Question

On April 1, 2000, Bajrang Marbles purchased a Machine for Rs 2,80,000 and spent Rs 10,000 on its carriage and Rs 10,000 on its installation. It is estimated that its working life is 10 years and after 10 years its scrap value will be Rs 20,000.

(a) Prepare Machine account and Depreciation account for the first four years by providing depreciation on the straight-line method. Accounts are closed on March 31 st every year.

(b) Prepare Machine account, Depreciation account and Provision for depreciation account (or accumulated depreciation account) for the first four years by providing depreciation using the straight-line method. Accounts are closed on March 31 st every year.

Answer 1

Answer (a)

Dr Machinery Account Cr
$\begin{array}{cccccccc}\text{Date}& \text{Particulars}& \text{JF}& \text{Amt.(Rs)}& \text{Date}& \text{Particulars}& \text{JF}& \text{Amt.(Rs)}\\ 2000& & & & 2001& & & \\ \text{Apr 1}& \text{Bank A/c}& & & \text{Mar 31}& \text{Depreciation A/c}& & 28,000\\ & (2,80,000+& & 3,00,000& & & & \\ & 10,000+10,000)& & & & & & \\ & & & & \text{Mar 31}& \text{Balance c/d}& & 2,72,000\\ & & & \underset{–}{\overline{3,00,000}}& & & & \underset{–}{\overline{3,00,000}}\\ 2001& & & & 2002& & & \\ \text{Apr 1}& \text{Balance b/d}& & 2,72,000& \text{Mar 31}& \text{Depreciation A/c}& & 28,000\\ & & & & \text{Mar 31}& \text{Balance c/d}& & 2,44,000\\ & & & \underset{–}{\overline{2,72,000}}& & & & \underset{–}{\overline{2,72,000}}\\ 2002& & & & 2003& & & \\ \text{Apr 1}& \text{Balance b/d}& & 2,44,000& \text{Mar 31}& \text{Depreciation A/c}& & 28,000\\ & & & & \text{Mar 31}& \text{Balance c/d}& & 2,16,000\\ & & & \underset{–}{\overline{2,44,000}}& & & & \underset{–}{\overline{2,44,000}}\\ 2003& & & & 2004& & & \\ \text{Apr 1}& \text{Balance b/d}& & 2,16,000& \text{Mar 31}& \text{Depreciation A/c}& & 28,000\\ & & & & \text{Mar 31}& \text{Balance c/d}& & 1,88,000\\ & & & \underset{–}{\overline{2,16,000}}& & & & \underset{–}{\overline{2,16,000}}\end{array}$

Working Note

Computation of Depreciation = $\frac{\text{Cost of Machine - Scrap}}{\text{No of years}}$

Depreciation = $\frac{(2,80,000+10,000+10,000)-20,000}{10}=Rs.28,000$

Dr Depreciation Account Cr
$\begin{array}{cccccccc}\text{Date}& \text{Particulars}& \text{JF}& \text{Amt.(Rs)}& \text{Date}& \text{Particulars}& \text{JF}& \text{Amt.(Rs)}\\ 2001& & & & 2001& & & \\ \text{Mar 31}& \text{Machinery A/c}& & 28,000& \text{Mar 31}& \text{Profit \& Loss A/c}& & 28,000\\ & & & \underset{–}{\overline{28,000}}& & & & \underset{–}{\overline{28,000}}\\ 2002& & & & 2002& & & \\ \text{Mar 31}& \text{Machinery A/c}& & 28,000& \text{Mar 31}& \text{Profit \& Loss A/c}& & 28,000\\ & & & \underset{–}{\overline{28,000}}& & & & \underset{–}{\overline{28,000}}\\ 2003& & & & 2003& & & \\ \text{Mar 31}& \text{Machinery A/c}& & 28,000& \text{Mar 31}& \text{Profit \& Loss A/c}& & 28,000\\ & & & \underset{–}{\overline{28,000}}& & & & \underset{–}{\overline{28,000}}\\ 2004& & & & 2004& & & \\ \text{Mar 31}& \text{Machinery A/c}& & 28,000& \text{Mar 31}& \text{Profit \& Loss A/c}& & 28,000\\ & & & \underset{–}{\overline{28,000}}& & & & \underset{–}{\overline{28,000}}\end{array}$

(b)

