Chapter 11 - Depreciation

Question:1
Calculate the Amount of annual Depreciation and Rate of Depreciation under Straight Line Method SLM
from the following:
Purchased a second-hand machine for 96,000, spent 24,000 on its cartage, repairs and installation, estimated useful life of machine 4 years.
Estimated residual value 72,000.
Solution:
Cost of Machine− Scrap Value of Machine
Life in Years
Amount of Annual Depreciation =
1, 20, 000− 72, 000
4
= = Rs 12,000
Amount of Depreciation
Cost of Machine
Rate of Depreciation = × 100
12, 000

= 1, 20, 000 × 100 = 10%p.a.

60
Question:2
​On 1st April, 2016, X Ltd. purchased a machine costing 4,00,000 and spent 50,000 on its installation. The estimated life of the machinery is 10 years,
after which its residual value will be 50,000 only. Find the amount of annual depreciation according to the Fixed Instalment Method and prepare
Machinery Account for the first three years. The books are closed on 31st March every year.
Solution:

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Book of X Ltd.
Machinery Account
Dr. Cr.
Amount Amount
Date Particulars J.F. Date Particulars J.F.
( ) ( )
2016 2017
April 01 Bank 4,00,000 Mar.31 Depreciation 40,000
April 01

2017
Bank
ErectionExpense

April 01 Balance b/d

50,000
4,50,000
2018
4,10,000 Mar.31 Depreciation
ID
Balance c/d

Balance c/d
4,10,000
4,50,000

40,000
3,70,000
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4,10,000 4,10,000
2018 2019
April 01 Balance b/d 3,70,000 Mar.31 Depreciation 40,000
Balance c/d 3,30,000
3,70,000 3,70,000
YG

Calculation of Depreciation:

4, 00, 000+ 50, 000-50, 000(Scrap Value)

10 years
Depreciation p. a. = = 40, 000 p. a.
D

Question:3
On 1st April, 2015, furniture costing 55,000 was purchased. It is estimated that its life is 10 years at the end of which it will be sold for 5,000. Additions
are made on 1st April 2016 and 1st October, 2018 to the value of 9,500 and 8,400 Residualvalues 500and 400respectively
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. Show the Furniture Account for the first four years, if Depreciation is written off according to the Straight Line Method.
Solution:
Furniture Account
Dr. Cr.
ST

Amount Amount
Date Particulars J.F. Date Particulars J.F.
( ) ( )
2015 2016
April 01 Bank 55,000 March Depreciation 5,000
F1 31 F1
March Balance c/d 50,000
31 F1
55,000 55,000
2016 2017
April 01 Balance b/d 50,000 March Depreciation
F1 31
April 01 Bank 9,500 F1 5,000
F2
F2 900 5,900
March Balance c/d
31
F1 45,000
F2 8,600 53,600
59,500 59,500
2017 2018
 April 01 Balance b/d March Depreciation
31
F1 45,000 F1 5,000
F2 8,600 53,600 F2 900 5,900
March Balance c/d
31
F1 40,000
F2 7,700 47,700
53,600 53,600
2018 2019
April 01 Balance b/d March Depreciation
31
F1 40,000 F1 5,000
F2 7,700 47,700 F2 900
Oct. 01 Bank 8,400 F3 400
F3 6,300

March Balance c/d

31

60
F1 35,000
F2 6,800
F3 8,000 49,800
56,100 56,100

Working Notes:

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ID
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Question:4
From the following transactions of a concern, prepare the Machinery Account for the year ended 31st March, 2019:
1st April, 2018 :Purchased a second-hand machinery for 40,000
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1st April, 2018 :Spent 10,000 on repairs for making it serviceable.

30th September, 2018 :Purchased additional new machinery for 20,000.
31st December, 2018 :Repairs and renewal of machinery 3,000.
31st March, 2019 :Depreciate the machinery at 10% p.a.
Solution:
Machinery Account
Dr. Cr.
Amount Amount
D

Date Particulars J.F. Date Particular J.F.

( ) ( )
2018 2019
Apr.01 Bank 50,000 Mar.31 Depreciation
M1
U

Sept 30 Bank 20,000 M1 5,000

M2
M2 1,000
6months 6,000
ST

Mar.31 Balance c/d

M1 45,000
M2 19,000 64,000
6months
70,000 70,000

Note:

Repair and renewal made on December 31, 2018 will not be recorded in Machinery Account because, this repair was made after putting the Machinery
into use.

Question:5
An asset was purchased for 10,500 on 1st April, 2012. The scrap value was estimated to to be 500 at the end of asset's 10 years' life. Straight Line
Method of depreciation was used. The accounting year ends on 31st March every year. The asset was sold for 600 on 31st March, 2019. Calculate the
following.
i
The Depreciation expense for the year ended 31st March, 2013.
ii
The net book value of the asset on 31st March, 2017.
iii
The gain or loss on sale of the asset on 31st March, 2019.
Solution:
Asset Account
Dr. Cr.
Amount Amount
Date Particulars J.F. Date Particulars J.F.
( ) ( )
2012 2013
April Bank 10,500 Mar.31 Depreciation 1,000
01
Mar.31 Balance c/d 9,500
10,500 10,500
2013 2014
April Balance b/d 9,500 Mar.31 Depreciation 1,000
01
Mar.31 Balance c/d 8,500
9,500 9,500
2014 2015

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April Balance b/d 8,500 Mar.31 Depreciation 1,000
01
Mar.31 Balance c/d 7,500
8,500 8,500
2015 2016
April Balance b/d 7,500 Mar.31 Depreciation 1,000
01

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Mar.31 Balance c/d 6,500
7,500 7,500
2016 2017
April Balance b/d 6,500 Mar.31 Depreciation 1,000
01
Mar.31 Balance c/d 5,500
6,500 6,500
2017
April Balance b/d
01

