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Naresh Aggarwal’s
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Accounting • Costing
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Step-1 West Patel Nagar, New: Delhi.
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 CA. Naresh Aggarwal’s
ACADEMY of ACCOUNTS
Accounting • Costing • Taxation • Financial Management
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org

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Blank Page Blank Page
 CA. Naresh Aggarwal’s
ACADEMY of ACCOUNTS
Accounting • Costing • Taxation • Financial Management
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org

B.Com(P)1st Year

AoA
Accounting for Depreciation
Watch us on &
Hire Purchase

https://www.youtube.com/CaNareshAggarwal

CA. Naresh Aggarwal’s

ACADEMY of ACCOUNTS
Accounting • Costing • Taxation • Financial Management
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org
 CA. Naresh Aggarwal’s
Hints for Depreciation
Assignment - 1 ACADEMY of ACCOUNTS
Accounting • Costing • Taxation
Journal • Financial Management
Entries
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org
When Asset is purchased : When Asset is Sold :
Asset’s Name A/c (Cost + Expense) Dr. Cash / Bank A/c Dr.
To Cash / Bank A/c To Asset’s Name A/c

When Depreciation is charged : For Profit on Sale of Asset :

Depreciation A/c Dr. Asset’s Name A/c Dr.
To Asset’s Name A/c To Profit on Sale of Asset A/c

If Provision for Depreciation is created : For Loss on Sale of Asset :

Profit & Loss A/c Dr. Loss on Sale of Asset A/c Dr.
To Depreciation A/c To Asset’s Name A/c

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Depreciation A/c Dr.
To Provision for Depreciation A/c

Watch us on

Calculation of Annual Depreciation

https://www.youtube.com/CaNareshAggarwal Straight Line Method / Original Cost Method / Fixed Instalment Method :

Cost + Expense on Purchase/Installation - Scrap Value

No. of Years of Life of the Asset

or

(Cost + Expense on Purchase/Installation - Scrap Value) x Rate

100

Diminishing Balance Method / Written Down Value Method /

Reducing Instalment Method :

Price: 40/- Opening Balance of Each Year x Rate

100
24 Accounting for Hire Purchase Practice in Accountancy 1

charge depreciation at 20% p.a. on original cost of the machines.

Deepali having spent Rs.800 on the repossessed machine and sold it for Rs.8,000 CA. Naresh Aggarwal’s
in cash. Write the necessary accounts in the books of both the parties.
[Balance of Machines: Rs.8,000; Loss on Repossession: Rs.1,000; Profit on Resale: Rs.200;
ACADEMY of ACCOUNTS
Vendor/Customer Balance: Rs.7,100] Accounting • Costing • Taxation • Financial Management
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org
Q-42: On 01.01.2010 five trucks were purchased by A on the Hire Purchase
System. The cash price of each truck is Rs.1,10,000. The payment was to be made
as follows :
Accounting for Depreciation
(i) 10% of cash price down Straight Line Method
(ii) 25% of cash price at the end of each of the subsequent half year. Q-1: Satyam Cineplex purchases a projector costing Rs.2,00,000 from a company
The payment due on 31.12.2010 could not be made and hence trucks were seized in USA. Custom duty of Rs.80,000 is levied by the government and Rs.35,000
by the Vendor but, after negotiations, A was allowed to keep three trucks on the were spent on its carriage and cartage. Further Rs.25,000 were spent on its
condition that the value of the other two trucks would be adjusted against the installation and erection. The residual value of the projector is estimated to be
amount due, the trucks being valued at cost less 25% depreciation. A’s books are Rs.40,000. Depreciation is charged at the rate of 10% p.a. by straight line method.
closed on 30th June each year and he charges 15% depreciation on trucks on the Show Projector A/c for first 4 years.
original cost. The vendor spent Rs.12,000 on getting the trucks thoroughly [Rs.2,20,000]

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overhauled and sold them for Rs.95,000 each. Show the various accounts in the
books of both the parties. Q-2: Handi Restaurant bought an Air Conditioner on 1.7.2010 costing Rs.20,000.
[Balance of Machines on 30.06.2012: Rs.2,55,750; It is decided to depreciate it at the rate of 15% p.a. under straight line method on
Loss on Repossession: Rs.22,000; Profit on Resale: Rs.13,000; Balance of Vendor: Rs.2,31,000] 31st march every year. Show necessary A/c for first 3 years.
[Rs.11,750]
Q-43: On 1st October, 2010 five trucks were purchased by A on the hire purchase
system. The cash price of each truck was Rs. 4,00,000. The payment was to be Q-3: On 01.05.2010, Diamond Ltd. purchased a machinery costing Rs.26,400
made as follows : and spent Rs.5,600 on its installation and will have a scrap value of Rs.2,000 . It
20% of cash price down; purchased another machine on 30.09.2010 for Rs.20,000. On 01.01.2012 it sold
25% of cash price at the end of each of the 4 subsequent half years. the first machine for Rs.14,000 and bought a new machinery for Rs.15,000.
The payment due on 30th September, 2011, could not be made and hence trucks Depreciation is charged on machine at the rate of 20% p.a. by fixed instalment
were seized by the vendor but, after negotiations, A was allowed to keep two trucks method on December 31st every year. You are required to show Machinery A/c for
three years.
on the condition that the value of the other three trucks would be adjusted against
[Loss on sale: Rs.8,000; Balance: Rs.23,000]
the amount due. The trucks being valued at cost less 25% depreciation. A’s books
are closed on 31st March every year and he charges 15% depreciation on trucks
Q-4: On 01.01.2010, M/s ABC Ltd. purchased a second hand machinery for
on the original cost. Vendor sold the repossessed trucks at Rs.8,50,000 after
Rs.17,000 and spent on its repairs and installation Rs.2,500 and Rs.500
incurring Rs.10,000 on their repair and reconditioning.
respectively. On 01.07.2010, it purchased another Machinery for Rs.8,000. On
Show the necessary accounts in the books of Both the parties. 30.09.2012 it sold the first Machinery for Rs.17,800 and purchased a new machinery
[Loss on repossession: Rs.1,20,000; Loss on resale: Rs.60,000 for Rs.30,000 on the same day.
Balance of Trucks on 31.03.2011: Rs.6,20,000; Vendor’s/Customer’s Balance: Rs.4,80,000] Depreciation is charged on machine at the rate of 5% p.a. by fixed instalment
method on December 31st every year. You are required to show Machinery A/c for
3 years.
[Profit on sale: Rs.550; Balance: Rs.36,625]

••••••••••••••••••••••••• Q-5: A second hand machinery was purchased on 01.07.2010 for Rs.44,000
and Rs.3,500 and Rs.2,500 were spent on its repairs and installations. On
01.01.2011 another machinery was purchased for Rs.30,000. On 01.01.2012 the
2 Accounting for Depreciation Practice in Accountancy 23

first machinery having become obsolete was disposed off for Rs.41,000 and on
the same day a new machine was purchased for Rs.25,000. On 31.03.2013 the CA. Naresh Aggarwal’s
second machine auctioned for Rs.24,500.
Depreciation is charged on machine at the rate of 10% p.a. by fixed instalment
ACADEMY of ACCOUNTS
method on December 31st every year. You are required to show Machinery A/c for Accounting • Costing • Taxation • Financial Management
years upto 2013. West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org
[Loss on sale of 1st machine: Rs.1,500; Profit on sale of 2nd machine: Rs.1,250; Balance: Rs.20,000]

Q-6: A second hand machinery was purchased on 01.07.2010 for Rs.22,000 and receive delivery of the machines and agreed to pay five half-yearly instalments of
Rs.1,750 and Rs.1,250 were spent on its repairs and installations. On 01.01.2011 Rs.50,000 each.
another machinery was purchased for Rs.15,000. On 01.01.2012 the first machinery Moon Ltd. could not pay the third instalment in time whereupon Star Ltd. repossesses
having become obsolete was disposed off for Rs.20,000 and on the same day a two machine and Moon Ltd. retained the other three machines. The value of the
new machine was purchased for Rs.12,000. On 31.03.2013 the second machine returned machine was agreed to be cash price less 40%. The purchaser charges
auctioned for Rs.12,250. Depreciation is charged on machine at the rate of 10% depreciation at the rate of 10% p.a. on reducing balance method.
p.a. by fixed instalment method on December 31st every year. You are required to Star Ltd. sold the one repossessed machine for Rs.22,500 after incurring repairs of
show Machinery A/c for years upto 2013. Rs.1,000 on each machine.
[Loss on sale of 1st machine: Rs.1,250; Profit on sale of 2nd machine: Rs.625; Balance: Rs.9,600] You are required to show
(i) Star Ltd. A/c and Machinery A/c in the books of hire-purchaser.

