Question

On 1st October, 2009, Raj & Co. purchased machinery worth ₹ 40,000. On 1st October, 2011, it buys additional machinery worth ₹ 10,000. On 30th September, 2012, half of the machinery purchased on 1st Oct., 2009, is sold for ₹ 8,200. The company writes off 10 per cent p.a. on the original cost. The accounts are closed every year on 31st March.
Show the Machinery Account for four years.

Answer 1

Machinery Account
Dr.					Cr.
Date	Particulars		Amount (Rs)	Date		Particulars		Amount (Rs)
2009				2010
Oct. 01	Bank A/c			Mar. 31		Depreciation A/c
	M1	20,000				M1 (for 6 months)	1,000
	M2	20,000	40,000			M2 (for 6 months)	1,000	2,000
						Balance c/d
						M1	19,000
						M2	19,000	38,000
			40,000					40,000
2010				2011
Apr. 01	Balance b/d			Mar. 31		Depreciation A/c
	M1	19,000				M1	2,000
	M2	19,000	38,000			M2	2,000	4,000
						Balance c/d
						M1	17,000
						M2	17,000	34,000
			38,000					38,000
2011				2012
Apr. 01	Balance b/d			Mar. 31		Depreciation A/c
	M1	17,000				M1	2,000
	M2	17,000	34,000			M2	2,000
Oct. 01	Bank A/c (M3)		10,000			M3 (for 6 months)	500	4,500
				Mar. 31		Balance c/d
						M1	15,000
						M2	15,000
						M3	9,500	39,500
			44,000					44,000
2012				2012
Apr. 01	Balance b/d			Sept. 30		Depreciation A/c (M1)		1,000
	M1	15,000				Bank A/c (Sale of M1)		8,200
	M2	15,000				Profit and Loss A/c (Loss on Sale of M1)		5,800
	M3	9,500	39,500	2013
				Mar.31		Depreciation A/c
						M2	2,000
						M3	1,000	3,000
						Balance c/d
						M2	13,000
						M3	8,500	21,500
			39,500					39,500

Working Note: Calculation of Profit or Loss on Sale of M1

Particulars	Amount
Value of Machinery on Apr. 01, 2012	15,000
Less: Depreciation for 6 months	1,000
Value of Machinery Sept. 30, 2012	14,000
Less: Sale Value	8,200
Loss on Sale	5,800

Note: In order to make easy calculation machinery purchased on October 01, 2009 has been divided into two parts i.e. M1 and M2

Thus, M1 represents the first part i.e. sold for Rs 8,200

M2 represents the second part, which remains in the business