2018
5,500
2018
5,500 Mar.31

Mar.31

2019
ID
Depreciation

Balance c/d
1,000

4,500
5,500
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April Balance b/d 4,500 Mar.31 Depreciation 1,000
01

Mar.31 Bank 600

Mar.31 Profit and Loss 2,900
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Loss
4,500 4,500

i Depreciation Expense for the year ended March 31, 2013 is Rs 1000

ii The Net Book Value of the asset on March 31, 2017 is Rs 5,500
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iii Loss on Sale of the asset on March 31, 2019 is Rs 2,900

Question:6
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On 1st April, 2015, A Ltd. purchased a machine for 2,40,000 and spent 10,000 on its erection. On 1st October, 2015 an additional machinery costing
1,00,000 was purchased. On 1st October, 2017, the machine purchased on 1st April, 2015 was sold for 1,43,000 and on the same date, a new machine
was purchased at cost of 2,00,000.
ST

Show the Machinery Account for the first four financial years after charging Depreciation at 5% p.a. by the Straight Line Method.
Solution:
Machinery Account
Dr. Cr.
Amount Amount
Date Particulars J.F. Date Particulars J.F.
( ) ( )
2015 2016
April 01 Bank 2,50,000 March 31 Depreciation
M1
Oct. 01 Bank 1,00,000 M1 12,500
M2
M2 2,500
6Months 15,000
March 31 Balance c/d
M1 2,37,500
M2 97,500 3,35,000
3,50,000 3,50,000
2016 2017
April 01 Balance b/d March 31 Depreciation
M1 2,37,500 M1 12,500
M2 97,500 3,35,000 M2 5,000 17,500
 March 31 Balance c/d
M1 2,25,000
M2 92,500 3,17,500
3,35,000 3,35,000
2017 2018
April 01 Balance b/d Oct. 01 Depreciation 6,250
for6months
M1 2,25,000 Oct. 01 Bank 1,43,000
M1sold
M2 92,500 3,17,500 Oct. 01 Profit and Loss 75,750
lossonsale
2017
July 01 Bank 2,00,000 March 31 Depreciation
M3
M2 5,000
M3 5,000
for6months 10,000
March 31 Balance c/d
M2 87,500
M3 1,95,000 2,82,500

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5,17,500 5,17,500
2018 2019
April 01 Balance b/d March 31 Depreciation
M2 87,500 M2 5,000
M3 1,95,000 2,82,500 M3 10,000 15,000
March 31 Balance c/d

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M2 82,500
M3 1,85,000 2,67,500
2,82,500 2,82,500

Working Notes:

1. Calculation of Deprecation
ID
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2. Calculation of profit or loss on sale of Machine 1

Amount
Particulars
( )
Book Value on April 01, 2017 2,25,000
Less: Deprecation for six month 6, 250
Book Value on Oct. 01, 2017 2,18,750
Less: Sale Proceeds 1, 43, 000
D

Loss on Sale of Machine 75,750

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Question:7
A Van was purchased on 1st April, 2016 for 60,000 and 5,000 was spent on its repair and registration. On 1st October, 2017 another van was
purchased for 70,000. On 1st April, 2018, the first van purchased on 1st April, 2016 was sold for 45,000 and a new van costing 1,70,000 was
purchased on the same date. Show the Van Account from 2016-17 to 2018-19 on the basis of Straight Line Method, if the rate of Depreciation charged is
ST

10% p.a. Assume that books are closed on 31st March every year.
Solution:
Van Account
Dr. Cr.
Amount Amount
Date Particulars J.F. Date Particulars J.F.
( ) ( )
2016 2017
April 01 Bank 65,000 March 31 Depreciation 6,500
I I
March 31 Balance c/d 58,500
I
65,000 65,000
2017 2018
April 01 Balance b/d 58,500 March 31 Depreciation
I
Oct. 01 Bank 70,000 I 6,500
II
II (for 6 3,500
month) 10,000
March 31 Balance c/d
I 52,000
 II 66,500 1,18,500
1,28,500 1,28,500
2018 2019
April 01 Balance b/d April 01 Bank 45,000
I
I 52,000 April 01 Profit and Loss (Loss on 7,000
Sale)
2018
II 66,500 1,18,500 March 31 Depreciation
April 01 Bank 1,70,000 II 7,000
III
III 17,000 24,000
March 31 Balance c/d
II 59,500
III 1,53,000 2,12,500
2,88,500 2,88,500

Working Notes

60
1. Calculation of Annual Depreciation

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2. Calculation of profit or loss on sale of Van
I

Particulars
Book Value on Apr. 01, 2018
Less: Sale of Van
Loss on Sale of Van
Amount
( )
52,000
45, 000
7,000
ID
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Question:8
On 1st April, 2015, Star Ltd. purchased 5 machines for 60,000 each. On 1st April, 2017, one of the machine was sold at a loss of 8,000. On 1st July,
2018, second machine was sold at a loss of 12,500. A new machine was purchased for 1,00,000 on 1st October, 2018.
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Prepare Machinery Account for 4 years, assuming accounts are closed on 31st March each year and depreciation is charged @ 10% per annum as per
Straight Line Method.
Solution:
Dr. Machinery A/c Cr.
Amount Amount
Date Particulars Date Particulars
2015 2016
April 01 To Cash/Bank A/c 60, 000 × 5 3,00,000 March 31 By Depreciation A/c 3, 00, 000 × 10/100 30,000
D

March 31 By balance c/d 2,70,000

3,00,000 3,00,000
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2016 2017
April 01 To balance b/d 2,70,000 March 31 By Depreciation A/c 3, 00, 000 × 10/100 30,000
March 31 By balance c/d 2,40,000
ST

2,70,000 2,70,000
2017 2017
April 01 To balance b/d 2,40,000 April 01 By Bank A/c WN1 40,000
April 01 By Profit & Loss A/c Lossonsale 8,000
2018
March 31 By Depreciation A/c 2, 40, 000 × 10/100 24,000
Onremainingmachinery
March 31 By balance c/d 1,68,000