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Diminishing Balance Method (ii) Moon Ltd A/c and Goods Repossessed A/c in the books of vendor.
Q-7: On 01.04.2010 a company purchased a machinery costing Rs.47,500 and [Loss on repossession: 25,500; Balance of Machine: 1,21,500; Loss on resale: 8,500;
spent Rs.2,500 on its installations. After the useful life its scrap value is estimated Balance of Repossessed Goods: Rs.31,000; Balance of Star Ltd.: Rs.84,000]
to be Rs.2000. Depreciation is charged under Diminishing Balance Method on
31st March every year at 10%. Show Machinery account for first three years. Q-40: Ajay Travels purchased three buses from Vijay Motors costing Rs.75,000
[Rs. 36,450] each on hire purchase system. Payment was to be made, for each bus, Rs.45,000
down and the remainder in three equal annual instalments together with interest at
Q-8: Sarvodaya Ltd. acquired a Machinery on 01.01.2010 costing Rs.27,000 and 12% p.a. Ajay Travels writes off depreciation at 20% on diminishing balance. It
spent Rs.2,000 on its installation and Rs.1,000 on its freight. The scrap value of the paid the first instalment at the end of the first year but could not pay the next. Vijay
machine is estimated at Rs.5,000. The accounts are closed on 31st December Motors agreed to leave one bus with the purchaser adjusting the value of the other
each year and depreciation is charged @ 5% p.a under Diminishing Balance two buses against the amount due. The Buses being valued at cost less 60%. After
Method. You are required to show Machine Account upto 2012. repairs and reconditioning of Rs.5,000 on each bus; Vijay Motors sold one of the
[Rs. 25,721] repossessed Bus for Rs.45,000. Show the necessary ledger accounts in the books
of Ajay Travels and Vijay Motors for the first two years.
Q-9: On 1st May 2010, Ambani Ltd. purchased a machinery costing Rs.54,400 [Balance of Buses: Rs.48,000; Loss on Repossession: Rs.36,000;
and spent Rs.5,600 on its installation and will have a scrap value of Rs.2,000 . It Profit on Resale: Rs.10,000; Balance of Repossessed Goods: Rs.35,000]
purchased another machine on 30th September 2010 for Rs.20,000. On 1st
January 2012 it sold the first machine for Rs.31,500 and bought a new machinery Q-41: On 01.01.2010, Chetali purchased from Deepali two machines on Hire
for Rs.25,000. Depreciation is charged on machine at the rate of 20% p.a. by Purchase System, the cash price of each machine being Rs.10,000. The Hire
reducing instalment method on December 31st every year. You are required to Purchase price of machines was payable as under:
show Machinery A/c for 3 years. (i) 15% of cash price immediately on delivery.
[Loss on sale: Rs.10,100; Balance: Rs.32,160] (ii) Further, four half yearly instalments of 25% of cash price.
Chetali could not pay the instalment due on 31.12.2010, and Deepali seized the
Q-10: On 01.01.2010, M/s XYZ Ltd. purchased a second hand machinery for
machines but on the request of Chetali, agreed to let her keep one machine on the
Rs.17,000 and spent on its repairs and installation Rs.2,500 and Rs.500
terms that the value of the other machine would be adjusted against the amount
respectively. On 01.07.2010, it purchased another Machinery for Rs.8,000. On
due. The machine being valued by charging depreciation of 30% p.a. Chetali
30.09.2012 it sold the first Machinery for Rs.18,000 and purchased a new machinery
22 Accounting for Hire Purchase Practice in Accountancy 3

Interest is charged at 10% p.a. to be paid together with instalment. Arti Traders
writes off 25% depreciation on the diminishing balance method. It paid the CA. Naresh Aggarwal’s
instalments due on 31.12.2010 and on 31.12.2011 but could not pay the final
instalment. Bharti Traders repossessed two machine adjusting its value against
ACADEMY of ACCOUNTS
the amount due. The repossession was done on the basis of 30% depreciation on Accounting • Costing • Taxation • Financial Management
diminishing balance method. After repairs and reconditioning of Rs.10,000 on West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org
each machine; Bharti Traders sold one of the repossessed machine for Rs.75,000.
Write up the ledger accounts in the books of Arti Traders and Bharti Traders showing
for Rs.30,000 on the same day. Depreciation is charged on machine at the rate of
the above transactions.
5% p.a. by diminishing balance method on December 31st every year. You are
[Balance of Machines: Rs.67,500; Loss on Repossession: Rs.25,240;
required to show Machinery A/c for 3 years.
Profit on Resale: Rs.10,120; Balance of Repossessed Goods: Rs.64,880]
[Profit on sale: Rs.627; Balance: Rs.36,664]

Q-37: Ram purchased seven trucks on hire purchase on 1st July 2010. The cash Q-11: A second hand machinery was purchased on 01.07.2010 for Rs.44,000
price of each truck was Rs.1,00,000. He was to pay 20% of the cash price at the and Rs.3,500 and Rs.2,500 were spent on its repairs and installations. On
time of delivery and balance in five half yearly instalments starting from 31.12.2010 01.01.2011 another machinery was purchased for Rs.30,000. On 01.01.2012 the
with interest at 10% per annum. first machinery having become obsolete was disposed off for Rs.32,300 and on
On Ram’s failure to pay the instalment due on 30th June 2011, it was agreed that the same day a new machine was purchased for Rs.25,000. On 31.03.2013 the

