Depreciation Chapter of Class 11 Accountancy, Methods, Examples, NCERT Solutions

Depreciation Chapter of Class 11 Accountancy: Depreciation is the gradual reduction in the value of tangible fixed assets over time due to wear and tear, usage, obsolescence, or the passage of time. For students of Class 11 Accountancy, understanding depreciation is crucial as it forms a high-scoring portion of the syllabus and lays the foundation for advanced accounting concepts in Class 12 and professional studies.

Depreciation is different from amortization (used for intangible assets like patents and goodwill) and depletion (used for natural resources such as minerals or coal). Its correct calculation ensures that profit and asset valuation in financial statements are realistic and reliable.

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What is Depreciation?

Depreciation is the reduction in the value of a tangible fixed asset over time due to usage, wear and tear, passage of time, or technological obsolescence. It helps businesses account for the declining worth of assets like machinery, vehicles, or buildings in their financial records. Depreciation ensures accurate profit calculation by spreading the asset’s cost over its useful life. It also aids in proper asset management, taxation, and financial reporting, making it an essential concept in accounting for Class 11 students.

Methods of Depreciation Class 11

Mentioned here are two methods following which one can calculate Methods of Depreciation Class 11. Check the formulas below for seamless calculation: 

Straight line method Class 11

The Straight Line Method charges the same amount of depreciation every year. It is simple and easy to calculate. This method is based on the idea that the asset loses equal value each year.

Formula:

Example:
A machine costs ₹50,000 and its scrap value is ₹5,000. Its useful life is 5 years.

Key Points:

• Depreciation expense remains constant every year.

• It is easy to calculate and record in accounts.

• May not reflect actual usage of the asset in early years.

Written down value method Class 11

The Written Down Value Method charges depreciation on the book value of the asset at the beginning of each year. This means the depreciation decreases over time as the asset ages.

Formula:

Depreciation (WDV)=Book Value at Beginning of Year×Depreciation Rate (%)

Example:
A machine costs ₹50,000 with a depreciation rate of 10%.

• First-year depreciation = ₹50,000 × 10% = ₹5,000

• Book value at the start of second year = ₹50,000 – ₹5,000 = ₹45,000

• Second-year depreciation = ₹45,000 × 10% = ₹4,500

Key Points:

• Depreciation expense reduces over the asset's life.

• Often preferred for tax purposes and reflects actual usage.

• Slightly more complex to calculate than SLM.

Difference between SLM and WDV

The table below carries the key differences between SLM and WDV: 

Depreciation Class 11 NCERT solutions

Listed here are some of the questions with solutions for the Depreciation chapter:

Q1. Bajrang Marbles – Straight Line Method

Question:
On April 01, 2010, Bajrang Marbles purchased a machine for ₹1,80,000 and spent ₹10,000 on its carriage and ₹10,000 on installation. The machine’s estimated working life is 10 years, and scrap value is ₹20,000.

(a) Prepare Machine Account and Depreciation Account for the first four years by providing depreciation on Straight Line Method (SLM). Accounts are closed on March 31 every year.

(b) Prepare Machine Account, Depreciation Account, and Provision for Depreciation Account for the first four years using SLM.

Solution:

Step 1: Calculate Depreciation

Depreciable Cost = Cost of Machine + Carriage + Installation – Scrap Value

Depreciable Cost = 1,80,000 + 10,000 + 10,000 – 20,000 = 1,80,000

Annual Depreciation = Depreciable Cost ÷ Useful Life = 1,80,000 ÷ 10 = 18,000

Step 2: Machine Account (SLM)

Balance (31-Mar-2014): ₹1,28,000

Step 3: Depreciation Account

Step 4: Provision for Depreciation Account

Balance (Provision): ₹72,000

Q2. Ashok Ltd – Straight Line Method

Question:
On July 01, 2010, Ashok Ltd purchased a machine for ₹1,08,000 and spent ₹12,000 on installation. Life = 12 years, salvage value = ₹12,000. Prepare Machine Account and Depreciation Account for the first three years using SLM. Accounts are closed on December 31 each year.

Solution:

Step 1: Depreciation Calculation

Cost of Machine = 1,08,000 + 12,000 = 1,20,000

Depreciable Cost = 1,20,000 – 12,000 = 1,08,000

Annual Depreciation = 1,08,000 ÷ 12 = 9,000

Step 2: Machine Account (SLM)

Balance on 01-Jan-2013 = ₹97,500

Q3. Reliance Ltd – Second Hand Machine

Question:
Reliance Ltd purchased a second-hand machine for ₹56,000 on Oct 01, 2011, and spent ₹28,000 on overhaul and installation. Salvage value = ₹6,000; estimated cost to recover scrap = ₹1,000; useful life = 15 years. Prepare Machine Account and Provision for Depreciation Account for first three years using SLM.

Solution:

Step 1: Depreciable Cost

Cost of Machine = 56,000 + 28,000 = 84,000

Net Scrap Value = 6,000 – 1,000 = 5,000

Depreciable Cost = 84,000 – 5,000 = 79,000

Annual Depreciation = 79,000 ÷ 15 ≈ 5,267

Balance of Provision for Depreciation (31-Mar-2015) = ₹18,200

Q4. Berlia Ltd – OCM & WDV Method

Question:
Machine purchased on July 01, 2015: ₹56,000 + ₹24,000 repair + ₹5,000 carriage
Another machine on Sep 01, 2016: ₹2,50,000 + ₹10,000 installation
Depreciation = 10% p.a.

(a) On Original Cost Method (OCM)
(b) On Written Down Value Method (WDV)

Balances as on 01-Jan-2019:

• OCM: ₹2,54,583

• WDV: ₹2,62,448

Q5. Ganga Ltd – Multiple Machines

Question:
Machine 1 (01-Jan-2014): ₹5,50,000 + ₹50,000 installation
Machine 2 (01-Sep-2014): ₹3,70,000
Machine 3 (01-May-2015): ₹8,40,000 (including installation)

Depreciation = 10% p.a. on Original Cost Method.

(a) Prepare Machine and Depreciation Accounts 2014–2017
(b) Prepare Machine and Provision for Depreciation Accounts 2014–2017

Balances:

• Machine Account 01-Jan-2015: ₹12,22,666

• Provision for Depreciation 01-Jan-2015: ₹5,87,334