The worked question on this page is original educational practice. It is not represented as a question from an official previous-year examination paper.
01 / UNDERSTANDING
Review the question
Create an original straight-line question with explicitly stated cost, life and residual value. In a genuine paper, check whether the question asks for annual expense, accumulated depreciation or carrying amount. Add a question asking for carrying amount after several full years under the stated assumptions. Require the learner to separate annual and accumulated depreciation. The solution should name the period and exclude unstated tax or impairment assumptions, which would otherwise turn a simple allocation exercise into a different question.
02 / UNDERSTANDING
The concept in context
Recording depreciation does not mean the business pays that amount in cash each period. The asset purchase and later accounting allocation have different timing. Useful life and residual value are estimates that require appropriate review; the resulting carrying amount is not automatically the asset's current selling price.
03 / UNDERSTANDING
A worked learning case
A teaching example uses a machine costing ₹110,000, an assumed residual value of ₹10,000 and a useful life of five years. Straight-line depreciation is ₹20,000 a year. The machine was paid for at purchase, so the annual expense allocates cost rather than representing a new annual machine-payment obligation.
ORIGINAL EDUCATIONAL PRACTICE
Try it before you check.
Under the stated assumptions, what is the machine's annual straight-line depreciation?
Show the answer and reasoning
₹20,000.
Subtract the ₹10,000 assumed residual value from the ₹110,000 cost to obtain a ₹100,000 depreciable amount. Dividing by the assumed five-year life gives ₹20,000 annually. The calculation illustrates cost allocation and does not establish a tax deduction, cash payment or current market value for the machine.
Two traps to watch for.
- Treating annual depreciation as a fresh cash outflow.
- Assuming book carrying amount equals current sale proceeds.
YOUR TOPIC-SPECIFIC LEARNING MAP
Learn from the attempt
Separate machine cost from the assumed residual amount.
Allocate the depreciable amount across the stated useful life.
Explain the difference between the expense and the purchase cash flow.
Explain the idea, apply it to a new situation, then check what changed in your reasoning.
BANKERS TUTORIAL · SOURCE NOTES
Keep the source alongside your notes.
Official links provide subject context and authoritative reference material. This guide’s explanation, scenario and question are original Bankers Tutorial learning content.
- iibf.org.in https://iibf.org.in/jaiib-junior-associate-IIBF
- iibf.org.in https://iibf.org.in/documents/RulesSyllabus/2026/FlagshipCourses/21%20-%20JAIIB-Final_Exam_24.07.25_Final_23.02.2026.pdf
- www.rbi.org.in https://www.rbi.org.in/commonperson/English/Scripts/PressReleases.aspx?Id=2123
For JAIIB preparation, check the current official notice before relying on changing dates, rules or examination requirements.
