Question

A machine was purchased on 1st April, 2015 for Rs. 10,00,000. On 1st October 2015, another machine was purchased for Rs. 6,00,000. Estimated scrap values were Rs. 40,000 and Rs. 20,000 respectively. Depreciation is to be provided @ 10 % per annum on the machines under the reducing balance system.

(i) Show the machinery account for the year ended 31st March 2016 and 2017.

(ii) Show how the machinery account will appear in the balance sheet as at 31st March, 2017.

Answer 1

$\begin{array}{cccccccc}\text{Dr}& & & & \text{Machinery Account}& & & \text{Cr}\end{array}\begin{array}{cccccccccccc}\text{Date}& \text{Particulars}& & \text{JF}& \text{Amt. (Rs)}& \text{Date}& \text{Particulars}& & \text{JF}& \text{Amt. (Rs)}& & \\ 2015& & & & & 2016& & & & & & \\ \text{Apr 1}& \text{Bank A/c (Mach A)}& & & 10,00,000& \text{Mar 31}& \text{Depreciation A/c}& & & & & \\ \text{Oct 1}& \text{Bank A/c (Mach B)}& & & 6,00,000& & \text{Mach A}& 1,00,000& & & & \\ & & & & & & \text{Mach B}& \underset{–}{30,000}& & 1,30,000& & \\ & & & & & \text{Mar 31}& \text{Balance c/d}& & & & & \\ & & & & & & \text{Mach A}& 9,00,000& & & & \\ & & & & & & \text{Mach B}& \underset{–}{5,70,000}& & 14,70,000& & \\ & & & & \overline{\underset{–}{\underset{–}{16,00,000}}}& & & & & \overline{\underset{–}{\underset{–}{16,00,000}}}& & \\ 2016& & & & & 2017& & & & & & \\ \text{Apr 1}& \text{Balance b/d}& & & & \text{Mar 31}& \text{Depreciation A/c (WN)}& & & & & \\ & \text{Mach A}& 9,00,000& & & & \text{Mach A}& 90,000& & & & \\ & \text{Mach B}& \underset{–}{5,70,000}& & 14,70,000& & \text{Mach B}& \underset{–}{57,000}& & 1,47,000& & \\ & & & & & \text{Mar 31}& \text{Balance c/d}& & & & & \\ & & & & & & \text{Mach A}& 8,10,000& & & & \\ & & & & & & \text{Mach B}& \underset{–}{5,13,000}& & 13,23,000& & \\ & & & & \overline{\underset{–}{\underset{–}{14,70,000}}}& & & & & \overline{\underset{–}{\underset{–}{14,70,000}}}& & \\ 2017& & & & & & & & & & & \\ \text{Apr 1}& \text{Balance b/d}& & & & & & & & & & \\ & \text{Mach A}& 8,10,000& & & & & & & & & \\ & \text{Mach B}& \underset{–}{5,13,000}& & \text{13,23,000}& & & & & & & \\ & & & & \overline{\underset{–}{\underset{–}{13,23,000}}}& & & & & & & \end{array}$

Working Note

Table showing calculation of depreciation on machinery

$\begin{array}{cccc}\text{Machinery}& \text{1st}& \text{2nd}& \text{Total}\\ \text{Date of Acquistion}& \text{1st April, 2015}& \text{1st October, 2015}& \text{Depreciation}\\ \text{Cost}& 10,00,000& 6,00,000& 1,30,000\\ \text{(-)Depreciation for 2015-16 @ 10 \%}& 1,00,000& 30,000\ast & \\ \text{per annum}& & & \\ \text{WDV (or book value) on 1st April, 2016}& 9,00,000& 5,70,000& 1,47,000\\ \text{(-)Depreciation for 2016-17 @ 10 \%}& 90,000& 57,000\ast & \\ \text{per annum}& & & \\ \text{WDV on 1st April, 2017}& 8,10,000& 5,13,000& \end{array}$

Depreciation for half year, i.e., 6,00,000 $\times \frac{10}{100}\times \frac{6}{12}=30,000$

(ii) Balance Sheet (Extract) as at 31st March, 2017

$\begin{array}{ccccc}\text{Capital \& Liabilities}& \text{Amt Rs.}& \text{Assets}& & \text{Amt Rs}.\\ & & \text{Machinery}& & \\ & & \text{A}& 8,00,000& \\ & & \text{B}& \underset{–}{5,13,000}& 13,23,000\end{array}$

Note: In balance sheet, the balance of machinery account as on 31st March, 2017 will be shown.