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Ram would return three trucks to the vendor and remaining four could be retained second machine auctioned for Rs.28,700. Depreciation is charged on machine at
by him. The returning price of three trucks was Rs.90,000 each. Ram charges the rate of 10% p.a. by diminishing balance method on December 31st every year.
depreciation at the rate of 20% per annum. You are required to show Machinery A/c for years upto 2013.
Vendor, after spending Rs.3,000 on repairs, sold away all the three trucks for [Loss on sale of 1st machine: Rs.10,450
Rs.80,000 each. Books of accounts are closed on June 30th every year. Profit on sale of 2nd machine: Rs.5008; Balance: Rs.20,250]
Show the necessary accounts in the books of Both the parties.
[Profit on repossession: Rs.30,000; Loss on resale: Rs.33,000; Q-12: A second hand machinery was purchased on 01.07.2010 for Rs.22,000
Balance of Trucks: 3,20,000; Vendor’s/Customer’s Balance: Rs.2,00,400] and Rs.1,750 and Rs.1,250 were spent on its repairs and installations. On
01.01.2011 another machinery was purchased for Rs. 15,000. On 01.01.2012 the
Q-38: Bhola Transport purchased from Durga Motors three Tempos costing first machinery having become obsolete was disposed off for Rs.19,200 and on
Rs.1,00,000 each on the hire purchase system on 1.1.2010. Payment was to be the same day a new machine was purchased for Rs.12,000. On 31.03.2013 the
made Rs.60,000 down and remainder in 3 equal annual installments payable on second machine auctioned for Rs.13,850.
Depreciation is charged on machine at the rate of 10% p.a. by diminishing balance
31.12.2010, 31.12.2011 and 31.12.2012 together with interest @ 10%. Bhola
method on December 31st every year. You are required to show Machinery A/c for
Transport writes off depreciation at the rate of 20% p.a. on the diminishing balance
years upto 2013.
method. It paid the instalment due at the end of first year but could not pay the next
[Loss on sale of 1st machine: Rs.2,175
on 31.12.2011. Durga Motors agreed to leave one Tempo with the purchase on
Profit on sale of 2nd machine: Rs.2,004; Balance: Rs.9,720]
31.12.2011 adjusting the value of the other two tempos against the amount due.
The tempos were valued on the basis of 30% depreciation annually.
Sale of a Part
Durga Motors spent Rs.10,000 on the repairs of the repossessed Tempos and Q-13: A company bought a machinery for Rs.1,00,000 including a boiler worth
resold them for Rs.50,000 each . Rs.20,000. The Machinery Account had been credited at the rate of 10% p.a. each
Show the necessary accounts in the books of the purchaser and seller. year by diminishing balance method. At the beginning of the 4th year, the boiler
[Loss on repossession: Rs.30,000; Loss on resale: Rs.8,000; become useless and sold for Rs.10,000. Show Machinery Account for four years.
Balance of Tempo: 64,000; Vendor’s/Customer’s Balance: Rs.78,000] [Loss on sale: Rs.4,580; Balance: Rs.52,488]

Q-39: Star Ltd. sold five machines costing Rs.50,000 each to Moon Ltd. on hire Q-14: A company bought a machinery for Rs.3,00,000 including a generator worth
purchase system on 1.1.2010. Moon Ltd. paid Rs.30,000 on the above date to Rs.60,000. The Machinery Account had been credited at the rate of 10% p.a. each
year by diminishing balance method. At the beginning of the 4th year, the generator
4 Accounting for Depreciation Practice in Accountancy 21

become useless and sold for Rs.30,000. Show Machinery Account for four years.
[Loss on sale: Rs.13,740; Balance: Rs.1,57,464] CA. Naresh Aggarwal’s

Q-15: Nakul bought a machine costing Rs.56,000 on 01.01.2010 and spent

ACADEMY of ACCOUNTS
Rs.1,000 on its freight and Rs.3,000 on its installation. On 31.03.2012, 1/3 of the Accounting • Costing • Taxation • Financial Management
machine become useless and disposed off for Rs.13,500. West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org
Depreciation is charged at the rate of 10% p.a. by reducing instalment method on
31st December each year. Show Plant and Machinery Account upto 2013.
written down value. The sets repossessed were sold by the seller for Rs.30,000
[Loss on sale: Rs.2,295; Balance: Rs.26,244]
after necessary repairs amounting to Rs.5,000. Open the necessary ledger
accounts in the books of both the parties.
Q-16: Sehdev bought a machine costing Rs.36,000 on 01.01.2010 and spent
[Interest :- 2010: Rs.7,500; 2011: Rs.5,250; 2012: Rs.2,250; Vendor/Customer Balance: Rs.9,420;
Rs.1,000 on its freight and Rs.3,000 on its installation. On 31.03.2012, 1/4 of the
Balance of Machines: Rs.20,480; Loss on Repossession: Rs.10,140; Profit on Resale: Rs.4,420]
machine become useless and disposed off for Rs.6,500.
Depreciation is charged at the rate of 10% p.a. by reducing instalment method on
31st December each year. Show Plant and Machinery Account upto 2013. Q-34: A company purchased two machines of Rs.21,000 each on Hire-Purchase
[Loss on sale: Rs.1,397; Balance: Rs.19,683] System paying Rs.12,000 down and remainder in three equal instalments of
Rs.10,000 each together with interest at 5% p.a. The company writes off
Q-17: On 01.07.2010, Mahesh purchased plant and machinery costing Rs.80,000. Depreciation at 10% p.a. according to Diminishing Balance Method.

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On 01.01.2011, he purchased another machine for Rs.15,000 and spent Rs.5,000 The company could not pay the second instalment. The vendor left one machine
on its erection and installation. On 30.06.2012 he sold a part of machinery for with the company adjusting the value of the other against amount due taking the
Rs.18,000 which was purchased for Rs.30,000 on 01.07.2010. machine at 20% Depreciation at Diminishing Balance Method. The repossessed
Depreciation is charged at the rate of 10% p.a. under diminishing balance method machine was sold by the seller for Rs.9,770 after necessary repairs amounting to
on 31st December each year. Show Plant and Machinery Account upto 2012. Rs.500. Prepare ledger accounts in the both company’s books.
[Loss on sale: Rs.6,367; Balance: Rs.54,675] [Adopted B.Com(P) Delhi]
[Balance of Machines: Rs.17,010; Loss on Repossession: Rs.3,570; Loss on Resale: Rs. 4,170]
Q-18: On 01.07.2010, Anamika purchased plant and machinery costing Rs.20,000.
On 01.01.2011, she purchased another machine for Rs.4,200 and spent Rs.800 Q-35: Amit, bought four machines from Sumit on hire-purchase. The cash price of
on its erection and installation. On 30.06.2012 she sold a part of machinery for each machine was Rs.14,000. It was agreed that Rs.15,000 should be paid
Rs.4,500 which was purchased for Rs.7,500 on 01.07.2010. immediately and the balance in three instalments of Rs.15,000 each at the end of
Depreciation is charged at the rate of 10% p.a. by written down value method on each year. Sumit charges interest at 5% p.a. The buyer depreciates Machines at
31st December each year. Show Plant and Machinery Account upto 2012. 10% p.a. on the Straight Line Method.
[Loss on sale: Rs.1,592; Balance: Rs.13,668]
Amit paid cash down and first instalments but failed to pay the second instalment.
Consequently, the seller repossessed three machines leaving one machine with
Q-19: On 01.01.2010 Advani bought a machine costing Rs.26,000 and spent
the buyer and adjusting the value of three machines against the amount due. The
Rs.500 on its freight and Rs.3,500 on its installation. On 31.03.2012, 1/3 of the
machine repossessed were valued on the basis of 20% depreciation p.a. on the
machine become useless and disposed off for Rs.6700.
written down value. The sets repossessed were sold by the seller for Rs.32,000
Depreciation is charged at the rate of 10% p.a. by Straight line method on 31st
December each year. Show Plant and Machinery Account upto 2013. after necessary repairs amounting to Rs.1,200. Open the necessary ledger
[Loss on sale: Rs.1,050; Balance: Rs.12,000] accounts in the books of both the parties.
[Balance of Machines: Rs.11,200; Loss on Repossession: Rs.6,720; Profit on Resale: Rs.3,920;
Q-20: On 01.01.2010 Atal purchased a machine costing Rs.93,000 and spent Vendor’s/Customer’s Balance: Rs.2,573; Interest: Down- nil; 1st- Rs.2,050; 2nd- Rs.1,403; 3rd- Rs.547]
Rs.1,500 on its freight and Rs.5,500 on its installation. On 31.03.2012, 1/4 of the
machine become useless and disposed off for Rs.16,000. Q-36: Arti Traders purchased three machines costing Rs.1,60,000 each from
Depreciation is charged at the rate of 10% p.a. by Straight line method on 31st Bharti Traders on 01.01.2010 on hire purchase system. The terms were:
December each year. Show Plant and Machinery Account upto 2013. (i) Payment on delivery: Rs.40,000 for each machine
[Loss on sale: Rs.3,375; Balance: Rs.45,000] (ii) Balance in three equal annual instalments
20 Accounting for Hire Purchase Practice in Accountancy 5

