Question

A company purchased second-hand machinery on 1st May, 2009 for ₹ 5,85,000 and immediately spent ₹ 15,000 on its erection. On 1st October, 2010, it purchased another machine for ₹ 4,00,000. On 31st July, 2011, it sold off the first machine for ₹ 2,50,000 and bought another for ₹ 4,20,000. On 1st November, 2012, the second machine was also sold off for ₹ 3,00,000. Depreciation was provided on the machinery @ 15% p.a. on Equal Instalment Method.
Show the Machinery Account, Depreciation Account and Provision for Depreciation Account assuming that the books are closed on 31st March every year.

Answer 1

Machinery Account
Dr.					Cr.
Date	Particulars		Amount (Rs)	Date		Particulars		Amount (Rs)
2009				2010
May 01	Bank A/c (M1) (5,58,000 + 15,000)		6,00,000	Mar. 31		Balance c/d		6,00,000
			6,00,000					6,00,000
2010				2011
Apr. 01	Balance b/d		6,00,000	Mar. 31		Balance c/d
Oct. 01	Bank A/c (M2)		4,00,000			M1	6,00,000
						M2	4,00,000	10,00,000
			10,00,000					10,00,000
2011				2011
Apr. 01	Balance b/d			July 31		Provision for Depreciation A/c		2,02,500
	M1	6,00,000				Bank A/c (Sale of M1)		2,50,000
	M2	4,00,000	10,00,000			Profit and Loss A/c (Loss on Sale of M1)		1,47,500
July 31	Bank A/c (M3)		4,20,000	2012
				Mar. 31		Balance c/d
						M2	4,00,000
						M3	4,20,000	8,20,000
			14,20,000					14,20,000
2012				2012
Apr. 01	Balance b/d			Nov. 01		Provision for Depreciation A/c		1,25,000
	M2	4,00,000				Bank A/c (Sale of M2)		3,00,000
	M3	4,20,000	8,20,000	2013
Nov. 01	Profit and Loss A/c (Profit on Sale of M2)		25,000	Mar. 31		Balance c/d (M3)		4,20,000
			8,45,000					8,45,000

Depreciation Account
Dr.				Cr.
Date	Particulars	Amount (Rs)	Date		Particulars	Amount (Rs)
2010			2010
Mar. 31	Provision for Depreciation A/c	82,500	Mar. 31		Profit & Loss A/c	82,500
		82,500				82,500
2011			2011
Mar. 31	Provision for Depreciation A/c	1,20,000	Mar. 31		Profit & Loss A/c	1,20,000
		1,20,000				1,20,000
2012			2012
Mar. 31	Provision for Depreciation A/c	1,32,000	Mar. 31		Profit & Loss A/c (1,02,000 + 30,000)	1,32,000
		1,32,000				1,32,000
2013			2013
Mar. 31	Provision for Depreciation A/c	98,000	Mar. 31		Profit & Loss A/c (63,000 + 35,000)	98,000
		98,000				98,000

Provision for Depreciation Account
Dr.			Cr.
Date	Particulars	Amount (Rs)		Date	Particulars		Amount (Rs)
2010				2010
Mar. 31	Balance c/d	82,500		Mar. 31	Depreciation A/c (M1) (for 11 months)		82,500
		82,500					82,500
2011				2010
Mar. 31	Balance c/d	2,02,500		Apr. 01	Balance b/d		82,500
				2011
				Mar. 31	Depreciation A/c
					M1	90,000
					M2 (for 6 months)	30,000	1,20,000
		2,02,500					2,02,500
2011				2011
July 31	Machinery A/c (82,500 + 90,000 + 30,000)	2,02,500		Apr. 01	Balance b/d		2,02,500
2012				July 31	Depreciation A/c (M1) (for 4 months)		30,000
Mar. 31	Balance c/d	1,32,000		2012
				Mar. 31	Depreciation A/c
					M2	60,000
					M3 (for 8 months)	42,000	1,02,000
		3,34,500					3,34,500
2011				2012
Nov. 01	Machinery A/c (30,000 + 60,000 + 35,000)	1,25,000		Apr. 01	Balance b/d		1,32,000
2013				Nov. 01	Depreciation A/c (M2) (for 7 months)		35,000
Mar. 31	Balance c/d	1,05,000		2013
				Mar. 31	Depreciation A/c (M3)		63,000
		2,30,000					2,30,000

Working Notes:

WN1: Calculation of Profit & Loss on Sale of M1

Particulars	Amount
Value of Machinery on May 01, 2009	6,00,000
Less: Depreciation for 11 months	82,500
Value of Machinery on Apr. 01, 2010	5,17,500
Less: Depreciation	90,000
Value of Machinery on Apr. 01, 2011	4,27,500
Less: Depreciation for 4 months	30,000
Value of Machinery on July 31, 2011	3,97,500
Less: Sale Value	2,50,000
Loss on Sale	1,47,500

WN2: Calculation of Profit & Loss on Sale of M2

Particulars	Amount
Value of Machinery on Oct. 01, 2010	4,00,000
Less: Depreciation for 6 months	30,000
Value of Machinery on Apr. 01, 2011	3,70,000
Less: Depreciation	60,000
Value of Machinery on Apr. 01, 2012	3,10,000
Less: Depreciation for 7 months	35,000
Value of Machinery on Nov. 01, 2012	2,75,000
Less: Sale Value	3,00,000
Profit on Sale	25,000