Question

Atul Traders, Ratnagiri purchased machinery for Rs 1,47,000 on 1st April 2008 and spent Rs 3,000 an its fixation and erection. In the same year on 1st october, additional machinery costing Rs 50,000 was purchased. On 1st October 2010 the machinery purchased on 1st october 2008 was sold for Rs 35,000.
Depreciation was provided annually on 31st March @ 10% p.a. on Reducing Balance Method. Prepare Machinery Account and Depreciation Account for 3 years

Answer 1

Machinery Account
Dr.	Cr.
Date	Particulars		Amount (Rs)	Date	Particulars		Amount (Rs)
2008				2009
Apr 1	Bank A/c (M1)(1,47,000+3,000)		1,50,000	Mar 31	Depreciation A/c
Oct 1	Bank A/c (M2)		50,000		M1	15,000
					M2 (for 6 months)	2,500	17,500
				Mar 31	Balance c/d
					M1 (1,50,000 - 15,000)	1,35,000
					M2 (50,000 - 2,500)	47,500	1,82,500
			2,00,000				2,00,000
2009				2010
Apr 1	Balance b/d			Mar 31	Depreciation A/c
	M1	1,35,000			M1	13,500
	M2	47,500	1,82,500		M2	4,750	18,250
				Mar 31	Balance c/d
					M1 (1,35,000 - 13,500)	1,21,500
					M2 (47,500 - 4,750)	42,750	1,64,250
			1,82,500				1,82,500
2010				2010
Apr 1	Balance b/d			Oct1	Depreciation A/c M2 (for 6 months)		2,138
	M1	1,21,500		Oct1	Bank A/c		35,000
	M2	42,750	1,64,250	Oct1	Profit & Loss A/c (loss on sale)		5,612
				2011
				Mar 31	Depreciation A/c M1		12,150
				Mar 31	Balance c/d M1 (1,21,500-12,150)		1,09,350
			1,64,250				1,64,250

Depreciation Account
Dr.					Cr.
Date	Particulars	Amount (Rs)	Date	Particulars	Amount (Rs)
2009			2009
Mar 31	Machinery A/c	17,500	Mar 31	Profit & Loss A/c	17,500
		17,500			17,500
2010			2010
Mar 31	Machinery A/c	18,250	Mar 31	Profit & Loss A/c	18,250
		18,250			18,250
2011			2011
Oct 1	Machinery A/c (on M2)	2,138	Mar 31	Profit & Loss A/c	14,288
Mar 3	Machinery A/c(on M1)	12,150
		14,288			14,288

Working Notes: Calculation of Profit or Loss on Sale

Particulars	Amount
Value of Machinery as on Apr.01, 2010	42,750
Less: Depreciation for 6 months	(2,138)
Value of Machinery as on Oct. 01, 2010	40,612
Less: Sale Value	(35,000)
Loss on Sale	5,612