Question

On 1st April 2008, a Company purchased 6 machines for ₹ 50,000 each. Depreciation at the rate of 10% p.a. is charged on Straight Line Method. The accounting year of the Company ends on 31st March and the depreciation is credited to a separate 'Provision for Depreciation Account'.
On 1st October, 2010, one machine was sold for ₹ 30,000 and on 1st April, 2011 a second machine was sold for ₹ 24,000.
You are required to prepare Machinery Account and Provision for Depreciation Account for four years ending 31st March, 2012.

Answer 1

Machinery Account
Dr.					Cr.
Date	Particulars		Amount (Rs)	Date		Particulars		Amount (Rs)
2008				2009
Apr. 01	Bank A/c			Mar. 31		Balance c/d
	M1	50,000				M1	50,000
	M2	50,000				M2	50,000
	M3	2,00,000	3,00,000			M3	2,00,000	3,00,000
			3,00,000					3,00,000
2009				2010
Apr. 01	Balance b/d			Mar. 31		Balance c/d
	M1	50,000				M1	50,000
	M2	50,000				M2	50,000
	M3	2,00,000	3,00,000			M3	2,00,000	3,00,000
			3,00,000					3,00,000
2010				2010
Apr. 01	Balance b/d			Oct. 01		Provision for Depreciation A/c		12,500
	M1	50,000				Bank A/c (Sale of M1)		30,000
	M2	50,000				Profit and Loss A/c (Loss on Sale of M1)		7,500
	M3	2,00,000	3,00,000	2011
				Mar. 31		Balance c/d
						M2	50,000
						M3	2,00,000	2,50,000
			3,00,000					3,00,000
2011				2011
Apr. 01	Balance b/d			Apr. 01		Provision for Depreciation A/c		15,000
	M2	50,000				Bank A/c (Sale of M2)		24,000
	M3	2,00,000	2,50,000			Profit and Loss A/c (Loss on Sale of M2)		11,000
				2012
				Mar. 31		Balance c/d (M3)		2,00,000
			2,50,000					2,50,000

Provision for Depreciation Account
Dr.				Cr.
Date	Particulars	Amount (Rs)	Date		Particulars			Amount (Rs)
2009			2009
Mar. 31	Balance c/d	30,000	Mar. 31		Depreciation A/c
					M1	5,000
					M2	5,000
					M3	20,000		30,000
		30,000						30,000
2010			2009
Mar. 31	Balance c/d	60,000	Apr. 01		Balance b/d			30,000
			2010
			Mar. 31		Depreciation A/c
					M1	5,000
					M2	5,000
					M3	20,000		30,000
		60,000						60,000
2010			2010
Oct. 01	Machinery A/c (M1) (5,000 + 5,000 + 2,500)	12,500	Apr. 01		Balance b/d			60,000
2011			Oct.01		Depreciation A/c (M1)			2,500
Mar. 31	Balance c/d	75,000	2011
			Mar. 31		Depreciation A/c
					M2		5,000
					M3		20,000	25,000
		87,500						87,500
2011			2011
Apr. 01	Machinery A/c (M2) (5,000 + 5,000 + 5,000)	15,000	Apr. 01		Balance b/d			75,000
2012			2012
Mar. 31	Balance c/d	80,000	Mar. 31		Depreciation A/c (M3)			20,000
		95,000						95,000

Working Notes:

WN1: Calculation of Profit & Loss on Sale of M1

Particulars	Amount
Value of Machinery on Apr. 01, 2008	50,000
Less: Depreciation	5,000
Value of Machinery on Apr. 01, 2009	45,000
Less: Depreciation	5,000
Value of Machinery on Apr. 01, 2010	40,000
Less: Depreciation for 6 months	2,500
Value of Machinery on Oct. 01, 2010	37,500
Less: Sale Value	30,000
Loss on Sale	7,500

WN2: Calculation of Profit & Loss on Sale of M2

Particulars	Amount
Value of Machinery on Apr. 01, 2008	50,000
Less: Depreciation	5,000
Value of Machinery on Apr. 01, 2009	45,000
Less: Depreciation	5,000
Value of Machinery on Apr. 01, 2010	40,000
Less: Depreciation	5,000
Value of Machinery on Apr. 01, 2011	35,000
Less: Sale Value	24,000
Loss on Sale	11,000

Note: For making calculation easy, Machinery purchased on April 01, 2008 has been divided into three i.e. M1, M2 and M3.

Thus, M1: Rs 50,000 (sold for Rs 30,000 on Oct. 01, 2010)

M2: Rs 50,000 (sold for Rs 24,000 on Apr. 01, 2011)
M3: Rs 2,00,000 (includes the cost of 4 machines)