2,40,000 2,40,000
2018 2018
April 01 To balance c/d 1,68,000 July 1 By Depreciation A/c 6, 000 × 3/12 1,500
Oct.01 To Cash/Bank A/c 1,00,000 July 1 By Bank A/c WN2 28,000
July 1 By Profit & Loss A/c LossonSale 12,500
2019
March 31 By Depreciation A/c (On remaining 23,000
Machinery)

[(1,80,000 × 10/100) +
 1, 00, 000 × 10/100 × 6/12
]
March 31 By balance c/d 2,03,000

2,68,000 2,68,000

Working Notes:
1) Calculation of Sale proceeds from Machinery sold on 1st April, 2017
Book Value of the Machine as on 1st April, 2017 = TotalopeningbalanceofMachineryonthisdate/5
= 2, 40, 000/5
= 48,000
Loss on Sale of Machinery = 8,000
Sale proceeds from the Machinery = Book Value of the Machine as on 1st April, 2017 – Loss on
Sale
=
48, 000– 8, 000 = 40,000

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2) Calculation of Sale proceeds from Machinery sold on 1st July 2018
Book Value of the Machine as on 1st July, 2018 =
(TotalopeningbalanceofMachineryonthisdate/4)– Depreciation

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(1, 68, 000/4)– 1, 500

= 40,500
Loss on Sale of Machinery = 12,500
Sale proceeds from the Machinery = Book Value of the Machine as on 1st July, 2018 – Loss on
Sale

Question:9
=
ID
40, 500– 12, 500 = 28,000

A company whose accounting year is a financial year, purchased on 1st July, 2015 machinery costing 30,000.
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It purchased further machinery on 1st January, 2016 costing 20,000 and on 1st October, 2016 costing 10,000.
On 1st April, 2017, one-third of the machinery installed on 1st July, 2015 became obsolete and was sold for 3,000.
Show how Machinery Account would appear in the books of the company. It being given that machinery was depreciated by Fixed Instalment Method at
10% p.a. What would be the value of Machinery Account on 1st April, 2018?
YG

Solution:
Machinery Account
Dr. Cr.
Amount Amount
Date Particulars J.F. Date Particulars J.F.
( ) ( )
2015 2016
July Bank 30,000 March Depreciation
01 I 31
D

2015
Jan. Bank 20,000 I (for 9 months) 2,250
01 II
II 500 2,750
U

March Balanced c/d

31
I 27,750
II 19,500 47,250
50,000 50,000
ST

2016 2017
April Balance b/d March Depreciation
01 31
I 27,750 I 3,000
II 19,500 47,250 II 2,000
III 500 5,500
Oct. Bank 10,000 March Balance c/d
01 III 31
I 24,750
II 17,500
III 9,500 51,750
57,250 57,250
2017 2017
April Balance b/d April 01 Bank I(1/3rd portion) 3,000
01
I 24,750 April 01 Profit and Loss 5,250
LossonSaleofI
2018
II 17,500 March Depreciation
31
III 9,500 51,750 I (on 2/3rd portion) 2,000
 II 2,000
III 1,000 5,000
March Balance c/d
31
I (on 2/3rd portion) 14,500
II 15,500
III 8,500 38,500
51,750 51,750

Working Notes

1. Calculation of Depreciation

60
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Calculation of profit or loss on sale of 1/3rd Portion of Machine I

Amount
Particulars
( )
Book Value of 1/3rd portion of Machine I on April 01, 2017
8,250
24, 750 × 1/3
Less: Sale Value 3, 000
Loss on sale
ID 5,250
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Question:10
On 1st July, 2015, A Co. Ltd. purchases second-hand machinery for 20,000 and spends 3,000 on reconditioning and installing it. On 1st January,
2016, the firm purchases new machinery worth 12,000. On 30th June, 2017, the machinery purchased on 1st January, 2016, was sold for 8,000 and on
1st July, 2017, a fresh plant was installed.
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Payments for this plant was to be made as follows:

1st July, 2017

5,000

30th June, 2018

6,000

30th June, 2019 5,500

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Payments in 2018 and 2019 include interest of 1,000 and 500 respectively.
The company writes off 10% p.a. on the original cost. The accounts are closed every year on 31st March. Show the Machinery Account for the year
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ended 31st March, 2018.

Solution:
Books of A. Co. Ltd
ST

Machinery
Dr. Cr.
Amount Amount
Date Particulars J.F. Date Particulars J.F.
( ) ( )
2015 2016
July 01 Bank 23,000 Mar.31 Depreciation
I
20, 000 + 3, 000
2016 I 1,725
for9months
Jan.01 Bank 12,000 II 300
II for3months 2,025
Mar.31 Balance c/d
I 21,275
II 11,700 32,975
35,000 35,000
2016 2017
April 01 Balance b/d Mar.31 Depreciation
I 21,275 I 2,300
II 11,700 32,975 II 1,200 3,500
Mar.31 Balance c/d
I 18,975
 II 10,500 29,475
32,975 32,975
2017 2017
April 01 Balance b/d June 30 Bank 8,000
II
I 18,975 June 30 Depreciation 300
II
for3months
II 10,500 June 30 Profit and Loss 2,200
29,475 Loss
July 01 Bank 5,000 2018
III
July 01 Creditors for plant 10,000 Mar.31 Depreciation
III
I 2,300
III 1,125
on15, 000for8months 3,425
Balance c/d
I 16,675
III 13,875 30,550

60
44,475 44,475

Working Notes

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1. Calculation of Depreciation

2.
II
Calculation of profit on loss on sale of Machine
ID
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Amount
Particulars
Rs
Book Value of Machine 10,500
II on April 01, 2017
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Less: Depreciation for 3 Months 300

