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problem 1:

A) Able Engineering Co. purchased new machinery for Rs 200, 000 on 1st January 2009. As the business expanded, it was essential to purchase the other machinery on 1st July 2010 for Rs100,000. Each machine had an estimated life of 10 years and nil residual value. On 30th September 2011, the first machinery was sold for Rs125, 000.

The company uses the straight-line method to depreciate both assets at the rate of 10% per annum. It is the company’s policy to give depreciation on a time basis according to the number of months of use.

For the year ended 31st

December 2011, prepare:

a) The machinery account.
b) The accumulated depreciation of machinery account.
c) The disposal of machinery account.
d) An extract of Income statement.
e) An extract of the balance sheet.

B) Illustrate how the matching concept applies to depreciation.

problem 2:

On reconciling his bank statement, Joy found that it showed his overdraft on 31 July 2012 to be Rs 5 230 and those two deposits on 31 July of Rs 600 and Rs 350 correspondingly, not yet recorded by the bank. Bank charges and interest appearing in the bank statement of Rs 380 have yet to be entered in his books which will change the existing credit balance in his bank overdraft account of Rs 4350.

Unpresented cheques were Rs 720. Additionally, an amount of Rs 850 paid to John was erroneously recorded in the cash book as Rs 580. This cheque was paid correctly by the bank as Rs 850. The bank overdraft account is understated by Rs 270 since of this error.


a) Compute the corrected bank balance that must appear in the cash book of Joy at 31st July 2012.

b) A bank reconciliation statement at 31st July 2012.

Financial Accounting, Accounting

  • Category:- Financial Accounting
  • Reference No.:- M96391

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