Dr Machinery Account Cr
$\begin{array}{cccccccc}\text{Date}& \text{Particulars}& \text{JF}& \text{Amt.(Rs)}& \text{Date}& \text{Particulars}& \text{JF}& \text{Amt.(Rs)}\\ 2000& & & & 2001& & & \\ \text{Apr 1}& \text{Bank A/c}& & 3,00,000& \text{Mar 31}& \text{Balance c/d}& & 3,00,000\\ & & & \underset{–}{\overline{3,00,000}}& & & & \underset{–}{\overline{3,00,000}}\\ 2001& & & & 2002& & & \\ \text{Apr 1}& \text{Balance b/d}& & 3,00,000& \text{Mar 31}& \text{Balance c/d}& & 3,00,000\\ & & & \underset{–}{\overline{3,00,000}}& & & & \underset{–}{\overline{3,00,000}}\\ 2002& & & & 2003& & & \\ \text{Apr 1}& \text{Balance b/d}& & 3,00,000& \text{Mar 31}& \text{Balance c/d}& & 3,00,000\\ & & & \underset{–}{\overline{3,00,000}}& & & & \underset{–}{\overline{3,00,000}}\\ 2003& & & & 2004& & & \\ \text{Apr 1}& \text{Balance b/d}& & 3,00,000& \text{Mar 31}& \text{Balance c/d}& & 3,00,000\\ & & & \underset{–}{\overline{3,00,000}}& & & & \underset{–}{\overline{3,00,000}}\end{array}$

Dr DepreciationAccount Cr
$\begin{array}{cccccccc}\text{Date}& \text{Particulars}& \text{JF}& \text{Amt.(Rs)}& \text{Date}& \text{Particulars}& \text{JF}& \text{Amt.(Rs)}\\ 2001& & & & 2001& & & \\ \text{Mar 31}& \text{Provision for}& & & \text{Mar 31}& \text{Profit \&}& & \\ & \text{Depreciation A/c}& & 28,000& & \text{Loss A/c}& & 28,000\\ & & & \underset{–}{\overline{28,000}}& & & & \underset{–}{\overline{28,000}}\\ 2002& & & & 2002& & & \\ \text{Mar 31}& \text{Provision for}& & & \text{Mar 31}& \text{Profit \&}& & \\ & \text{Depreciation A/c}& & 28,000& & \text{Loss A/c}& & 28,000\\ & & & \underset{–}{\overline{28,000}}& & & & \underset{–}{\overline{28,000}}\\ 2003& & & & 2003& & & \\ \text{Mar 31}& \text{Provision for}& & & \text{Mar 31}& \text{Profit \&}& & \\ & \text{Depreciation A/c}& & 28,000& & \text{Loss A/c}& & 28,000\\ & & & \underset{–}{\overline{28,000}}& & & & \underset{–}{\overline{28,000}}\\ 2004& & & & 2004& & & \\ \text{Mar 31}& \text{Provision for}& & & \text{Mar 31}& \text{Profit \&}& & \\ & \text{Depreciation A/c}& & 28,000& & \text{Loss A/c}& & 28,000\\ & & & \underset{–}{\overline{28,000}}& & & & \underset{–}{\overline{28,000}}\end{array}$

Dr Provision for Depreciation Account Cr
$\begin{array}{cccccccc}\text{Date}& \text{Particulars}& \text{JF}& \text{Amt.(Rs)}& \text{Date}& \text{Particulars}& \text{JF}& \text{Amt.(Rs)}\\ 2001& & & & 2001& & & \\ \text{Mar 31}& \text{Balance c/d}& & 28,000& \text{Mar 31}& \text{Depreciation A/c}& & 28,000\\ & & & \underset{–}{\overline{28,000}}& & & & \underset{–}{\overline{28,000}}\\ 2002& & & & 2001& & & \\ \text{Mar 31}& \text{Balance c/d}& & 56,000& \text{Apr 1}& \text{Balance b/d}& & 28,000\\ & & & & 2002& & & \\ & & & & \text{Mar 31}& \text{Depreciation A/c}& & 28,000\\ & & & \underset{–}{\overline{56,000}}& & & & \underset{–}{\overline{56,000}}\\ 2003& & & & 2002& & & \\ \text{Mar 31}& \text{Balance c/d}& & 84,000& \text{Apr 1}& \text{Balance b/d}& & 56,000\\ & & & & 2003& & & \\ & & & & \text{Mar 31}& \text{Depreciation A/c}& & 28,000\\ & & & \underset{–}{\overline{84,000}}& & & & \underset{–}{\overline{84,000}}\\ 2004& & & & 2003& & & \\ \text{Mar 31}& \text{Balance c/d}& & 1,12,000& \text{Apr 1}& \text{Balance b/d}& & 84,000\\ & & & & 2004& & & \\ & & & & \text{Mar 31}& \text{Depreciation A/c}& & 28,000\\ & & & \underset{–}{\overline{1,12,000}}& & & & \underset{–}{\overline{1,12,000}}\end{array}$