.a. was to be written off every year under Diminishing Balance Method.
Assuming the accounts were closed on 31st March every year, show the Machinery Account for the years ended 31st March, 2018 and 2019.
→