Question

Akshay purchased machinery worth Rs 20,000 on 1st April 2006. He charges depreciation @ 10% on Written Down Value Method on 31st March every year.
On 1st July 2008 he sold a part of the Machinery for Rs 2,000 The original cost of which on 1st April 2006 was Rs 4,000
Prepare Machinery Account for first four years and pass Journal entries for 3rd year i.c. 2008-09

Answer 1

Machinery Account
Dr.	Cr.
Date		Particulars	Amount (Rs)	Date	Particulars	Amount (Rs)
2006				2007
Apr 1		Bank A/c	20,000	Mar 31	Depreciation A/c	2,000
				Mar 31	Balance c/d	18,000
			20,000			20,000
2007				2008
Apr 1		Balance b/d	18,000	Mar 31	Depreciation A/c	1,800
				Mar 31	Balance c/d	16,200
			18,000			18,000
2008				2008
Apr1		Balance b/d	16,200	Jul 1	Depreciation A/c	81
				Jul 1	Bank A/c	2,000
				Jul 1	Profit & Loss A/c (loss on sale)	1,159
				2009
				Mar 31	Depreciation A/c	1,296*
				Mar 31	Balance c/d	11,664
			16,200			16,200
2009				2010
Apr 1		Balance b/d	11,664	Mar 31	Depreciation A/c	1,166
				Mar 31	Balance c/d (11,664 – 1,166)	10,498
			11,664			11,664

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
2008-09
Jul 1	Depreciation A/c	Dr.		81
	Bank A/c	Dr.		2,000
	Profit & Loss A/c	Dr.		1,159
	To Machinery A/c				3,240
	(Machinery sold)
Mar 31	Depreciation A/c	Dr.		1,296
	To Furniture A/c				1,296
	(Depreciation charged on furniture)
Mar 31	Profit & Loss A/c	Dr.		1,377
	To Depreciation A/c				1,377
	(Depreciation transferred to Profit and Loss A/c)

Working Notes: Calculation of Loss on Sale of Machinery

Particulars	Amount
Cost of Machine as on April 1, 2006	4,000
Less: Depreciation 2006-07	(400)
Value of Machine as on Mar 31, 2007	3,600
Less : Depreciation 2007-08	(360)
Value of Machine as on Mar 31, 2008	3,240
Less: Depreciation for 3 months	(81)
Value of Machine as on Jul. 01, 2008	3,159
Less: Sale Value	(2,000)
Loss on Sale	1,159

* Depreciation on remaining Machinery (16,200-3,240) = 12,960, × 10% = Rs 1,296