Accounting Treatment of Depreciation

The video tutorial covers the concept of depreciation, focusing on the written down value (WDV) method. It explains how to calculate depreciation for a machine purchased by a company, including handling asset disposal and new purchases. The tutorial emphasizes the importance of noting key dates and provides a step-by-step guide to preparing a machinery ledger account over four accounting years. It also highlights common mistakes and offers tips for accurate calculations.

What is the initial cost of the machine including installation?

• 3 lakh 90,000

• 4 lakh

• 3 lakh 80,000

• 4 lakh 10,000

How is depreciation calculated in the first year?

• 10% on the initial cost for 12 months

• 15% on the initial cost for 8 months

• 10% on the initial cost for 8 months

• 15% on the initial cost for 12 months

What is the value of the machinery at the end of the second year?

• 3 lakh 40,000

• 3 lakh 60,000

• 3 lakh 80,000

• 3 lakh 50,000

What happens to the machinery on 30th November, 2011?

• It is donated

• It is upgraded

• It is dismantled and sold

• It is sold for a profit

How is the loss on disposal of the machine calculated?

• By subtracting the dismantling cost from the sale price

• By adding the dismantling cost to the written down value and subtracting the sale price

• By subtracting the sale price from the initial cost

• By adding the sale price to the dismantling cost

What is the cost of the new machine purchased on 4th December, 2011?

• 7 lakh

• 8 lakh

• 7 lakh 50,000

• 7 lakh 60,000

For how many months is depreciation charged on the new machine in the fourth year?

• 8 months

• 4 months

• 12 months

• 6 months