Question

A Company purchased a second-hand machine on 1st April, 2016, for ₹ 30,000 and immediately spent ₹ 4,000 on its repair and ₹ 1,000 on its installation. On Oct. 1, 2018, the machine was sold for ₹ 25,000. Prepare Machine Account after charging depreciation @ 10% p.a. by diminishing balance method, assuming that the books are closed on 31st March every year. IGST was charged @ 12% on purchase and sale of machine.

Answer 1

Machinery Account
Dr.				Cr.
Date	Particulars	Amount (₹)	Date		Particulars	Amount (₹)
2016			2017
Apr. 01	Bank A/c (30,000 +4,000 + 1,000)	35,000	Mar. 31		Depreciation A/c	3,500
					Balance c/d	31,500
		35,000				35,000
2017			2018
Apr. 01	Balance b/d	31,500	Mar. 31		Depreciation A/c	3,150
			Mar. 31		Balance c/d	28,350
		31,500				31,500
2018			2018
Apr. 01	Balance b/d	28,350	Oct. 01		Depreciation A/c	1,418
					Bank A/c (Sale)	25,000
					Profit and Loss A/c (Loss on Sale)	1,932
		28,350				28,350

Working Note: Calculation of Profit or Loss on Sale

Particulars	Amount (₹)
Value of Machinery on Apr. 01, 2018	28,350
Less: Depreciation for 6 months	1,418
Value of Machinery on Oct. 01, 2018	26,932
Less: Sale Value	25,000
Loss on Sale	1,932