Book Value on June 30 10,200
Less: Sale 8, 000
Loss on Sale 2,200

Question:11
On 1st April, 2016, Shivam Enterprise purchased a second-hand machinery for 52,000 and spent 2,000 on cartage, 3,000 on unloading, 2,000 on
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installation and 1,000 as brokerage of the middle man. It was estimated that the machinery will have a scrap value of 6,000 at the end of its useful life,
which is 10 years. On 31st December 2016, repairs and renewals amounted to 2,500 were paid. On 1st October, 2018, this machine was sold for
30,600 and an amount of 600 was paid as commission to an agent. Calculate the amount of annual depreciation and rate of depreciation. Also prepare
the Machinery Account for first 3 years, assuming that firm follows financial year for accounting.
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Solution:
Cost of Machine− Scrap Value of Machine
Life in Years
Amount of Depreciation =
ST

60, 000 (Note) − 6, 000

10
= = 5,400
Amount of Depreciation
Cost of Machine
Rate of Depreciation = × 100
5, 400

= 60, 000 × 100 = 9% p.a.

Machinery Account
Dr. Cr.
Amount Amount
Date Particulars Date Particulars
( ) ( )
2016 2017
Apr. 01 Bank A/c 60,000 Mar. 31 Depreciation A/c 5,400
Mar. 31 Balance c/d 54,600
60,000 60,000
2017 2018
Apr. 01 Balance b/d 54,600 Mar. 31 Depreciation A/c 5,400
 Mar. 31 Balance c/d 49,200

54,600 54,600
2018 2019
Apr. 01 Balance b/d 49,200 Oct. 01 Depreciation A/c (for 6 months) 2,700
Bank A/c (Sale) 30,000
Profit and Loss A/c (Loss on Sale) 16,500

49,200 49,200

Working Notes: Calculation of Profit or Loss on Sale

Particulars Amount
Value of Machine as on Apr. 01, 2018 49,200
Less: Depreciation for 6 months 2,700
Value of M1 as on Oct. 01, 2018

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46,500
Less: Sale Value 30,000
Loss on Sale 16,500

Note:

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1. All the expenses incurred up to the date at which machine is put in use will be added to cost of machine.
2. The amount spent on repairs is a recurring nature expenses. So, it will not be added to Machine A/c.
3. Cost of Machine = 52,000 + 2,000 + 3,000 + 2,000 + 1,000 = Rs 60,000

Question:12
Modern Ltd. purchased a machinery on 1st August, 2016 for 60,000. On 1st October, 2017, it purchased another machine for 20,000 plus CGST and

Solution:
Books of Modern Ltd.
Machinery Account
ID
SGST @ 6% each. On 30th June, 2018, it sold the first machine purchased in 2016 for 38,500 charging IGST @ 12%. Depreciation is provided @ 20%
p.a. on the original cost each year. Accounts are closed on 31st March every year. Prepare the Machinery Account for three years.
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Dr. Cr.
Amount Amount
Date Particulars J.F. Date Particulars J.F.
( ) ( )
2016 2017
YG

Aug.01 Bank 60,000 March 31 Depreciation

M1
M1 8,000
for8months
March 31 Balance c/d 52,000
60,000 60,000
2017 2018
April 01 Balance b/d 52,000 March 31 Depreciation
D

Oct. 01 Bank 20,000 M1 12,000

M2
M2 2,000
6months 14,000
March 31 Balance c/d
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M1 40,000
M2 18,000 58,000
72,000 72,000
2018 2019
ST

April 01 Balance b/d June 30 Depreciation 3,000

M1
for3months
M1 40,000 June 30 Bank 38,500
M1
M2 18,000 58,000 2018
June Profit and Loss (profit) 1,500 Mar.31 Depreciation 4,000
30 M2
Mar.31 Balance c/d 14,000
59,500 59,500

Working Notes

1. Calculation of Annual Depreciation

 Particulars Amount
( )
Value on Apr 01, 2018 40,000
Depreciation for 3 Months 3, 000
Value on June 30, 2018 37,000
Less: Sales Value of 38, 500
Machine
Profit on sale of Machine 1 1,500

3. Journal entries for purchase and sale with GST

Journal
Debit Credit
Date Particulars L.F. Amount Amount

2017
Oct 01 Machinery A/c Dr. 20,000
Input CGST A/c Dr. 1,200
Input SGST A/c Dr. 1,200

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To Bank A/c 22,400
MachinerypurchasedwithCGSTandSGST@6

2018
Jun 30 Bank A/c Dr. 43,120
To Machinery A/c 38,500

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To Output IGST A/c 4,620
Machinerypurchasedon1stAug, 2015soldwithIGST@12

Question:13

become obsolete and was sold for 6,000, charging CGST and SGST @ 6% each.
ID
On 1st July, 2016, Sohan Lal & Sons purchased a plant costing 60,000. Additonal plant was purchased on 1st January, 2017 for 40,000 and on 1st
October, 2017, for 20,000, plus CGST and SGST @ 6% each. On 1st April, 2018, one-third of the plant purchased on 1st July, 2016, was found to have

Prepare the Plant Account for the first three years in the books of Sohan Lal & Sons. Depreciation is charged @ 10% p.a. on Straight Line Method.
Accounts are closed on 31st March each year.
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Solution:
Books of Sohan Lal & Sons
Plant Account
Dr. Cr.
YG

Amount Amount
Date Particulars J.F. Date Particulars J.F.
( ) ( )
2016 2017
July 01 Bank 60,000 March Depreciation
I 31
I for 9 months 4,500
2016 II for 3 months 1,000 5,500
Jan. 01 Bank 40,000 March Balance c/d
II 31
D

I 55,500
II 39,000 94,500
1,00,000 1,00,000
2017 2018
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April 01 Balance b/d March Depreciation

