Question

X Ltd. which closes its books of account every year on 31st March, purchased on 1st October, 2011 machinery costing ₹ 4,40,000. It purchased further machinery on 1st April, 2012 costing ₹ 5,20,000. On 30th June, 2013, the first machine was sold for ₹ 2,50,000 and on the same date a fresh machine was installed at a cost of ₹ 3,00,000. On 1st July 2014, the second machine purchased on 1st April 2012 was also sold for ₹ 3,25,000.
The company writes off depreciation at 10% p.a. on the Straight Line Method each year. Show the Machinery A/c, Depreciation A/c and Provision for Depreciation A/c for all the four years.

Answer 1

Machinery Account
Dr.					Cr.
Date	Particulars		Amount (Rs)	Date		Particulars		Amount (Rs)
2011				2012
Oct. 01	Bank A/c (M1)		4,40,000	Mar. 31		Balance c/d		4,40,000
			4,40,000					4,40,000
2012				2013
Apr. 01	Balance b/d		4,40,000	Mar. 31		Balance c/d
Apr. 01	Bank A/c (M2)		5,20,000			M1	4,40,000
						M2	5,20,000	9,60,000
			9,60,000					9,60,000
2013				2013
Apr. 01	Balance b/d			June 30		Provision for Depreciation A/c		77,000
	M1	4,40,000				Bank A/c (Sale of M1 )		2,50,000
	M2	5,20,000	9,60,000			Profit and Loss A/c (Loss on Sale of M1)		1,13,000
June 30	Bank A/c (M3)		3,00,000	2014
				Mar. 31		Balance c/d
						M2	5,20,000
						M3	3,00,000	8,20,000
			12,60,000					12,60,000
2014				2014
Apr. 01	Balance b/d			July 01		Provision for Depreciation A/c		1,17,000
	M2	5,20,000				Bank A/c (Sale of M2)		3,25,000
	M3	3,00,000	8,20,000			Profit and Loss A/c (Loss on Sale of M2)		78,000
				2015
				Mar. 31		Balance c/d (M3)		3,00,000
			8,20,000					8,20,000

Depreciation Account
Dr.				Cr.
Date	Particulars	Amount (Rs)	Date		Particulars	Amount (Rs)
2012			2012
Mar. 31	Provision for Depreciation A/c	22,000	Mar. 31		Profit & Loss A/c	22,000
		22,000				22,000
2013			2013
Mar. 31	Provision for Depreciation A/c	96,000	Mar. 31		Profit & Loss A/c	96,000
		96,000				96,000
2014			2014
Mar. 31	Provision for Depreciation A/c	85,500	Mar. 31		Profit & Loss A/c (74,500 + 11,000)	85,500
		85,500				85,500
2015			2015
Mar. 31	Provision for Depreciation A/c	43,000	Mar. 31		Profit & Loss A/c (30,000 + 13,000)	43,000
		43,000				43,000

Provision for Depreciation Account
Dr.			Cr.
Date	Particulars	Amount (Rs)		Date	Particulars		Amount (Rs)
2012				2012
Mar. 31	Balance c/d (M1)	22,000		Mar. 31	Depreciation A/c (M1) (for 6 months)		22,000
		22,000					22,000
2013				2012
Mar. 31	Balance c/d	1,18,000		Apr. 01	Balance b/d		22,000
				2013
				Mar. 31	Depreciation A/c
					M1	44,000
					M2	52,000	96,000
		1,18,000					1,18,000
2013				2013
June 30	Machinery A/c (M1) (22,000 + 44,000 + 11,000)	77,000		Apr. 01	Balance b/d		1,18,000
2014				June 30	Depreciation A/c (M1) (for 3 months)		11,000
Mar. 31	Balance c/d	1,26,500		2014
				Mar. 31	Depreciation A/c
					M2	52,000
					M3 (for 9 months)	22,500	74,500
		2,03,500					2,03,500
2014				2014
July 01	Machinery A/c (M2) (52,000 + 52,000 + 13,000)	1,17,000		Apr. 01	Balance b/d		1,26,500
2015				July 01	Depreciation A/c (M2) (for 3 months)		13,000
Mar. 31	Balance c/d (M3)	52,500		2015
				Mar. 31	Depreciation A/c (M3)		30,000
		1,69,500					1,69,500

Working Notes:

WN1: Calculation of Profit & Loss on Sale of M1

Particulars	Amount
Value of Machinery on Oct. 01, 2011	4,40,000
Less: Depreciation for 6 months	22,000
Value of Machinery on Apr. 01, 2012	4,18,000
Less: Depreciation	44,000
Value of Machinery on Apr. 01, 2013	3,74,000
Less: Depreciation for 3 months	11,000
Value of Machinery on June 30, 2013	3,63,000
Less: Sale Value	2,50,000
Loss on Sale	1,13,000

WN2: Calculation of Profit & Loss on Sale of M2

Particulars	Amount
Value of Machinery on Apr. 01, 2012	5,20,000
Less: Depreciation	52,000
Value of Machinery on Apr. 01, 2013	4,68,000
Less: Depreciation	52,000
Value of Machinery on Apr. 01, 2014	4,16,000
Less: Depreciation for 3 months	13,000
Value of Machinery on June 30, 2014	4,03,000
Less: Sale Value	3,25,000
Loss on Sale	78,000