Course Content
Basic Accountancy (Past Paper 2009)
All questions are taken from DAO Exam Part-I (Past Paper 2009)
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Classifying daily basis transactions according to their types
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What is Statement of Financial Position (SOFP)
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Write double-Entry Formula Entries
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Recording Cash Book Transaction
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Journal Entry
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Short Questions
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Find Depreciation: The Time Value of Money
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Reconciliation of Payables and Supplier’s Memorandum Ledger Balances
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Basic Accounting-I (Past Paper 2010)
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Let's Analyze your knowledge with Quiz
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Basic Accounting (Past Paper 2010)
Division Accounts Officer's Examination (Part-I) 2010 paper answers
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Present Journal entries from the enlisted transactions
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Transactions Typically Recorded in a Journal
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Security Aspects of Handling and Storing Money
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Define Bank Reconciliation & draw it benefits
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Bank Reconciliation Example
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Bad debt
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Good internal controls to support an efficient and reliable payroll system
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Replacing Machinery
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Dismantling Costs of Old Machine
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Basic Accounting Help Material
Short definition of the Accounting terms
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Book of Accounts
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Accounting Processes
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Single-entry and Double-entry accounting:
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Financial Statements (Assets, Liabilities, and Shareholders’ Equity)
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Difference between a balance sheet, an income statement and a cash flow statement
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What is the difference between a cash book and a bank statement?
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Course outline for Basic Accounting
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New Accounting Model (Exam-2009)
Books references: 1. Account Code (Volume III). 2. Chart of Accounts (Issued by CGA). 3. Manual Accounting Principles. 4. Accounting Policies and Procedures Manual.
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Select Suitable answers
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Write short notes on the following questions.
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Pass Journal Entries
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Reconciliation of Contractors’ Expenditure in APPM
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Treatment of Replacement Cheques, Unclaimed and Stale Cheques in APPM
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Business Communication (Exam 2009)
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Proposal for the Auditor General of Pakistan
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Write an essay on the new challenges emerging for the auditors
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What type of business skills are used in contract planning, execution, implementation and evaluation?
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Please comment on the following:
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Please comment in short on the following:
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Private: DAO Part-I Examination 2024 (Fresh Candidates) Past Papers
About Lesson
The cost of removal which was Rs.20,000/- will be capitalized. The machine will be recognized in the SOFP (balance sheet) as:-
Cost of machine Rs.
Add: dismantling costs of old machine Rs.
To SOFP (balance sheet) Rs.
Answer:

Certainly! Let’s account for the dismantling costs of the old machine and recognize the new machine in the balance sheet (Statement of Financial Position):

  1. Dismantling Costs of Old Machine:

    • The cost of removing the old machine (Rs. 20,000/-) will be capitalized.
    • This means we treat it as part of the cost of the new machine.

  2. Recognition in the Balance Sheet:

    • We’ll recognize the new machine in the balance sheet.
    • The entry will include both the cost of the new machine and the capitalized dismantling costs.

Journal Entry:

  • Debit: New Machine (Cost of Machine) Account: Rs. 50,000/- (purchase price of the new machine)
  • Debit: Dismantling Costs (Capitalized) Account: Rs. 20,000/- (cost of removing the old machine)
  • Credit: Cash/Bank Account: Rs. 70,000/- (payment made for the new machine and dismantling costs)

The balance sheet will show:

  • Assets:
    • New Machine: Rs. 50,000/- (cost of the new machine)
    • Accumulated Depreciation (New Machine): Depreciation on the new machine over its useful life
    • Total: Rs. 50,000/-
  • Liabilities and Equity:
    • Cash/Bank: Rs. 70,000/- (payment made)
    • Total: Rs. 70,000/-

Remember that the dismantling costs are capitalized because they are directly related to bringing the new machine into operation.

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