Question

On 1st July 2015, ABC Ltd. purchase 4 machines for ₹ 80,000 each. The accounting year of the company ends on 31st March every year. Depreciation is provided at the rate of 15% p.a. on original cost.
On 1st April, 2017 one machine was sold for ₹ 50,000 and on 1st January, 2019 a second machine was sold for ₹ 40,000. Another machine with a higher capacity which cost ₹ 2,00,000 was purchased on 1st January, 2019.
You are required to show: (i) Machinery Account, (ii) Depreciation Account, and (iii) Provision for Depreciation Account for four years ending 31st March, 2019.

Answer 1

Machinery Account
Dr.				Cr.
Date	Particulars		Amount (₹)	Date	Particulars		Amount (₹)
2015				2016
July 01	Bank A/c			Mar. 31	Balance c/d
	M1	80,000			M1	80,000
	M2	80,000			M2	80,000
	M3	1,60,000	3,20,000		M3	1,60,000	3,20,000
			3,20,000				3,20,000
2016				2017
Apr. 01	Balance b/d			Mar. 31	Balance c/d
	M1	80,000			M1	80,000
	M2	80,000			M2	80,000
	M3	1,60,000	3,20,000		M3	1,60,000	3,20,000
			3,20,000				3,20,000
2017				2017
Apr. 01	Balance b/d			Apr. 01	Provision for Depreciation A/c		21,000
	M1	80,000		Apr. 01	Bank A/c (Sale of M1 )		50,000
	M2	80,000		Apr. 01	Profit and Loss A/c (Loss on Sale of M1)		9,000
	M3	1,60,000	3,20,000	2018
				Mar. 31	Balance c/d
					M2	80,000
					M3	1,60,000	2,40,000
			3,20,000				3,20,000
2018				2019
Apr. 01	Balance b/d			Jan. 01	Provision for Depreciation A/c		42,000
	M2	80,000		Jan. 01	Bank A/c (Sale of M2)		40,000
	M3	1,60,000	2,40,000	Mar. 31	Balance c/d
2019					M3	1,60,000
Jan. 01	Profit and Loss A/c (Profit on Sale of M2)		2,000		M4	2,00,000	3,60,000
Jan. 01	Bank A/c (M4)		2,00,000
			4,42,000				4,42,000

Depreciation Account
Dr.				Cr.
Date	Particulars	Amount (₹)	Date		Particulars	Amount (₹)
2016			2016
Mar.31	Provision for Depreciation A/c	36,000	Mar.31		Profit & Loss A/c	36,000
		36,000				36,000
2017			2017
Mar.31	Provision for Depreciation A/c	48,000	Mar.31		Profit & Loss A/c	48,000
		48,000				48,000
2018			2018
Mar.31	Provision for Depreciation A/c	36,000	Mar.31		Profit & Loss A/c	36,000
		36,000				36,000
2019			2019
Mar.31	Provision for Depreciation A/c	40,500	Mar.31		Profit & Loss A/c (31,500 + 9,000)	40,500
		40,500				40,500

Provision for Depreciation Account
Dr.			Cr.
Date	Particulars	Amount (₹)		Date	Particulars		Amount (₹)
2016				2016
Mar. 31	Balance c/d	36,000		Mar. 31	Depreciation A/c
					M1 (for 9 months)	9,000
					M2 (for 9 months)	9,000
					M3 (for 9 months)	18,000	36,000
		36,000					36,000
2017				2016
Mar. 31	Balance c/d	84,000		Apr. 01	Balance b/d		36,000
				2017
				Mar. 31	Depreciation A/c
					M1	12,000
					M2	12,000
					M3	24,000	48,000
		84,000					84,000
2017				2017
Apr. 01	Machinery A/c (9,000 + 12,000)	21,000		Apr. 01	Balance b/d		84,000
2018				2018
Mar. 31	Balance c/d	99,000		Mar. 31	Depreciation A/c
					M2	12,000
					M3	24,000	36,000
		1,20,000					1,20,000
2019				2018
Jan. 01	Machinery A/c (9,000 + 12,000 + 12,000 + 9,000)	42,000		Apr. 01	Balance b/d		99,000
Mar. 31	Balance c/d	97,500		2019
				Jan. 01	Depreciation A/c (M2)		9,000
				Mar. 31	Depreciation A/c
					M3	24,000
					M4 (for 3 months)	7,500	31,500
		1,39,500					1,39,500

Working Notes:

WN1: Calculation of Profit & Loss on Sale M1

Particulars	Amount
Value of Machinery on July 01, 2015	80,000
Less: Depreciation for 9 months	9,000
Value of Machinery on Apr. 01, 2016	71,000
Less: Depreciation	12,000
Value of Machinery on Apr. 01, 2017	59,000
Less: Sale Value	50,000
Loss on Sale	9,000

WN2: Calculation of Profit & Loss on Sale of M2

Particulars	Amount
Value of Machinery on July 01, 2015	80,000
Less: Depreciation for 9 months	9,000
Value of Machinery on Apr. 01, 2016	71,000
Less: Depreciation	12,000
Value of Machinery on Apr. 01, 2017	59,000
Less: Depreciation	12,000
Value of Machinery on Apr. 01, 2018	47,000
Less: Depreciation for 9 months	9,000
Value of Machinery on Jan. 01, 2019	38,000
Less: Sale Value	40,000
Profit on Sale	2,000

Note: In order to make easy calculation, machinery purchased on July 01, 2015 has been divided into three parts i.e. M1, M2 and M3.

Thus, M1: Rs 80,000 (sold for Rs 50,000 on Apr. 01, 2017)

M2: Rs 80,000 (sold for Rs 40,000 on Jan. 01, 2019)
M3: Rs 1,60,000 (includes the cost of 2 machines)