(a) (i) Define depreciation.

(ii) Explain any three causes of depreciation.

OR

(b) Prepare trading and profit and loss account in the books of Ms. Vinodhini for the year ended 31/12/2017 and balance sheet as on that date from the following information.

| Particulars | ₹ | Par

Question

(a) (i) Define depreciation.

(ii) Explain any three causes of depreciation.

OR

(b) Prepare trading and profit and loss account in the books of Ms. Vinodhini for the year ended 31/12/2017 and balance sheet as on that date from the following information.

| Particulars | ₹ | Particulars | ₹ |
| --- | --- | --- | --- |
| Opening stock | 2,500 | Sales | 7,000 |
| Carriage inwards | 2,700 | Purchases | 3,300 |
| Closing stock | 4,000 | Rent | 2,600 |
| Interest received | 2,500 | Capital | 52,000 |
| Plant | 52,000 | Cash | 6,400 |
| Creditors | 8,000 | | |

Accepted Answer

>

> [!TLDR]
> (a) Define depreciation and give three causes; (b) Ms. Vinodhini's Trading, P&L Account and Balance Sheet → Gross Profit ₹2,500, Net Profit ₹2,400, Balance Sheet ₹62,400.
>
> ### (a) Depreciation
>
> **(i) Definition.** Depreciation is the permanent, continuous and gradual reduction in the book value of a fixed asset arising from its use, the passage of time or obsolescence. It is a charge against profit that spreads the cost of the asset over its useful life (Tamil Nadu HSC Class-11 Accountancy, Depreciation Accounting).
>
> **(ii) Any three causes:**
>
> | Cause | Explanation |
> | --- | --- |
> | Wear and tear | Constant use in operations physically reduces the asset's efficiency and value |
> | Efflux (passage) of time | Some assets (e.g. lease, patent) lose value simply as time passes, whether used or not |
> | Obsolescence | New technology/inventions make the existing asset out-of-date even if still usable |
>
> (Other acceptable causes: depletion of wasting assets, accidents, permanent fall in market value.)
>
> ### (b) Final accounts of Ms. Vinodhini for the year ended 31/12/2017
>
> **Trading and Profit & Loss Account**
>
> | Dr — Particulars | ₹ | Cr — Particulars | ₹ |
> | --- | --- | --- | --- |
> | To Opening stock | 2,500 | By Sales | 7,000 |
> | To Purchases | 3,300 | By Closing stock | 4,000 |
> | To Carriage inwards | 2,700 | | |
> | To **Gross profit c/d** | **2,500** | | |
> | **Total** | **11,000** | **Total** | **11,000** |
> | To Rent | 2,600 | By Gross profit b/d | 2,500 |
> | To **Net profit** | **2,400** | By Interest received | 2,500 |
> | **Total** | **5,000** | **Total** | **5,000** |
>
> **Balance Sheet as on 31/12/2017**
>
> | Liabilities | ₹ | Assets | ₹ |
> | --- | --- | --- | --- |
> | Capital 52,000 + Net profit 2,400 | 54,400 | Plant | 52,000 |
> | Creditors | 8,000 | Closing stock | 4,000 |
> | | | Cash | 6,400 | …

Particulars	₹	Particulars	₹
Opening stock	2,500	Sales	7,000
Carriage inwards	2,700	Purchases	3,300
Closing stock	4,000	Rent	2,600
Interest received	2,500	Capital	52,000
Plant	52,000	Cash	6,400
Creditors	8,000

Cause	Explanation
Wear and tear	Constant use in operations physically reduces the asset's efficiency and value
Efflux (passage) of time	Some assets (e.g. lease, patent) lose value simply as time passes, whether used or not
Obsolescence	New technology/inventions make the existing asset out-of-date even if still usable

Dr — Particulars	₹	Cr — Particulars	₹
To Opening stock	2,500	By Sales	7,000
To Purchases	3,300	By Closing stock	4,000
To Carriage inwards	2,700
To Gross profit c/d	2,500
Total	11,000	Total	11,000
To Rent	2,600	By Gross profit b/d	2,500
To Net profit	2,400	By Interest received	2,500
Total	5,000	Total	5,000

Liabilities	₹	Assets	₹
Capital 52,000 + Net profit 2,400	54,400	Plant	52,000
Creditors	8,000	Closing stock	4,000
		Cash	6,400

(a) Depreciation

(b) Final accounts of Ms. Vinodhini for the year ended 31/12/2017

🎓Unlock everything free for 14 days

Unlock everything free for 14 days