atswa pilot questions answers part i - The Institute of Chartered ...

The company charges depreciation on straight line basis at 20% per annum
with no residual value.
The management decides to dispose the old vehicle for cedi 30,000 on 1
January 2011.
Required:
Show the relevant accounts to record the above transactions in the books
of the company for the years 2007 to 2011.
(10½ Marks)
(Total 12½ Marks)
SOLUTION 3
a) Double entry principle is the system of keeping account that takes advantage of two fold
aspects of every transaction; whereby one account receiving the benefit is debited and the
other account yielding the benefit is credited.
(2 Marks)
Motor Vehicle Account
cedi
cedi
1/1/07 Cash account 200,000 31/12/07 Balance c/d 200,000
1/1/08 Balance b/d 200,000 31/12/08 Balance c/d 200,000
1/1/09 Balance b/d 200,000 31/12/09 Balance c/d 200,000
1/1/10 Balance b/d 200,000 31/12/10 Balance c/d 500,000
1/1/10 Bank account 300,000
500,000 500,000
1/1/11 Balance b/d 500,000 1/1/11 Disposal a/c 200,000
31/12/11 Balance c/d 300,000
500,000 500,000
1/1/12 balance b/d 300,000 (4 Marks)
ii
Asset Disposal Account
cedi
cedi
1/1/11 Motor vehicle 200,000 1/1/11 Provision for depr. 160,000*
“ Bank 30,000
31/12/11 Profit on sale 10,000
200,000 200,000 (2 Marks)
* Provision for depreciation on asset disposed off:
Date of purchase of motor vehicle disposed 1January 2007
Date of disposal 1January 2011
Life span
4 years
Depreciation 200,000 x 20% x 4 years c160,000 (½Mark)
iii
Provision for depreciation on Motor Vehicle
cedi
cedi
31/12/07 Balance c/d 40,000 31/12/07 P & L account 40,000
31/12/08 Balance c/d 80,000 1/01/08 Balance b/d 40,000
31/12/08 P & L account 40,000
80,000 80,000
31/12/09 Balance c/d 120,000 1/01/09 Balance b/d 80,000
31/12/09 P & L account 40,000
120,000 120,000
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