Question : On October 1, 2000, a Truck was purchased for Rs $8, 00, 000$ by Laxmi Transport Ltd. Depreciation was provided at $15 %$ per annum on the diminishing balance basis on this truck. On December 31, 2003, this truck was sold for Rs $5, 00, 000$ . Accounts are closed on 31st March every year. Prepare a Truck account for the four years.

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Solution

Answer :
Journal Entries
Date Particulars LF Amt. (Dr) Amt. (Cr)
2001
Jul 1
Machinery A/c Dr
To Sundry Creditor's A/c
To Bank A/c
(Being machinery purchased for Rs $2, 00, 000$ and installation charges of Rs $25, 000$ paid through cheque)
$2, 25, 000$
$2, 00, 000$
$25, 000$
Dec 31 Depreciation A/c Dr
To Machinery A/c (Being depreciation charged on machinery for six months)
$20, 500$ $20, 500$
Dec 31 Profit and Loss A/c Dr
To Depreciation A/c (Being depreciation charged on machinery transferred to Profit and Loss Account)
$20, 500$ $20, 500$
2002 Dec 31 Depreciation A/c
To Machinery A/c Dr
(Being depreciation charged on Machinery)
$41, 000$ $41, 000$
Dec 31 Profit and Loss A/c Dr
To Depreciation A/c (Being depreciation charged on machinery transferred to Profit and Loss Account)
$41, 000$ $41, 000$
2003 Dec 31 Depreciation A/c Dr
To Machinery A/c
(Being depreciation charged on machinery)
$41, 000$
$41, 000$
Dec 31 Profit and Loss A/c Dr
To Depreciation A/c
(Being depreciation charged on machinery transferred to Profit and Loss Account)
$41, 000$ $41, 000$

Dr Machinery Account Cr
Date Particulars JF Amt.(Rs) Date Particulars JF Amt. (Rs)
2001 Jul 1 To Sundry Creditor's A/c $2, 00, 000$ 2001 Dec 31 By Depreciation A/c $20, 500$
Jul 1 To Bank A/c $25, 000$ Dec 31 By Balance c/d $2, 04, 500$
$2, 25, 000$ $2, 25, 000$
2002 Jan 1 To Balance b/d $2, 04, 500$ 2002 Dec 31 By Depreciation A/c $41, 000$

Dec 31 By Balance c/d $1, 63, 500$
$2, 04, 500$ $2, 04, 500$
2003 Jan 1 To Balance b/d $1, 63, 500$ 2003 Dec 31 By Depreciation A/c $41, 000$
Dec 31 By Balance c/d $1, 22, 500$
$1, 63, 500$ $1, 63, 500$

Dr Depreciation Account Cr
Date Particulars JF Amt. (Rs) Date Particulars JF Amt. (Rs)
2001 Dec 31 To Machinery A/c $20, 500$ 2001 Dec 31 By Profit & Loss A/c $20, 500$
$20, 500$ $20, 500$
2002 Dec 31 To Machinery A/c $41, 000$ 2002 Dec 31 By Profit & Loss A/c $41, 000$
$41, 000$ $41, 000$
2003 Dec 31 To Machiery A/c $41, 000$ 2003 Dec 31 By Profit & Loss A/c $41, 000$
$41, 000$ $41, 000$

Working Note
Computation of Depreciation to be charged Annually
Dep = $[\frac{C o s t o f M a c h i n e - S c r a p}{N o o f y e a r s (E f f e c t i v e L i f e)}$
= $\frac{2, 25, 000 - 20, 000}{5}$ = $R s .41, 000$

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Date	Particulars	LF	Amt. (Dr)	Amt. (Cr)
2001 Jul 1	Machinery A/c Dr To Sundry Creditor's A/c To Bank A/c (Being machinery purchased for Rs $2, 00, 000$ and installation charges of Rs $25, 000$ paid through cheque)		$2, 25, 000$	$2, 00, 000$ $25, 000$
Dec 31	Depreciation A/c Dr To Machinery A/c (Being depreciation charged on machinery for six months)		$20, 500$	$20, 500$
Dec 31	Profit and Loss A/c Dr To Depreciation A/c (Being depreciation charged on machinery transferred to Profit and Loss Account)		$20, 500$	$20, 500$
2002 Dec 31	Depreciation A/c To Machinery A/c Dr (Being depreciation charged on Machinery)		$41, 000$	$41, 000$
Dec 31	Profit and Loss A/c Dr To Depreciation A/c (Being depreciation charged on machinery transferred to Profit and Loss Account)		$41, 000$	$41, 000$
2003 Dec 31	Depreciation A/c Dr To Machinery A/c (Being depreciation charged on machinery)		$41, 000$	$41, 000$
Dec 31	Profit and Loss A/c Dr To Depreciation A/c (Being depreciation charged on machinery transferred to Profit and Loss Account)		$41, 000$	$41, 000$

Date	Particulars	JF	Amt.(Rs)	Date	Particulars	JF	Amt. (Rs)
2001 Jul 1	To Sundry Creditor's A/c		$2, 00, 000$	2001 Dec 31	By Depreciation A/c		$20, 500$
Jul 1	To Bank A/c		$25, 000$	Dec 31	By Balance c/d		$2, 04, 500$
			$2, 25, 000$				$2, 25, 000$
2002 Jan 1	To Balance b/d		$2, 04, 500$	2002 Dec 31	By Depreciation A/c		$41, 000$
				Dec 31	By Balance c/d		$1, 63, 500$
			$2, 04, 500$				$2, 04, 500$
2003 Jan 1	To Balance b/d		$1, 63, 500$	2003 Dec 31	By Depreciation A/c		$41, 000$
				Dec 31	By Balance c/d		$1, 22, 500$
			$1, 63, 500$				$1, 63, 500$