Question

The following balances appear in the books of M/s Amrit:

		₹
1st April, 2004	Machinery A/c	60,000
1st April, 2004	Provision for depreciation A/c	36,000

On 1st April, 2004, they decided to dispose off a machinery for ₹ 8,400 which was purchased on 1st April, 2000 for ₹ 16,000.
You are required to prepare Machinery A/c, Provision for Depreciation A/c and Machinery Disposal A/c for 2004-05. Depreciation was charged at 10% p.a on original cost method.

Answer 1

Machinery Account
Dr.				Cr.
Date	Particulars	Amount (Rs)	Date		Particulars	Amount (Rs)
2004			2004
Apr. 01	Balance b/d	60,000	Apr. 01		Machinery Disposal A/c	16,000
			2005
			Mar. 31		Balance c/d	44,000
		60,000				60,000

Provision for Depreciation Account
Dr.			Cr.
Date	Particulars	Amount (Rs)		Date	Particulars	Amount (Rs)
2004				2004
Apr. 01	Machinery Disposal A/c (1,600 × 4)	6,400		Apr. 01	Balance b/d	36,000
2005				2005
Mar. 31	Balance c/d	34,000		Mar. 31	Depreciation A/c (WN2)	4,400
		40,400				40,400

Machinery Disposal Account
Dr.				Cr.
Date	Particulars	Amount (Rs)	Date		Particulars	Amount (Rs)
2004			2004
Apr. 01	Machinery A/c	16,000	Apr. 01		Provision for Depreciation A/c	6,400
			Apr. 01		Bank A/c (Sale)	8,400
			Apr. 01		Profit and Loss A/c (Loss on Sale)	1,200
		16,000				16,000

Working Notes:

WN1: Calculation of Profit & Loss on Sale

Particulars	Amount
Value of Furniture on Apr. 01, 2004	16,000
Less: Depreciation for 4 years @ 10% p.a.	6,400
Value of Furniture on Apr. 01, 2004	9,600
Less: Sale Value	8,400
Loss on Sale	1,200

WN2: Calculation of Depreciation on remaining value of Machinery