31
I 55,500 I 6,000
II 39,000 94,500 II 4,000
ST

Oct. 01 Bank 20,000 III for 6 months 1,000

III 11,000
March Balance c/d
31
I 49,500
II 35,000
III 19,000 1,03,500
1,14,500 1,14,500
2018 2018
April 01 Balance b/d April 01 Bank 6,000
I 49,500 April 01 Profit and Loss 10,500
loss
16, 500– 6, 000
2019
II 35,000 March Depreciation
31
III 19,000 1,03,500 I 4,000
II 4,000
III 2,000 10,000
March Balance c/d
31
I 29,000
 II 31,000
III 17,000 77,000
1,03,500 1,03,500

Working Notes

1. Calculation of Depreciation

2. Calculation of profit or loss on Sale of Plant I

60
Amount
Particulars
( )
1/3rd of Book Value of Plant I as on April 01, 2018 16,500
49, 500 × 1/3
Less: Sale of Plant 6, 000
Loss on Sale of Plant 10,500

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3. Journal entries for purchase and sale with GST

Journal
Debit Credit
Date Particulars L.F. Amount Amount

2017
Oct 01 Machinery A/c
Input CGST A/c
Input SGST A/c
To Bank A/c
MachinerypurchasedwithCGSTandSGST@6
ID Dr.
Dr.
Dr.
20,000
1,200
1,200
22,400
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2018
Apr 1 Bank A/c Dr. 6,720
To Machinery A/c 6,000
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To Output CGST A/c 360

To Output SGST A/c 360
Machinerypurchasedon1stJuly, 2015soldwithCGSTandSGST@6

Question:14
D

Following balances appear in the books of Rama Bros:

1st April, 2016 Machinery A/c 80,000

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Provision for Depreciation A/c 36,000

On 1st April, 2016, they decided to sell a machine for 8,700. This machine was purchased for 16,000 in April, 2012. Prepare the Provision for
Depreciation Account and Machinery Account on 31st March, 2017, assuming the firm has been charging Depreciation at 10% p.a. on Straight Line
ST

Method.
Solution:
Books of Rama Bros.
Machinery Account
Dr. Cr.
Amount Amount
Date Particulars J.F. Date Particulars J.F.
( ) ( )
2016 2016
Apr.01 Balance b/d Apr.01 Provision for 6,400
64, 000 + 16, 000 80,000 Depreciation
Apr.01 Bank 8,700
Apr.01 Profit and Loss 900
2017
Mar.31 Balance c/d 64,000
80,000 80,000

Provision for Depreciation Account

Dr. Cr.
 Amount Amount
Date Particulars J.F. Date Particulars J.F.
( ) ( )
2016 2016
Apr.01 Machinery Account 6,400 Apr.01 Balance b/d 36,000
AccumulatedDep. onMachineSold
2017 Balance c/d 36,000 2017 Depreciation 6,400
Mar.31 Mar.31 on64, 000@10
42,400 42,400

Working Notes
1 Calculation of Book Value of Machine Sold on April 01, 2015
Amount
Particulars
( )
Machine purchased in 2012 16,000
Less: Accumulate Depreciation for 4 years till Mar 31, 2015 6, 400
1, 600 × 4

60
Book value on April 01, 2016 9,600

2Calculation of profit or loss on Sale of Machine

Amount
Particulars
( )
Book Value on April 01, 2016 9,600
Less: Sale Value 8, 700

E3
Loss on Sale of Machine 900

Question:15
Following balances appear in the books of Priyank Brothers:

1st April, 2017 Machinery A/c

Provision for Depreciation A/c
20,00,000
8,00,000
ID
On 1st April, 2017, they decide to sell a machine for 5,00,000. This machine was purchased for 7,50,000 on 1st April, 2014. Prepare the Machinery
U
Account and Provision for Depreciation Account for the year ended 31st March, 2018 assuming that the firm has been charging Depreciation @ 10% p.a.
on the Straight Line Method.
Solution:
Books of Priyank Brothers
YG

Machinery Account
Dr. Cr.
Date Particulars J.F. Amount Date Particulars J.F. Amount
( ) ( )
2017 2017
April 01 Balance b/d 20,00,000 April 01 Provision for 2,25,000
Depreciation
April 01 Bank 5,00,000
D

April 01 Profit and Loss 25,000

Loss
2018
Mar.31 Balance c/d 12,50,000
20,00,000 20,00,000
U

Provision for Depreciation Account

ST

Dr. Cr.
Amount Amount
Date Particulars J.F. Date Particulars J.F.
( ) ( )
2017 2017
April 01 Machinery 2,25,000 April 01 Balance b/d 8,00,000
2018 2018
Mar.31 Balance c/d 7,00,000 Mar.31 Depreciation 1,25,000
fortheyear

9,25,000 9,25,000

Working Notes
1 Calculation of Loss on Sale of Machinery
Amount
Particulars
( )
Original cost of Machine Sold 7,50,000
Less: Accumulated Depreciation on Machine Sold, for 3
years, 2, 25, 000
7, 50, 000 × 10
 Book Value of Machine Sold 5,25,000
Less: Sale Value 5, 00, 000
Loss on Sale of Machine 25,000

Question:16
Following balances appear in the books of X Ltd. as on 1st April, 2018:

Machinery A/c 5,00,000

Provision for Depreciation A/c 2,25,000

The machinery is depreciated @ 10% p.a. on the Fixed Instalment Method. The accounting year being April-March. On 1st October, 2018, a machinery
which was purchased on 1st July, 2015 for 1,00,000 was sold for 42,000 plus CGST and SGST @ 6% each and on the same date a new machine was
purchased for 2,00,000 paying IGST @ 12%. Prepare Machinery Account and Provision for Depreciation Account for the year ended 31st March, 2019.
Solution:
Machinery Account

60
Dr. Cr.
Amount Amount
Date Particulars J.F. Date Particulars J.F.
( ) ( )
2018 2018
April 01 Balance b/d 5,00,000 Oct.01 Provision for 32,500
4, 00, 000 + 1, 00, 000 Depreciation

E3
Oct.01 Bank 2,00,000 Oct.01 Bank 42,000
Oct.01 Profit and 25,500
Loss(WN1)
2019
Mar.31 Balance c/d 6,00,000