failed to pay 3rd instalment and machine was repossessed. Later after
spending Rs. 500 on repairs machine was sold for Rs. 8,500. CA. Naresh Aggarwal’s
You are required to show necessary accounts in the books of both the parties.
[Cash Price: Rs.20,000; Loss on repossession: Rs.6,000; Loss on resale: Rs.400]
ACADEMY of ACCOUNTS
Accounting • Costing • Taxation • Financial Management
Q-31: Sonu purchased a machine on hire purchase from Monu having cash price West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org
of Rs. 20,000. The following installments will be paid including interest:
01.01.2010 Down Payment Rs. 9,000 Q-21: On 01.01.2010 Ram bought a machine costing Rs.50,000. On 01.07.2012,
31.12.2010 1st Instalment Rs. 5,600 a part of the machine become useless and disposed off for Rs.13,000; its original
31.12.2011 2nd Instalment Rs. 3,650 cost was Rs.20,000 on 01.01.2010.
31.12.2012 3rd Instalment Rs. 2,850 Depreciation is charged at the rate of 15% p.a. by Straight line method on 31st
31.12.2013 4th Instalment Rs. 1,100 December each year. Show Plant and Machinery Account upto 2012.
Interest is charged @10% p.a. Depreciation is provided @ 15% p.a. under Straight [Profit on sale: Rs.500; Balance: Rs.16,500]
Line Method. Customer failed to pay 2nd instalment and machine was
repossessed. Later after spending Rs. 350 on repairs machine was sold for Q-22: On 01.01.2010 Rajani bought a machine costing Rs.70,000. On 01.07.2012,
Rs.8,500 a part of the machine become useless and disposed off for Rs.19,000; its original
You are required to show Machine A/c, Monu’s A/c in the books of Sonu and cost was Rs.30,000 on 01.01.2010.
Depreciation is charged at the rate of 15% p.a. by Straight line method on 31st

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Sonu’s A/c in the books of Monu for four years.
[Cash Price: Rs.20,000; Loss on repossession: Rs.6,850; Profit on resale: Rs.1,000] December each year. Show Plant and Machinery Account upto 2012.
[Profit on sale: Rs.250; Balance: Rs.22,000]

Partial Repossession Preparation of Provision for Depreciation

Q-23: Anjali purchased on 01.07.2010, a machine costing Rs.17,000 and spent
Q-32: On 01.01.2010 Chetali purchased from Deepali three machines costing Rs.3,000 on its installation and erection. She purchased another machine on
Rs.2,00,000 each payable Rs.50,000 down and three annual installments of 01.04.2011 for Rs.12,000. On 30.06.2012 she sold the first machine for Rs.14,500.
Rs.60,000 for each machine at the end of each year. The purchaser charges Depreciation is charged on machine at the rate of 10% p.a. by original cost method
depreciation on machines @ 10% p.a. on written down value method. on December 31st every year. You are required to show Machinery A/c and
Chetali could not pay second instalment and Deepali took possession of two Provision for Depreciation A/c upto year 2013.
machines. Value of the Machines repossessed was to be determined after charging [Loss on sale: Rs.1,500; Machine A/c: Rs.12,000; Prov. for Dep. A/c: Rs.3,300]
25% depreciation under straight line method. Deepali paid Rs.10,000 for repairs
on repossessed machines and sold them for Rs.80,000 each. Q-24: Neha purchased on 01.04.20010, a machine costing Rs.13,500 and spent
Show the necessary accounts in the books of Both the parties. Rs.2,500 on its installation and erection. She purchased another machine on
[Loss on repossession: Rs.1,24,000; Loss on resale: Rs.50,000; 30.09.2011 for Rs.24,000. On 30.06.2012 she sold the first machine for Rs.10,000.
Balance of Machines: 1,62,000; Vendor’s/Customer’s Balance: Rs.1,45,000] Depreciation is charged on machine at the rate of 10% p.a. by original cost method
on December 31st every year. You are required to show Machinery A/c and
Q-33: On 01.01.2010, Ravi, bought five machines from Dinesh on hire-purchase. Provision for Depreciation A/c upto yea 2013.
The cash price of each machine was Rs.20,000. It was agreed that Rs.25,000 [Loss on sale: Rs.2,400; Machine A/c: Rs.24,000; Prov. for Dep. A/c: Rs.5,400]
should be paid immediately and the balance in three instalments of Rs.30,000
each at the end of each year. Dinesh charges interest at 10% p.a. The buyer Q-25: On 01.01.2010, M/s ABC Ltd. purchased a second hand machinery for Rs.
depreciates Machines at 20% p.a. on the diminishing balance method. 17,000 and spent on its repairs and installation Rs. 2,500 and Rs. 500 respectively.
Ravi paid cash down and two instalments but failed to pay the last instalment. On 01.07.2010, it purchased another Machinery for Rs. 8,000. On 30.09.2012 it
Consequently, the seller repossessed three machines leaving two machines with sold the first Machinery for Rs. 17,800 and purchased a new machinery for Rs.
the buyer and adjusting the value of three machines against the amount due. The 30,000 on the same day.
machine repossessed were valued on the basis of 30% depreciation p.a. on the
6 Accounting for Depreciation Practice in Accountancy 19

Depreciation is charged on machine at the rate of 5% p.a. by fixed instalment

method on December 31st every year. You are required to show Machinery A/c, CA. Naresh Aggarwal’s
Machine Disposal A/c and Provision for Depreciation A/c for 3 years.
[Profit on sale: Rs.550; Machine A/c: Rs.38,000; Prov. for Dep. A/c: Rs.1,375]
ACADEMY of ACCOUNTS
Accounting • Costing • Taxation • Financial Management
Q-26: On 1st May 2010, Alfa Ltd. purchased a machinery costing Rs.26,400 and West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org
spent Rs.5,600 on its installation and will have a scrap value of Rs.2,000. It
purchased another machine on 30th September 2010 for Rs.20,000. On 1st January
2012 it sold the first machine for Rs.14,000 and bought a new machinery for Q-28: Ajay purchased a machine on hire purchase from Vijay at total hire purchase
Rs.15,000. Depreciation is charged on machine at the rate of 20% p.a. by fixed price of Rs. 20,000. The following installments will be paid including interest:
instalment method on December 31st every year. Show Machinery A/c, Provision 01.01.2010 Down Payment Rs. 9,000
for Depreciation A/c and Machine Disposal A/c for 3 years. 30.06.2010 1st Instalment Rs. 4,500
[Loss on sale: Rs.8,000; Machine A/c: Rs.35,000; Prov. for Dep. A/c: Rs.12,000] 31.12.2010 2nd Instalment Rs. 3,300
30.06.2011 3rd Instalment Rs. 2,150
Q-27: Surender Singh purchased on 1.4.2010 furniture costing Rs.19,200 and 31.12.2011 4th Instalment Rs. 1,050
spent Rs.800 on its cartage. On 30.6.2011 he purchased another furniture for Interest is charged @10% p.a. and depreciation provided @ 20% p.a. under
Rs.15,000. Depreciation is charged at the rate of 10% p.a. by Diminishing Balance Diminishing Balance Method. Ajay failed to pay 3rd instalment and machine was
repossessed. Later after spending Rs. 300 on repairs machine was sold for

