Question

XYZ & Company, Jalgoan purchased a Building for Rs 8,00,000 on 1st July 2007. On 1st April 2008 an extension was made to the above Building by spending Rs 4,00,000. On 1st october 2009 half of the Building was sold for Rs 5,60,000 and brokerage at 2% of the selling price was paid
Depreciation in charged on 31st march every year @ 10% p.a. under diminishing balance method.
Prepare Building Account and Depreciation Account for 2007-08 2008-09 and 2009-10.

Answer 1

Building Account
Dr.	Cr.
Date		Particulars		Amount (Rs)	Date	Particulars		Amount (Rs)
2007					2008
Jul 1		Bank A/c (B1)		8,00,000	Mar 31	Depreciation A/c (for 9 months)		60,000
					Mar 31	Balance c/d (8,00,000-60,000)		7,40,000
				8,00,000				8,00,000
2008					2009
Apr 1		Balance b/d		7,40,000	Mar 31	Depreciation A/c
Apr 1		Bank A/c (B2)		4,00,000		B1	74,000
						B2	40,000	1,14,000
					Mar 31	Balance c/d
						B1 (7,40,000 - 74,000)	6,66,000
						B2 (4,00,000 - 40,000)	3,60,000	10,26,000
				11,40,000				11,40,000
2009					2009
Apr 1		Balance b/d			Oct 1	Depreciation A/c		25,650
		B1	6,66,000			Bank A/c (5,60,000 - 2% of 5,60,000)		5,48,800
		B2	3,60,000	10,26,000	2010
					Mar 31	Depreciation A/c		51,300*
Oct 1		Profit & Loss A/c (Profit on sale)		61,450	Mar 31	Balance c/d (5,13,000 - 51,300)		4,61,700
				10,87,450				10,87,450

Depreciation Account
Dr.							Cr.
Date		Particulars	Amount (Rs)	Date	Particulars	Amount (Rs)
2008				2008
Mar 31		Building A/c	60,000	Mar 31	Profit & Loss A/c	60,000
			60,000			60,000
2009				2009
Mar 31		Building A/c	1,14,000	Mar 31	Profit & Loss A/c	1,14,000
			1,14,000			1,14,000
2010				2010
Oct 1		Building A/c	25,650	Mar 31	Profit & Loss A/c	76,950
Mar 31		Building A/c	51,300
			76,950			76,950

Working Notes: Calculation of Profit or Loss on Sale

Particulars	Amount
Value of Building as on Apr.01, 2009	5,13,000
Less: Depreciation for 6 months	(25,650)
Value of Building as on Oct. 01, 2009	4,87,350
Less: Sale Value (after deducting 2% brokerage)	(5,48,800)
Profit on Sale	(61,450)

*Depreciation on remaining value of Building (10,26,000-5,13,000) = 5, 13,000 × 10% = Rs 51,300