7,00,000 7,00,000

Dr.
Provision for Depreciation Account
ID Cr.
U
Amount Amount
Date Particulars J.F. Date Particulars J.F.
( ) ( )
2018 2018
Oct.01 Machinery 32,500 April 01 Balance b/d 2,25,000
YG

2019 2019
Mar.31 Balance c/d 2,47,500 Mar.31 Depreciation (WN2) 55,000
2,80,000 2,80,000

Working Notes:
1 Calculation of Loss on Sale of Machinery
Amount
D

Particulars
( )
Original cost of Machine Sold 1,00,000
Less: Accumulated Depreciation on Machine Sold, from
July 2015 to Oct 01, 2018 (1,00,000 × 10% × 3.25 years) 32, 500
U

Book Value of Machine Sold 67,500

Less: Sale Value 42, 000
Loss on Sale of Machine 25,500

2 Calculation of Depreciation Charged during the year

ST

Amount
Particulars
( )
On 4,00,000 @ 10%
40,000
4, 00, 000 × 10
On 2,00,000 @ 10% for 6 months
10,000
2, 00, 000 × 10
On 1,00,000 @ 10% for 6 months
5,000
1, 00, 000 × 10
Total 55,000

3. Journal entries for sale and purchase with GST

Journal
Debit Credit
Date Particulars L.F. Amount Amount

2018
Oct 1 Bank A/c Dr. 47,040
To Machinery A/c 42,000
 To Output CGST A/c 2,520
To Output SGST A/c 2,520
Machinerypurchasedon1stJuly, 2014soldwithCGSTandSGST@6

Oct 1 Machinery A/c Dr. 2,00,000

Input IGST A/c Dr. 24,000
To Bank A/c 2,24,000
MachinerypurchasedwithIGST@12

Question:17
A boiler was purchased from abroad for 10,000. Shipping and forwarding charges 2,000, Import duty 7,000 and expenses of installation amounted to
1,000.
Calculate the Depreciation for the first three years separatelyforeachyear
@ 10% p.a. on Diminishing Balance Method.
Solution:
Boiler Account

60
Dr. Cr.
Amount Amount
Date Particulars J.F. Date Particulars J.F.
( ) ( )
I year I year
Jan.01 Bank 20,000 Dec.31 Depreciation 2,000
10, 000 + 2, 000 + 7, 000 + 1, 000

E3
Balance c/d 18,000
20,000 20,000
II year II year
Jan.01 Balance b/d 18,000 Dec.31 Depreciation 1,800
Dec.31 Balance c/d 16,200
18,000 18,000
III year III year
Jan.01 Balance b/d

16,200
ID
16,200 Dec.31 Depreciation
Dec.31 Balance c/d
1,620
14,580
16,200
U
Question:18
YG

The original cost of furniture amounted to 4,000 and it is decided to write off 5% on the original cost as Depreciation at the end of each year. Show the
Ledger Account as it will appear during the first four years. Show also how the same account will appear if it was decided to write off 5% p.a. on the
diminishing balance of the asset each year.
Solution:
Furniture Account
OriginalCostMethod
Dr. Cr.
Amount Amount
Date Particulars J.F. Date Particulars J.F.
D

( ) ( )
I year I year
Jan.01 Bank 4,000 Dec.31 Depreciation 200
Dec.31 Balance c/d 3,800
U

4,000 4,000
II year II year
Jan.01 Balance b/d 3,800 Dec.31 Depreciation 200
Dec.31 Balance c/d 3,600
3,800 3,800
ST

III year III year

Jan.01 Balance b/d 3,600 Dec.31 Depreciation 200
Dec.31 Balance c/d 3,400
3,600 3,600
IV year IV year
Jan.01 Balance b/d 3,400 Dec.31 Depreciation 200
Dec.31 Balance c/d 3,200
3,400 3,400

Note:

Furniture Account
DiminishingBalanceMethod
Dr. Cr.
Amount Amount
Date Particulars J.F. Date Particulars J.F.
( ) ( )
I year I year
Jan.01 Bank 4,000 Dec.31 Depreciation 200
 Dec.31 Balance c/d 3,800
4,000 4,000
II year II year
Jan.01 Balance b/d 3,800 Dec.31 Depreciation 190
Dec.31 Balance c/d 3,610
3,800 3,800
III year III year
Jan.01 Balance b/d 3,610 Dec.31 Depreciation 181
Dec.31 Balance c/d 3,429
3,610 3,610
IV year IV year
Jan.01 Balance b/d 3,429 Dec.31 Depreciation 171
Dec.31 Balance c/d 3,258
3,429 3,429

Note: Depreciation p.a. =

60
Question:19
Babu purchased on 1st April, 2017, a machine for 6,000. On 1st October, 2017, he also purchased another machine for 5,000. On 1st October, 2018,
he sold the machine purchased on 1st April, 2017 for 4,000.
It was decided that Depreciation @ 10% p.a. was to be written off every year under Diminishing Balance Method.
Assuming the accounts were closed on 31st March every year, show the Machinery Account for the years ended 31st March, 2018 and 2019.

