Question

Kaushal Traders purchased a second-hand machinery on 1st April, 2015 for ₹ 23,000 and spent ₹ 2,000 on its repair. It was decided to depreciate the machinery @ 20% every year on 31st March at Diminishing Balance Method.
Prepare the Machinery Account from years ended 31st March, 2016 to 2018 and show Profit or Loss as it was sold on 31st March, 2018 for ₹ 10,800.

Answer 1

Books of Kaushal Traders Machinery Account
Dr.									Cr.
Date		Particulars	J.F.	Amount (Rs)	Date	Particulars	J.F.	Amount (Rs)
2015					2016
Apr.01		Bank (23,000 + 2,000)		25,000	Mar.31	Depreciation (25,000 × 20%)		5,000
					Mar.31	Balance c/d		20,000
				25,000				25,000
2016					2017
Apr.01		Balance b/d		20,000	Mar.31	Depreciation (20,000 × 20%)		4,000
						Balance c/d		16,000
				20,000				20,000
2017					2018
Apr.01		Balance b/d		16,000	Mar.31	Depreciation (16,000 × 20%)		3,200
					Mar.31	Bank		10,800
					Mar.31	Profit and Loss (Loss)		2,000
				16,000				16,000

Working Note:

(1) Calculation of profit or loss on sale of machine:

Particulars	Amount (Rs)
Book Value of machine on Apr. 01, 2017	16,000
Less: Depreciation for 2017 (16,000 × 20%)	(3,200)
Book Value of Machine on Mar. 31, 2018	12,800
Less: Sale Value	(10,800)
Loss on Sale	2,000