Question

On 1st April, 2015, a machinery was purchased for ₹ 20,000. On 1st October, 2016 another machine was purchased for ₹ 10,000 and on 1st April, 2017, one more machine was purchased for ₹ 5,000. The firm depreciates its machinery @ 10% p.a. on the Diminishing Balance Method.
What is the amount of Depreciation for the years ended 31st March, 2016; 2017 and 2018? What will be the balance in Machinery Account as on 31st March, 2018?

Answer 1

I. Calculation of Depreciation from April 01, 2015 to March 31, 2018

Depreciation Rate: 10% p.a. on Diminishing Balance Method

Year	Machinery	Date of Purchase	Value	No. of Months	Amt. of Dep.	Total Dep.
2015-16	M1	April 01, 2015	20,000	12	2,000	2,000
2016-17	M1	April 01, 2015	18,000 (20,000 – 2,000)	12	1,800
	M2	Oct. 01,2016	10,000	6	500	2,300
2017-18	M1	April 01, 2015	16,200 (18,000 – 1,800)	12	1,620
	M2	Oct. 01,2016	9,500	12	950
	M3	April 01, 2017	5,000	12	500	3,070

II. Balance in Machinery Account as on March 31, 2018 will be Rs 27,630

Working Notes: Preparation of Machinery Account

Machinery Account
Dr.					Cr.
Date	Particulars		Amount (Rs)	Date		Particulars					Amount (Rs)
2015				2016
April 01	Bank A/c (M1)		20,000	March 31		Depreciation A/c (M1)					2,000
				March 31		Balance c/d (M1)					18,000
			20,000								20,000
2016				2017
April 01	Balance b/d (M1)		18,000	March 31		Depreciation A/c
Oct. 01	Bank A/c (M2)		10,000			M1				1,800
						M2				500	2,300
				March 31		Balance c/d
						M1			16,200
						M2			9,500		25,700
			28,000								28,000
2017				2018
April 01	Balance b/d			March 31		Depreciation A/c
	M1	16,200				M1		1,620
	M2	9,500	25,700			M2		950
April 01	Bank A/c (M3)		5,000			M3		500			3,070
				March 31		Balance c/d
						M1	14,580
						M2	8,550
						M3	4,500				27,630
			30,700								30,700

Note: Since the question does not specify to prepare the Machinery Account, thus, it is optional to prepare this account.