Question

On July 1, 2005 Pushpak Ltd. purchased a machinery for ₹ 5,70,000 and paid ₹ 30,000 for its overhauling and installation. Depreciation is provided @ 20% p.a. on Original Cost Method and the books are closed on 31st March every year. The machine was sold on 31st January 2008 for a sum of ₹ 1,60,000. You are required to show the Machinery Account and Provision for Depreciation Account for three years.

Answer 1

Machinery Account
Dr.			Cr.
Date	Particulars	Amount (Rs)		Date	Particulars	Amount (Rs)
2005				2006
July 01	Bank A/c (5,70,000 + 30,000)	6,00,000		Mar. 31	Balance c/d	6,00,000
		6,00,000				6,00,000
2006				2007
Apr. 01	Balance b/d	6,00,000		Mar. 31	Balance c/d	6,00,000
		6,00,000				6,00,000
2007				2008
Apr. 01	Balance b/d	6,00,000		Jan. 31	Provision for Depreciation A/c	3,10,000
					Bank A/c (Sale)	1,60,000
					Profit and Loss A/c (Loss on Sale)	1,30,000
		6,00,000				6,00,000

Provision for Depreciation Account
Dr.				Cr.
Date	Particulars	Amount (Rs)	Date		Particulars	Amount (Rs)
2006			2006
Mar. 31	Balance c/d	90,000	Mar. 31		Depreciation A/c (for 9 months)	90,000
		90,000				90,000
2007			2006
Mar. 31	Balance c/d	2,10,000	Apr. 01		Balance b/d	90,000
			2007
			Mar. 31		Depreciation A/c	1,20,000
		2,10,000				2,10,000
2008			2007
Jan. 31	Machinery A/c	3,10,000	Apr. 01		Balance b/d	2,10,000
			2008
			Jan. 31		Depreciation A/c (for 10 months)	1,00,000
		3,10,000				3,10,000

Working Note: Calculation of Profit & Loss on Sale

Particulars	Amount
Value of Machinery on July 01, 2005	6,00,000
Less: Depreciation for 9 Months	90,000
Value of Machinery on Apr. 01, 2006	5,10,000
Less: Depreciation	1,20,000
Value of Machinery on Apr. 01, 2007	3,90,000
Less: Depreciation for 10 Months	1,00,000
Value of Machinery on Jan. 31, 2008	2,90,000
Less: Sale Value	1,60,000
Loss on Sale	1,30,000