Accountancy · Class 12 Commerce
Ch 2Depreciation — Class 12 Accountancy, concept-first.
Every fixed asset a business buys to use in its operations — a machine, a delivery vehicle, office furniture, a computer, a factory building — is expected to serve the business for several years, but none of these assets lasts forever at the same value.
Key concepts
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Provisions and Reserves
A Provision is a charge against profit, set aside to meet a known liability or an anticipated fall in an asset's value (e.g., Provision for Depreciation, Provision for Doubtful Debts), created whether or not the business…
Start with this concept →Chapter contents
The NCERT structure, section by section. Open a section to see its questions, then read the concept-first solution.
Meaning, Need and Causes of Depreciation
Every fixed asset a business buys to use in its operations — a machine, a delivery vehicle, office furniture, a computer, a factory building — is expected to serve the business for several years, but…
Straight Line Method (SLM)
The Straight Line Method — also known as the Fixed Instalment Method, or the Original Cost Method — is the simplest way of spreading an asset's cost over its useful life: an EQUAL amount of depreciati…
Written Down Value (WDV) Method
Under the Written Down Value Method — also called the Diminishing Balance Method or Reducing Instalment Method — a FIXED PERCENTAGE rate of depreciation is applied every year, but the percentage is al…
Straight Line Method and Written Down Value Method Compared
Both methods allocate an asset's cost over its useful life, but they differ in the base used, the pattern of the charge, and the situations they suit best.
Provisions and Reserves
A Provision is an amount set aside, as a CHARGE against profit (that is, debited to the Profit and Loss Account before profit is even arrived at), to meet a known liability or an anticipated diminutio…
Accounting Treatment: Recording Depreciation and Disposal of an Asset
Depreciation can be recorded in a business's books in either of two ways, and both are tested through journal entries and ledger accounts in AP Board Class 12 Commerce Accountancy examinations.
Exercises
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- Q8Distinguish between a Provision and a Reserve, with one example of each.Free
- Q9Explain briefly why a business needs to provide depreciation on its fixed assets, giving at least three distinct reasons.Preview
- Q10A machine was purchased on 1 July 2024 for ₹48,000 and sold on 28 February 2025 for ₹43,000, within the same accounting year (April 2024 to…Preview
Sample & Board Papers
Sample papers and previous-year board questions for this subject.
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- Q1Sireesha Traders purchased a second hand machine for ₹ 72,000 on 1st January, 2011 and spent ₹ 8,000 on repairs and installed the same. Depr…Preview
- Q2Write any two causes of depreciation.Preview
- Q3Dheeraj and Co. purchased machinery on 1st April, 2017 for ₹ 3,00,000 and spent ₹ 20,000 for its installation. Depreciation is provided @ 10…Preview
- Q4Write any two causes of depreciation.Preview
- Q5Sanjay purchased machinery for ₹ 90,000 on 1st October, 2011. He spent ₹ 10,000 as installation expenses. Depreciation is to be provided at…Preview
- Q6Write any two causes of Depreciation.Preview
- Q7On 1st January 2020 Suma purchased Furniture for ₹ 80,000. Depreciation is to be provided annually at 10% under straight line method. On 31s…Preview
- Q8Write a short note on: Obsolescence.Preview
More questions
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- Q1A company purchased a machine for ₹1,50,000. Its estimated scrap value at the end of its useful life of 9 years is ₹15,000. Calculate the an…Free
- Q2A machine costing ₹75,000 is depreciated at 20% per annum under the Written Down Value Method. Find the depreciation for each of the first t…Free
- Q3A machine costing ₹1,00,000 has an estimated life of 4 years and a scrap value of ₹20,000. Compare the depreciation charged and the closing…Free
- Q4Sri Ganesh Traders purchased a machine on 1 October 2023 for ₹1,00,000, with an estimated life of 5 years and no scrap value, charging depre…Preview
- Q5On 1 April 2024, Sri Ganesh Traders purchased furniture for ₹50,000, to be depreciated at 10% per annum under the Straight Line Method, main…Preview
- Q6A machine purchased for ₹60,000 on 1 April 2022, depreciated at 10% per annum under the Straight Line Method and charged directly to the Mac…Preview
- Q7A machine costing ₹1,20,000, purchased on 1 April 2021, was depreciated at 10% per annum under the Straight Line Method, using a Provision f…Preview