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CA Foundation · Accounting · Financial Statements of Not-for-Profit Organisations

Matrix Library Society started the year with a stock of books of ₹2,00,000. It purchased new books worth ₹50,000 during the year. At the year end books were valued at ₹2,10,000 after providing for depreciation. What amount of depreciation on books will be charged to the Income and Expenditure Account, if purchases of books are capitalised?

Depreciation on books is ₹40,000. Opening books of ₹2,00,000 plus additions of ₹50,000 give ₹2,50,000, and with the closing value at ₹2,10,000 the difference of ₹40,000 is charged to the Income and Expenditure Account as depreciation.

  1. A₹40,000Correct
  2. B₹60,000
  3. C₹10,000
  4. D₹50,000

Explanation

Books are capitalised as an asset. Depreciation = opening value 2,00,000 + additions 50,000 - closing value 2,10,000 = 40,000. Option 3 (10,000) is wrong because it only takes the net change in value of the books, ignoring the additions.

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