AoA
Method on 31st December each year. Show Furniture Account and Provision for
Depreciation A/c for first 3 years. Rs.3,500.
[Machine A/c- Rs.35,000; Prov. for Dep. A/c- Rs.7,190] You are required to show necessary accounts in the books of both the parties.
[Cash Price: Rs.19,000; Loss on repossession: Rs.10,530; Profit on resale: Rs.50]
Q-28: Anita purchased on 01.07.2010, a machine costing Rs.17,000 and spent
Rs.3,000 on its installation and erection. She purchased another machine on Q-29: A purchased a machine on hire purchase from B having cash price of Rs.
01.04.2011 for Rs.12,000. On 30.06.2012 she sold the first machine for Rs.13,000. 20,000. The following installments will be paid together with interest:
Depreciation is charged on machine at the rate of 10% p.a. by Diminishing Balance 01.01.2010 Down Payment Rs. 6,000
Method on December 31st every year. You are required to show Machinery A/c 31.03.2010 1st Instalment Rs. 4,000
and Provision for Depreciation A/c upto year 2013. 30.06.2010 2nd Instalment Rs. 4,000
[Loss on sale: Rs.3,245; Machine A/c: Rs.12,000; Prov. for Dep. A/c: Rs.3,009] 30.09.2010 3rd Instalment Rs. 4,000
31.12.2010 4th Instalment Rs. 2,000
Q-29: A company which charges depreciation @ 10% p.a. by straight line method Total Interest charged is Rs. 3,200 and depreciation provided @ 20% p.a. under
had the following balances on 01.01.2010 written down value method. Customer failed to pay last instalment and machine
Machinery A/c : Rs.80,000 was repossessed. Later after spending Rs. 300 on repairs machine was sold for
Provision for Depreciation A/c : Rs.25,000 Rs. 2,100.
On 01.01.2010 the company sold a part of the machine costing Rs.15,000 and You are required to show necessary accounts in the books of both the parties.
accumulated depreciation Rs.5,000 for Rs.7,000. On the same day it purchased [Loss on repossession: Rs.13,800; Loss on resale: Rs.400]
another machinery for Rs.35,000
Show Machinery A/c and Provision for Depreciation A/c for the year 2010. Q-30: X purchased a machine on hire purchase from Y. The following installments
[Loss on sale: Rs.3,000; Machine A/c: Rs.1,00,000; Prov. for Dep. A/c: Rs.30,000] will be paid including interest:
01.01.2010 Down Payment Rs. 4,000
Q-30: A company which charges depreciation @ 20% p.a. by straight line method 30.06.2010 1st Instalment Rs. 4,800
had the following balances on 01.01.2010 31.12.2010 2nd Instalment Rs. 4,600
Machinery A/c : Rs.20,000 30.06.2011 3rd Instalment Rs. 4,400
Provision for Depreciation A/c : Rs.5,000 31.12.2011 4th Instalment Rs. 4,200
On 01.01.2010 the company sold a part of the machine costing Rs.8,000 and Depreciation provided @ 20% p.a. under written down value method. Customer
18 Accounting for Hire Purchase Practice in Accountancy 7

31.12.2012 3rd Instalment Rs. 2,850

31.12.2013 4th Instalment Rs. 1,100 CA. Naresh Aggarwal’s
Interest is charged @10% p.a. Depreciation is provided @ 10% p.a. under Straight
Line Method.
ACADEMY of ACCOUNTS
You are required to show Machine A/c, Monu’s A/c in the books of Sonu and Accounting • Costing • Taxation • Financial Management
Sonu’s A/c in the books of Monu for four years. West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org
[Interest: Down-nil; 1st 1,100; 2nd 650; 3rd 350; 4th 100; Total Cash Price: 20,000]

accumulated depreciation Rs.2,000 for Rs.4,500. On the same day it purchased

Q-25: X purchased a truck on hire-purchase system from Y. The total cash price of
another machinery for Rs.35,000
the truck is Rs.31,960, payable Rs.8,000 down, and three instalments of Rs.12,000,
Show Machinery A/c and Provision for Depreciation A/c for the year 2010.
Rs.10,000 and Rs.4,000 payable at the end of the first, second and third year
[Loss on sale: Rs.1,500; Machine A/c: Rs.47,000; Prov. for Dep. A/c: Rs.12,400]
respectively. Interest is charged at 5% p.a. Charge depreciation at 10% on straight
line method. Prepare Ledger accounts in the books of X and Y.
Change of Method
[Interest: Down- nil; 1st- 1,198; 2nd- 658; 3rd- 184; Total Interest: 2,040; Balance of Truck: 22,372]
Q-31: A limited company purchased on 01.01.2010 a second hand plant for
Rs.36,000 and immediately spent Rs.24,000 on its overhauling. On 01.07.2010
additional plant costing Rs.30,000 is purchased. On 01.07.2012 the plant purchased
Full Repossession
on 01.01.2010, having become obsolete is sold for Rs.12,000 and on the same

AoA
date fresh plant is purchased at a cost of Rs.72,000.
Q-26: Sonu purchased a machine on hire purchase from Monu having cash price
Depreciation is provided @ 10% per annum on original cost on 31st December
of Rs. 30,000. The following installments will be paid together with interest:
every year. In 2013, However, the company changes the method of providing
01.01.2010 Down Payment Rs. 12,000
depreciation and adopts the method of writing off 15% per annum on the diminishing
31.12.2010 1st Instalment Rs. 6,000
balance method. Show the Plant Account from 2010 to 2013.
31.12.2011 2nd Instalment Rs. 5,000
[Adopted B.Com (Pass)]
31.12.2012 3rd Instalment Rs. 4,000
[Balance in Plant Account: Rs.77,265; Loss on sale: Rs.33,000]
31.12.2013 4th Instalment Rs. 3,000
Interest is charged @10% p.a. and depreciation provided @ 15% p.a. under straight
Q-32: A manufacturing company purchased on 01.01.2010, a second hand plant
line method. Sonu failed to pay 3rd instalment and machine was repossessed.
for Rs.30,000 and immediately spent Rs.20,000 on overhauling it. On 01.07.2010,
Later after spending Rs. 1,500 on repairs machine was sold for Rs. 13,000.
additional machinery costing Rs.25,000 was purchased. On 01.07.2012, the plant
You are required to show necessary accounts in the books of both the parties.
purchased on 01.01.2010 became obsolete and was sold for Rs.20,000. On that
[Loss on repossession: Rs.8,800; Profit on resale: Rs.3,800]
date a new machine was purchased at a cost of Rs.60,000.
Depreciation was provided for annually on 31st December, at the rate of 10% p.a.
Q-27: Seeta purchased a machine on hire purchase from Geeta having cash price
on the original cost of asset. In 2013, however, the company changed this method
of Rs. 25,000. The following installments will be paid together with interest:
of providing depreciation and adopted the method of writing off 15 % on Diminishing
01.01.2010 Down Payment Rs. 9,000
value. Show the Machinery Account as it would appear in the books of the Company
31.12.2010 1st Instalment Rs. 4,000
for the years 2010 to 2013.
31.12.2011 2nd Instalment Rs. 4,000
[Balance of Machinery: Rs.64,388; Loss on sale: Rs.17,500]
31.12.2012 3rd Instalment Rs. 4,000
31.12.2013 4th Instalment Rs. 4,000
Q-33: Rich Ltd. purchased on 01.04.2010 certain machinery for Rs.1,45,000 and
Interest is charged @5% p.a. and depreciation provided @ 10% p.a. under straight
paid Rs.5,000 on its installation. 01.10.2010 another machinery for Rs.50,000 was
line method. Seeta failed to pay 3rd instalment and machine was repossessed.
acquired. On 01.04.2011, the first machinery was sold at Rs.1,10,000 and on the
Later after spending Rs. 800 on repairs machine was sold for Rs. 11,000.
same date a fresh machinery was purchased at a cost of Rs.90,000. Depreciation
You are required to show necessary accounts in the books of both the parties.
was annually provided on 31st March at 10% p.a. on written down value.
[Loss on repossession: Rs.9,100; Profit on resale: Rs.1,800] On 01.04.2012 however, the firm decided to change the method of providing
8 Accounting for Depreciation Practice in Accountancy 17

