CMA Intermediate · Cost Accounting · Contract Costing
Plant costing Rs 8,00,000 was purchased for a contract and used for the whole year. At the year end its value after depreciation is Rs 6,80,000. What is the amount of depreciation to be charged to the contract account?
Depreciation charged to the contract is Rs 1,20,000, being the plant's cost of Rs 8,00,000 minus its year-end value of Rs 6,80,000. The Rs 6,80,000 is the plant balance carried forward, not the expense for the year.
- ARs 6,80,000
- BRs 1,20,000Correct
- CRs 8,00,000
- DRs 14,80,000
Explanation
Depreciation = cost less year-end value = 8,00,000 - 6,80,000 = Rs 1,20,000. Rs 6,80,000 is the value to be shown as plant at site, not the charge. Adding the two figures is meaningless.
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