E3
Solution:
Books of Babu
Machinery Account
Dr. Cr.
Amount Amount
Date Particulars J.F. Date Particulars J.F.
( ) ( )
2017
Apr. 01 Bank
I
Oct. 01 Bank
II
5,000
2018
ID
6,000 Mar. 31 Depreciation

II (for 6 months)
600

250 850
U
Mar. 31 Balance c/d
I 5,400
II 4,750 10,150
11,000 11,000
2018 2018
YG

Apr. 01 Balance b/d Oct. 01 Depreciation 270

I (for 6 months)
I 5,400 Oct. 01 Bank 4,000
I
II 4,750 10,150 Oct. 01 Profit and Loss 1,130
Loss
2019
Mar. 31 Depreciation 475
D

II
Mar. 31 Balance c/d 4,275
II
10,150 10,150
U

Working Note
ST

1 Calculation of profit or loss on sale of machine:

Amount
Particulars
( )
Book Value of Machinery Apr. 01, 2018 5,400
Less: Depreciation 270
for6Months
Book Value of Machinery on Oct. 01 2018 5,130
Less: Sale 4, 000
Loss on Sale 1,130

Question:20
X bought a machine for 25,000 on which he spent 5,000 for carriage and freight. 1,000 for brokerage of the middleman, 3,500 for installation and
500 for an iron pad. The machine is depreciated @ 10% p.a. on Written Down Value basis. After three years, the machine was sold to Y for 30,500 and
500 was paid as commission to the broker through whom the sale was effected. Find out the profit and loss on sale of machine.
Solution:
Books of X
Machinery Account
 Dr. Cr.
Amount Amount
Date Particulars J.F. Date Particulars J.F.
( ) ( )
I year I year
Jan.01 Bank 35,000 Dec.31 Depreciation 3,500
25, 000 + 5, 000 + 1, 000 + 3, 500 + 500
Dec.31 Balance c/d 31,500
35,000 35,000
II year II year
Jan.01 Balance b/d 31,500 Dec.31 Depreciation 3,150
Dec.31 Balance c/d 28,350
31,500 31,500
III year III year
Jan.01 Balance b/d 28,350 Dec.31 Depreciation 2,835
Dec.31 Balance c/d 25,515
28,350 28,350
IV year IV year

60
Jan.01 Balance b/d 25,515 Jan.01 Bank 30,000
30, 500– 500brokerage
Dec.31 Profit and Loss (Profit) 4,485
30,000 30,000

E3
Question:21
A company purchased a machinery for 50,000 on 1st October, 2016. Another machinery costing 10,000 was purchased on 1st December, 2017. On
31st March, 2019, the machinery purchased in 2016 was sold at a loss of 5,000. The company charges depreciation @ 15% p.a. on Diminishing
Balance Method. Accounts are closed on 31st March every year. Prepare the Machinery Account for 3 years.
Solution:

Dr.
Date Particulars J.F.
Machinery Account

Amount
( )
Date
ID
Particulars J.F.
Amount
( )
Cr.
U
2016 2017
Oct.01 Bank 50,000 Mar.31 Depreciation (for 6 Months)
I 3,750
Mar.31 Balance c/d 46,250
YG

50,000 50,000
2017 2018
Apr.01 Balance b/d 46,250 Mar.31 Depreciation
I
Dec.01 Bank 10,000 I 6,938
II
II 500 7,438
Mar.31 Balance c/d
I 39,312
D

II 9,500 48,812
56,250 56,250
2018 2019

Apr.01 Balance b/d Mar.31 Depreciation

U

I 39,312 I 5,897
II 9,500 48,812 II 1,425 7,322
Mar.31 Bank
I 28,415
ST

Mar.31 Profit and Loss

Loss 5,000
Mar.31 Balance c/d
II 8,075
48,812 48,812

Working Note
1 Calculation of profit or loss on sale of machine:

Amount
Particulars
( )
Book Value of Machine I on Apr. 01, 2018 39,312
Less: Depreciation 5,897
39, 312 × 15
Book Value of Machine I on Mar. 31, 2019 33,415
Less: Sale Value 28, 415
Loss on Sale of Machine I 5,000
Question:22
On 1st April, 2016, a machinery was purchased for 20,000. On 1st October, 2017 another machine was purchased for 10,000 and on 1st April, 2018,
one more machine was purchased for 5,000. The firm depreciates its machinery @ 10% p.a. on the Diminishing Balance Method.
What is the amount of Depreciation for the years ended 31st March, 2017, 2018 and 2019? What will be the balance in Machinery Account as on 31st
March, 2019?
Solution:
I. Calculation of Depreciation from April 01, 2016 to March 31, 2019
Depreciation Rate: 10% p.a. on Diminishing Balance Method

Date of No. of Amt. of Total

Year Machinery Value
Purchase Months Dep. Dep.
2016-17 M1 April 01, 2015 20,000 12 2,000 2,000
2017-18 M1 April 01, 2015 18,000 12 1,800
20, 000– 2, 000
M2 Oct. 01,2016 10,000 6 500 2,300
2018-19 M1 April 01, 2015 16,200 12 1,620
18, 000– 1, 800
M2 Oct. 01,2016 9,500 12 950

60
M3 April 01, 2017 5,000 12 500 3,070

II. Balance in Machinery Account as on March 31, 2019 will be Rs 27,630

Working Notes: Preparation of Machinery Account

Machinery Account

E3
Dr. Cr.
Amount Amount
Date Particulars Date Particulars
( ) ( )
2016 2017
April 01 Bank A/c 20,000 March Depreciation A/c 2,000
M1 31 M1

2017
April 01 Balance b/d
20,000

18,000
March
31

2018
March
M1 ID
Balance c/d

Depreciation A/c
18,000

20,000

M1 31
U
Oct. 01 Bank A/c 10,000 M1 1,800
M2
500 2,300
YG

M2
March Balance c/d
31
M1 16,200
M2 9,500 25,700
28,000 28,000
2018 2019
D

April 01 Balance b/d March Depreciation A/c

31
M1 16,200 M1 1,620
M2 9,500 25,700 M2 950
U

April 01 Bank A/c 5,000 M3 500 3,070

M3
March Balance c/d
31
ST

M1 14,580
M2 8,550
M3 4,500 27,630
30,700 30,700

Note: Since the question does not specify to prepare the Machinery Account, thus, it is optional to prepare this account.