depreciation and adopted the method of providing depreciation @ 10% p.a. on the
original cost, with retrospective effect. Ascertain the value of machinery on CA. Naresh Aggarwal’s
31.03.2013.
[Balance of Machinery: Rs.1,09,500; Loss on Sale: Rs.25,000;
ACADEMY of ACCOUNTS
Additional Depreciation to be charged: Rs.250] Accounting • Costing • Taxation • Financial Management
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org
Q-34: Machine Account of Best Ltd. showed a debit balance of Rs.5,60,000 as on
01.01.2010. They have been charging depreciation at 10% on straight line method.
They have now decided to change the method of depreciation from straight line Interest is charged @10% p.a. and depreciation provided @ 10% p.a. under
method to written down value method with effect from 01.01.2007, on which date Diminishing Balance Method.
they purchased the machine. You are required to prepare machine account up to You are required to show Machine A/c, Vijay’s A/c in the books of Ajay and Ajay’s
31.12.2010. A/c in the books of Vijay for three years.
[Balance of Machinery: Rs.5,24,880; Excess Depreciation charged: Rs.23,200] [Interest: Down-nil; 1st 500; 2nd 300; 3rd 150; 4th 50; Total Cash Price 15,000]

Q-35: A firm which depreciates its machinery at 10% on diminishing balance Q-22: A purchased a machine on hire purchase from B having cash price of Rs.
method, had on 01.04.2010 Rs.4,86,000 to the debit of machinery account. During 20,000. The following installments will be paid together with interest:
2010-2011, a part of machinery purchased on 01.04.2008 for Rs.40,000, was sold 01.01.2010 Down Payment Rs. 6,000
for Rs.22,500 on 01.10.2010 and a new machinery at a cost of Rs.75,000 was 31.03.2010 1st Instalment Rs. 4,000

AoA
purchased and installed on the same date, installation charges being Rs.4,000. 30.06.2010 2nd Instalment Rs. 4,000
The firm wanted to change its method of depreciation from diminishing balance 30.09.2010 3rd Instalment Rs. 4,000
method to straight line method with effect from 01.04.2008. Rate of depreciation 31.12.2010 4th Instalment Rs. 2,000
remains the same as before. Show Machinery A/c for the year ending 31.03.2011 Total Interest charged is Rs. 960 and depreciation provided @ 10% p.a. under
after incorporating the effect of the above transactions. written down value method.
[Balance of Machinery: Rs.4,67,050; Loss on Sale: Rs.8,280; You are required to show Machine A/c, B’s A/c in the books of A and A’s A/c in the
Additional Depreciation to be charged: Rs.5,600] books of B for three years.
[Interest: Down-nil; 1st 420; 2nd 300; 3rd 180; 4th 60; Total H.P.P: 20,960]
Q-36: X Ltd. which depreciates its machinery at 10% p.a. on Diminishing Balance
Method had on 01.01.2010, Rs.4,86,000 to the debit of Machinery Account. During Q-23: X purchased a machine on hire purchase from Y. The following installments
2010 part of the Machinery purchased on 01.01.2008 for Rs.60,000 was sold for will be paid including interest:
Rs.40,000 on 01.07.2010 and a new machinery at a cost of Rs.70,000 was 01.01.2010 Down Payment Rs. 4,000
purchased and installed at the same date, installation charges being Rs.5,000. 30.06.2010 1st Instalment Rs. 4,800
The Company wanted to change its method of depreciation from Diminishing 31.12.2010 2nd Instalment Rs. 4,600
Balance Method to Straight Line Method with effect from 01.01.2008 and adjust 30.06.2011 3rd Instalment Rs. 4,400
the difference before 31.12.2010. The rate depreciation remains the same as 31.12.2011 4th Instalment Rs. 4,200
before. Show the Machinery Account for 2010. Depreciation provided @ 10% p.a. under written down value method.
[Balance of Machinery: Rs.4,49,250; Loss on Sale: Rs.6,170; You are required to show Machine A/c, Y’s A/c in the books of X and X’s A/c in the
Additional Depreciation to be charged: Rs.5,400] books of Y for three years.
[Interest: Down-nil; 1st 800; 2nd 600; 3rd 400; 4th 200; Total Cash Price: 20,000]
Q-37: Ram Ltd. which depreciates its machinery at 10% p.a. on Diminishing
Balance Method, had on 01.01.2010 Rs.9,72,000 on the debit side of Machinery Q-24: Sonu purchased a machine on hire purchase from Monu having cash price
Account. During the year 2010 machinery purchased on 01.01.2008 for Rs.80,000 of Rs. 20,000. The following installments will be paid including interest:
was sold for Rs.45,000 on 01.07.2010 and a new machinery at a cost of Rs.1,50,000 01.01.2010 Down Payment Rs. 9,000
was purchased and installed on the same date, installation charges being Rs.8,000. 31.12.2010 1st Instalment Rs. 5,600
The company wanted to change the method of depreciation from Diminishing 31.12.2011 2nd Instalment Rs. 3,650
16 Accounting for Hire Purchase Practice in Accountancy 9

01.01.2010 Down Payment Rs. 5,000

30.06.2010 1st Instalment Rs. 4,500 CA. Naresh Aggarwal’s
31.12.2010
30.06.2011
2nd Instalment
3rd Instalment
Rs. 3,300
Rs. 2,150
ACADEMY of ACCOUNTS
31.12.2011 4th Instalment Rs. 1,050 Accounting • Costing • Taxation • Financial Management
Total Hire Purchase Price is Rs. 16,000 and Interest is charged @10% p.a. West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org
[Interest: Down-nil; 1st 500; 2nd 300; 3rd 150; 4th 50; Total Cash Price 15,000]

Balance Method to Straight Line Method with effect from 01.01.2008. Difference of
Accounting for Hire Purchase depreciation, up to 31.12.2010 to be adjusted. The rate of depreciation remains
the same as before.
Q-19: Ram purchased a machine on hire purchase from Shyam having cash price [Adopted B.Com (Pass)] [Balance of Machinery: Rs.9,34,100; Loss on Sale: Rs.16,560;
of Rs. 30,000. The following installments will be paid together with interest: Additional Depreciation to be charged: Rs.11,200]
01.01.2010 Down Payment Rs. 10,000
31.12.2010 1st Instalment Rs. 5,000 Q-38: Ramesh charged depreciation on its plant and machinery @ 10% per
31.12.2011 2nd Instalment Rs. 5,000 annum on the diminishing balance method. On 31.03.2011, he decides to adopt
31.12.2012 3rd Instalment Rs. 5,000 straight line method of charging depreciation with retrospective effect from

