Question

Books of Mumbai Chemicals Ltd. showed the following balances on 1st April 2012:

Machinery A/c	₹ 10,00,000
Provision for Depreciation A/c	₹ 4,05,000

On 1st April, 2012, a machine which had a cost of ₹ 2,00,000 on 1st October, 2009 was sold for ₹ 80,000. The firm writes off depreciation @ 10% p.a. under the Reducing Balance Method and its accounts are made up on 31st March each year. You are required to prepare the Machinery A/c and Provision for Depreciation A/c for the year ending 31st March, 2013.

Answer 1

Machinery Account
Dr.			Cr.
Date	Particulars	Amount (Rs)		Date	Particulars	Amount (Rs)
2012				2012
Apr.01	Balance b/d (8,00,000 + 2,00,000)	10,00,000		Apr.01	Provision for Depreciation A/c	46,100
					Bank A/c (Sale )	80,000
					Profit and Loss A/c (Loss on Sale)	73,900
				2013
				Mar.31	Balance c/d	8,00,000
		10,00,000				10,00,000

Provision for Depreciation Account
Dr.				Cr.
Date	Particulars	Amount (Rs)	Date		Particulars		Amount (Rs)
2012			2012
Apr. 01	Machinery A/c	46,100	Apr. 01		Balance b/d		4,05,000
2013					M1	46,100
Mar. 31	Balance c/d	4,03,010			M2	3,28,900	4,05,000
			2013
			Mar. 31		Depreciation A/c (WN2)		44,110
		4,49,110					4,49,110

Working Notes:

WN1: Calculation of Profit & Loss on Sale

Particulars	Amount
Value of Machinery on Oct. 01, 2009	2,00,000
Less: Depreciation for 6 months	10,000
Value of Machinery on Apr. 01, 2010	1,90,000
Less: Depreciation	19,000
Value of Machinery on Apr. 01, 2011	1,71,000
Less: Depreciation	17,100
Value of Machinery on Apr. 01,2012	1,53,900
Less: Sale Value	80,000
Loss on Sale	73,900

WN2: Calculation of Depreciation on remaining value of Machinery