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CA Intermediate · Advanced Accounting · Financial Statements of Companies

Zenith Ltd. reports profit before tax of Rs 40,00,000 for FY 2025-26. Its PPE (gross block) at the start was Rs 1,00,00,000 and at the end Rs 1,30,00,000; accumulated depreciation at the start was Rs 30,00,000 and at the end Rs 45,00,000. During the year it sold an asset of original cost Rs 10,00,000 (accumulated depreciation Rs 6,00,000) and no other disposals occurred. Which figure is the depreciation charged to the statement of profit and loss for the year, and what is the amount of additions to gross block?

Depreciation charged is Rs 21,00,000 and additions to gross block are Rs 40,00,000. Opening accumulated depreciation of Rs 30,00,000 plus the charge less Rs 6,00,000 on disposal gives Rs 45,00,000, and opening gross block plus additions less Rs 10,00,000 gives Rs 1,30,00,000.

  1. ADepreciation Rs 21,00,000; additions Rs 40,00,000Correct
  2. BDepreciation Rs 15,00,000; additions Rs 30,00,000
  3. CDepreciation Rs 21,00,000; additions Rs 30,00,000
  4. DDepreciation Rs 9,00,000; additions Rs 40,00,000

Explanation

Closing accumulated depreciation = opening 30,00,000 + charge - 6,00,000 on disposal = 45,00,000, so charge = Rs 21,00,000. Closing gross block = 1,00,00,000 + additions - 10,00,000 = 1,30,00,000, so additions = Rs 40,00,000. Rs 15,00,000 and Rs 30,00,000 result from ignoring the disposals.

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