AoA
31.12.2013 4th Instalment Rs. 5,000 01.04.2007, the rate of depreciation being 15%. On 01.04.2010, the plant and
Interest is charged @10% p.a. and depreciation provided @ 15% p.a. under straight machinery account stood in the books at Rs.5,83,200. On 01.07.2010, a sum of
line method. Rs.1,30,000 was realised by selling a machine cost of which on 01.04.2007 was
You are required to show Machine A/c, Shyam’s A/c in the books of Ram and Rs.1,80,000. On 01.01.2011, a new machine was acquired at a cost of Rs.3,00,000.
Ram’s A/c in the books of Shyam for four years. Show the plant and machinery account in the books of the company for the year
[Interest: Down-nil; 1st 2,000; 2nd 1,500; 3rd 1,000; 4th 500; Total H.P.P: 35,000] ended 31.03.2011.
[Balance of Machinery: Rs.5,36,750; Profit on Sale: Rs.2,060;
Q-20: Seeta purchased a machine on hire purchase from Geeta having cash price Additional Depreciation to be charged: Rs.1,10,980]
of Rs. 25,000. The following installments will be paid together with interest:
01.01.2010 Down Payment Rs. 9,000 Q-39: Star Ltd. which commenced business on 01.04.2011 uses 15% diminishing
31.12.2010 1st Instalment Rs. 4,000 balance method to charge depreciation on machine on 31st March every year.
31.12.2011 2nd Instalment Rs. 4,000 The balance in Machinery A/c on 01.04.2014 was Rs.3,68,475.
31.12.2012 3rd Instalment Rs. 4,000 on 01-10-2014 it buys a new machinery for Rs.2,00,000. Further, during the year
31.12.2013 4th Instalment Rs. 4,000 company changes its method of depeciation and adopts straight line method with
Interest is charged @5% p.a. and depreciation provided @ 10% p.a. under straight retrospective effects from the beginning.
line method. You are required to show Machinery A/c in the books of Star Ltd for the period
You are required to show Machine A/c, Geeta’s A/c in the books of Seeta and 01-04-2011 to 31-03-2015.
Seeta’s A/c in the books of Geeta for four years.
[Interest: Down-nil; 1st 800; 2nd 600; 3rd 400; 4th 200] Annuity Method
Q-40: A company has acquired a lease of a Cinema Hall for a term of 5 years by
Q-21: Ajay purchased a machine on hire purchase from Vijay at total hire purchase payment of Rs.4,00,000. It is proposed to depreciate the lease by the Annuity
price of Rs. 16,000. The following installments will be paid including interest: Method, charging 5% p.a. Reference to the Annuity Table shows that the amount
01.01.2010 Down Payment Rs. 5,000 for Re. 1 for 5 years at 5% is Re. 0.230975.
30.06.2010 1st Instalment Rs. 4,500 Show the ledger account of asset during the period of the lease. Calculations are
31.12.2010 2nd Instalment Rs. 3,300 to be made to the nearest rupee.
30.06.2011 3rd Instalment Rs. 2,150 [Interest of 1 to 5 years: Rs.20,000; Rs.16,381; Rs.12,580; Rs.8,590 and Rs.4399 respectively
31.12.2011 4th Instalment Rs. 1,050 Annual Depreciation: Rs.92,390]
10 Accounting for Depreciation Practice in Accountancy 15

Q-41: A firm purchased a lease for Rs.10,000 to be depreciated over a period of CA. Naresh Aggarwal’s
four years under Annuity System. The rate of interest is 5% p.a. The Annuity Table
shows that the annual amount required to write off rupee one in four years at 5%
ACADEMY of ACCOUNTS
p.a. is Re. 0.282012. Prepare the Lease Account for four years. Calculations are to Accounting • Costing • Taxation • Financial Management
be made to the nearest rupee. West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org
[Interest of 1 to 4 years: Rs.500; Rs.384; Rs.262; and Rs.134 respectively
Annual Depreciation: Rs.2,820]
Q-14: Calculate Interest and Cash Price from the following information:
Depletion Method 01.01.2010 Down Payment Rs. 6,000
Q-42: The Hindustan Minerals Ltd. leased on 30.06.2010 a coal mine for a sum of 31.12.2010 1st Instalment Rs. 2,300
Rs.10,00,000. It is estimated that the total quantity of coal in the mine is 1,00,000 31.12.2011 2nd Instalment Rs. 2,200
tones. The annual output is as follows: 31.12.2012 3rd Instalment Rs. 2,100
Year Production (in Tones) [Interest: Down-nil; 1st 300; 2nd 200; 3rd 100; Total Cash Price: 12,000]
2010 7,000
2011 18,000 Type-4: When Hire Price Instalments and Rate of Interest is given
2012 21,000 Q-15: Calculate Interest and Cash Price from the following information:
01.01.2010 Down Payment Rs. 4,800

AoA
2013 16,000
Using the depletion method of depreciation, show the Mine Account for the above 31.12.2010 1st Instalment Rs. 5,600
four calendar years. 31.12.2011 2nd Instalment Rs. 3,650
[Adopted B.Com (Pass)] 31.12.2012 3rd Instalment Rs. 2,850
[Balance in Mines Account: Rs.3,80,000] 31.12.2013 4th Instalment Rs. 1,100
Total Hire Purchase Price is Rs. 18,000 and Interest is charged @10% p.a.
Q-43: The Coal Ltd. leased on 01.04.2010 a coal mine for a sum of Rs.30,00,000. [Interest: Down-nil; 1st 1,100; 2nd 650; 3rd 350; 4th 100; Total Cash Price: 15,800]
It is estimated that the total quantity of coal in the mine is 50,000 tones. The annual
output is as follows: Q-16: Calculate Interest and Cash Price from the following information:
Year Production (in Tones) 01.01.2010 Down Payment Rs. 3,150
2010 3,000 31.12.2010 1st Instalment Rs. 2,750
2011 10,000 31.12.2011 2nd Instalment Rs. 6,650
2012 12,000 31.12.2012 3rd Instalment Rs. 5,350
2013 15,000 31.12.2013 4th Instalment Rs. 2,100
Using the depletion method of depreciation, show the Mine Account for the above Total Hire Purchase Price is Rs. 20,000 and Interest is charged @5% p.a.
four calendar years. [Interest: Down-nil; 1st 750; 2nd 650; 3rd 350; 4th 100; Total Cash Price: 18,150]
[Balance in Mines Account: Rs.6,00,000]
Q-17: Calculate Interest and Cash price from the following information:
Sum of the Years Digit Method 01.01.2010 Down Payment Rs. 12,000
Q-44: On 1.1.2010 a company purchased a machinery costing Rs.42,000 and 30.06.2010 1st Instalment Rs. 6,900
spent Rs.5,000 on its installations. After the useful life of five years its scrap value 31.12.2010 2nd Instalment Rs. 6,600
is estimated to be Rs.2,000. Accounts are closed on 31st December each year. 30.06.2011 3rd Instalment Rs. 4,300
Show Machinery account if depreciation is charged under ‘sum of the digit method’. 31.12.2011 4th Instalment Rs. 2,100
[Depreciation of 1 to 5 years: Rs.15,000; Rs.12,000; Rs.9,000; Rs.6,000 and Rs.3,000] Total Hire Purchase Price is Rs. 31,900 and Interest is charged @10% p.a.
[Interest: Down-nil; 1st 900; 2nd 600; 3rd 300; 4th 100; Total Cash Price 30,000]

Q-18: Calculate Interest and Cash price from the following information:
14 Accounting for Hire Purchase Practice in Accountancy 11

Q-9: Calculate Interest and Hire purchase price from the following information:
01.01.2010 Down Payment Rs. 5,000 CA. Naresh Aggarwal’s
30.06.2010
31.12.2010
1st Instalment
2nd Instalment
Rs. 4,000
Rs. 3,000
ACADEMY of ACCOUNTS
30.06.2011 3rd Instalment Rs. 2,000 Accounting • Costing • Taxation • Financial Management
31.12.2011 4th Instalment Rs. 1,000 West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org
Total cash price is Rs. 15,000 and Interest is charged Rs. 1,000.
[Interest: Down-nil; 1st 500; 2nd 300; 3rd 150; 4th 50; Total H.P.P: 16,000]

Q-10: Calculate Interest and Hire purchase price from the following information: Q-45: Rajesh Bros. acquired a Machinery on 1.1.2010 costing Rs.48,000 and
01.01.2010 Down Payment Rs. 6,000 spent Rs.4,000 on its installation and Rs.1,000 on its freight. The scrap value of the
31.03.2010 1st Instalment Rs. 4,000 machine is estimated at Rs.3,000. The life of the machine is assumed to be four
30.06.2010 2nd Instalment Rs. 4,000 years and accounts are closed on 31st December each year. Show Machinery
30.09.2010 3rd Instalment Rs. 4,000 account if depreciation is charged under ‘sum of the digit method’.
31.12.2010 4th Instalment Rs. 2,000 [Depreciation of 1 to 4 years: Rs.20,000; Rs.15,000; Rs.10,000 and Rs.5,000]
Total cash price is Rs. 20,000 and Interest is charged Rs. 960.
[Interest: Down-nil; 1st 420; 2nd 300; 3rd 180; 4th 60; Total H.P.P: 20,960] Q-46: On 1.1.2010 a company purchased a machinery costing Rs.30,000. Having
the useful life of five years. Accounts are closed on 31st December each year.

AoA
Type-3: When only Hire Price Instalments are given Show Machinery account if depreciation is charged under ‘sum of the digit method’.
Q-11: Calculate Interest and Cash Price from the following information: [Depreciation of 1 to 5 years: Rs.10,000; Rs.8,000; Rs.6,000; Rs.4,000 and Rs.2,000]
01.01.2010 Down Payment Rs. 8,000
31.12.2010 1st Instalment Rs. 7,000
31.12.2011 2nd Instalment Rs. 6,500
31.12.2012 3rd Instalment Rs. 6,000 •••••••••••••••••••••••••
31.12.2013 4th Instalment Rs. 5,500
[Interest: Down-nil; 1st 2,000; 2nd 1,500; 3rd 1,000; 4th 500; Total Cash Price: 28,000]

Q-12: Calculate Interest and Cash Price from the following information:
01.01.2010 Down Payment Rs. 6,000
31.12.2010 1st Instalment Rs. 4,800
31.12.2011 2nd Instalment Rs. 4,600
31.12.2012 3rd Instalment Rs. 4,400
31.12.2013 4th Instalment Rs. 4,200
[Interest: Down-nil; 1st 800; 2nd 600; 3rd 400; 4th 200; Total Cash Price: 22,000]

Q-13: Calculate Interest and Cash Price from the following information:
01.01.2010 Down Payment Rs. 5,000
31.12.2010 1st Instalment Rs. 6,500
31.12.2011 2nd Instalment Rs. 6,200
31.12.2012 3rd Instalment Rs. 5,900
31.12.2013 4th Instalment Rs. 5,600
31.12.2014 5th Instalment Rs. 5,300
[Interest: Down-nil; 1st 1,500; 2nd 1,200; 3rd 900; 4th 600; 5th 300; Total Cash Price: 30,000]
12 Accounting for Hire Purchase Practice in Accountancy 13

Hire Purchase CA. Naresh Aggarwal’s

Calculation of Interest, Cash Price and Hire Purchase Price ACADEMY of ACCOUNTS
Accounting • Costing • Taxation • Financial Management
Type-1: When Cash Price Instalments and Rate of Interest is given
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org
Q-1: Calculate Interest and Hire purchase price from the following information:
01.01.2010 Down Payment Rs. 8,000
31.12.2010 1st Instalment Rs. 5,000 01.01.2010 Down Payment Rs. 6,000
31.12.2011 2nd Instalment Rs. 5,000 31.03.2010 1st Instalment Rs. 4,000
31.12.2012 3rd Instalment Rs. 5,000 30.06.2010 2nd Instalment Rs. 4,000
31.12.2013 4th Instalment Rs. 5,000 30.09.2010 3rd Instalment Rs. 4,000
Total cash price is Rs. 28,000 and Interest is charged @10% p.a. 31.12.2010 4th Instalment Rs. 2,000
[Interest: Down-nil; 1st 2,000; 2nd 1,500; 3rd 1,000; 4th 500; Total H.P.P: 33,000] Total cash price is Rs. 20,000 and Interest is charged @12% p.a.
[Interest: Down-nil; 1st 420; 2nd 300; 3rd 180; 4th 60; Total H.P.P: 20,960]
Q-2: Calculate Interest and Hire purchase price from the following information:
01.01.2010 Down Payment Rs. 6,000 Type-2: When Cash Price Instalments and Total Interest or Total H.P.P. is given
31.12.2010 1st Instalment Rs. 4,000

AoA
Q-6: Calculate Interest and Hire purchase price from the following information:
31.12.2011 2nd Instalment Rs. 4,000 01.01.2010 Down Payment Rs. 8,000
31.12.2012 3rd Instalment Rs. 4,000 31.12.2010 1st Instalment Rs. 5,000
31.12.2013 4th Instalment Rs. 4,000 31.12.2011 2nd Instalment Rs. 5,000
Total cash price is Rs. 22,000 and Interest is charged @5% p.a. 31.12.2012 3rd Instalment Rs. 5,000
[Interest: Down-nil; 1st 800; 2nd 600; 3rd 400; 4th 200; Total H.P.P: 24,000] 31.12.2013 4th Instalment Rs. 5,000
Total cash price is Rs. 28,000 and Interest is charged Rs.5,000.
Q-3: Calculate Interest and Hire purchase price from the following information: [Interest: Down-nil; 1st 2,000; 2nd 1,500; 3rd 1,000; 4th 500; Total H.P.P: 33,000]
01.01.2010 Down Payment Rs. 12,000
30.06.2010 1st Instalment Rs. 6,000 Q-7: Calculate Interest from the following information:
31.12.2010 2nd Instalment Rs. 6,000 01.01.2010 Down Payment Rs. 6,000
30.06.2011 3rd Instalment Rs. 4,000 31.12.2010 1st Instalment Rs. 4,000
31.12.2011 4th Instalment Rs. 2,000 31.12.2011 2nd Instalment Rs. 4,000
Total cash price is Rs. 30,000 and Interest is charged @10% p.a. 31.12.2012 3rd Instalment Rs. 4,000
[Interest: Down-nil; 1st 900; 2nd 600; 3rd 300; 4th 100; Total H.P.P: 31,900] 31.12.2013 4th Instalment Rs. 4,000
Total cash price is Rs. 22,000 and Hire Purchase Price is Rs. 24,000.
Q-4: Calculate Interest and Hire purchase price from the following information: [Interest: Total 2,000; Down-nil; 1st 800; 2nd 600; 3rd 400; 4th 200]
01.01.2010 Down Payment Rs. 5,000
30.06.2010 1st Instalment Rs. 4,000 Q-8: Calculate Interest from the following information:
31.12.2010 2nd Instalment Rs. 3,000 01.01.2010 Down Payment Rs. 12,000
30.06.2011 3rd Instalment Rs. 2,000 30.06.2010 1st Instalment Rs. 6,000
31.12.2011 4th Instalment Rs. 1,000 31.12.2010 2nd Instalment Rs. 6,000
Total cash price is Rs. 15,000 and Interest is charged @10% p.a. 30.06.2011 3rd Instalment Rs. 4,000
[Interest: Down-nil; 1st 500; 2nd 300; 3rd 150; 4th 50; Total H.P.P: 16,000] 31.12.2011 4th Instalment Rs. 2,000
Total cash price is Rs. 30,000 and Hire Purchase Price is Rs. 31,900.
Q-5: Calculate Interest and Hire purchase price from the following information: [Interest: Total 1,900; Down-nil; 1st 900; 2nd 600; 3rd 300; 4th 100]