Question:23
M/s. P & Q purchased machinery for 40,000 on 1st October, 2016. Depreciation is provided @ 10% p.a. on the Diminishing Balance. On 31st January,
2019, one-fourth of the machinery was found unsuitable and disposed off for 5,600. On the same date new machinery at a cost of 15,000 was
purchased. Write up the Machinery account for the years ended 31st March, 2017, 2018 and 2019. Accounts are closed on 31st March each year.
Solution:
Machinery Account
Dr. Cr.
Amount Amount
Date Particulars J.F. Date Particulars J.F.
() ()
 2016 2017
Oct. 01 Bank Mar.31 Depreciation
I 30,000 I 1,500
3/4 3/4 for 6 months
I 10,000 I 500
1/4 40,000 1/4 for 6 months 2,000
Mar.31 Balance c/d
I 28,500
3/4
I 9,500
1/4 38,000
40,000 40,000
2017 2018
Apr.01 Balance b/d Mar.31 Depreciation
I 28,500 I 2,850
3/4 3/4
I 9,500 I 950
1/4 38,000 1/4 3,800
Mar.31 Balance c/d
I 25,650

60
3/4
I 8,550
1/4 34,200
38,000 38,000
2018 2019
Apr.01 Balance b/d Jan.31 Depreciation I 713

E3
1/4(for 10 Months)
I 25,650 Jan.31 Bank I
3/4 1/4 5,600
2019 I 8,550 Profit and Loss (Loss)
1/4 34,200 2,237
Jan.31 Bank 15,000 Mar.31 Depreciation
II

Mar.31
ID
I
3/4
II (for 2 months)
Balance c/d
I
3/4
2,565

250

23,085
2,815
U
II 14,750 37,835
49,200 49,200
YG

Working Note
1Calculation of Profit or Loss on Sale of Machine I
1/4:
Amount
Particulars
()
Book Value of Machine 8,550
I
D

1/4 on Apr. 01, 2018

Less: Depreciation for 10 Months 713
Book Value of Machine 7,837
I
U

1/4 on Jan. 31 2019

Less: Sale Value 5, 600
Loss on Sale of Machine I 2,237
1/4
ST

Question:24
On 1st October, 2015, Meenal Sharma bought a machine for 25,000 on which he spent 5,000 for carriage and freight; 1,000 for brokerage of the
middle-man, 4,000 for installation. The machine is depreciated @ 10% p.a. on written down value basis. On 31st March, 2018 the machine was sold to
Deepa for 30,500 and 500 was paid as commission to broker through whom the sales was effected. Find out the profit or loss on sale of machine if
accounts are closed on 31st March, every year.
Solution:
Machinery Account
Dr. Cr.
Amount Amount
Date Particulars J.F. Date Particulars J.F.
() ()
2015 2016
Oct 01 Bank 35,000 Mar.31 Depreciation (for 6 months)
25, 000 + 5, 000 + 1, 000 + 4, 000 1,750
Mar.31 Balance c/d 33,250
35,000 35,000
2016 2017
Apr.01 Balance b/d 33,250 Mar.31 Depreciation 3,325
 Mar.31 Balance c/d 29,925
33,250 33,250
2017 2018
Apr.01 Balance b/d 29,925 Mar.31 Depreciation 2,993
2018 Mar.31 Bank A/c 30,000
Mar.31 Profit and Loss A/c (Profit on Sale) 30, 500– 500
(WN1) 3,068
32,993 32,993

Working Note:
Calculation of Profit or Loss on sale of Machine I:
Particulars Amount
()
Book Value of Machine on Apr. 01, 2017 29,925
Less: Depreciation for the year 2, 993
Book Value of Machine I on Mar. 31, 2018 26,932
Less: Sale Value 30, 000
30, 500– 500

60
Profit on Sale 3,068

Question:25
A company purchased on 1st July, 2015 machinery costing 30,000. It further purchased machinery on 1st January, 2016 costing 20,000 and on 1st

E3
October, 2016 costing 10,000. On 1st April, 2017, one-third of the machinery installed on 1st July, 2015 became obsolete and was sold for 3,000. The
company follows financial year as accounting year.
Show how the Machinery Account would appear in the books of company if depreciation is charged @ 10% p.a. on Written Down Value Method.
Solution:
Machinery Account
Dr. Cr.
Amount Amount
Date
2015
July 01 Bank
I
2/3
Particulars

20,000
J.F.
Rs
Date
2016
ID
Mar.31 Depreciation
I
2/3
Particulars

1,500
J.F.
Rs
U
2016 I 10,000 30,000 I 750
1/3 1/3
Jan.01 Bank 20,000 II 500
II 2,750
YG

Mar.31 Balance c/d

I 18,500
2/3
I 9,250
1/3
II 19,500 47,250
50,000 50,000
2016 2017
Apr 01 Balance b/d Mar 31 Depreciation
D

I 18,500 I 1,850
2/3 2/3
I 9,250 I 925
1/3 1/3
U

II 19,500 47,250 II 1,950

Oct 01 Bank 10,000 III 500
III 5,225
Mar 31 Balance c/d
ST

I 16,650
2/3
I 8,325
1/3
II 17,550
III 9,500 52,025
57,250 57,250
2017 2017
Apr.01 Balance b/d Apr.01 Bank 3,000
I
1/3
I 16,650 Apr.01 Profit and Loss
2/3 Loss 5,325
I 8,325 Mar.31, Depreciation
1/3
II 17,550 2018 I 1,665
2/3
III 9,500 52,025 II 1,755

III 950 4,370

 Mar.31 Balance c/d
I 14,985
2/3
II 15,795
III 8,550 39,330
52,025 52,025

Working Note:
1 Calculation of Profit or Loss on Sale of Plant I
1/3:
Amount
Particulars
Rs
Book Value of Plant I 8,325
1/3 as on Apr 01, 2017
Less: Sale Value 3, 000
Loss on Sale 5,325

60
Question:26
Astha Engineering Works purchased a machine on 1st July, 2015 for 1,80,000 and spent 20,000 on its installation.
On 1st April, 2016, if purchased another machine for 2,40,000. On 1st October, 2017, the machine purchased on 1st July, 2015 was sold for 1,45,000

E3
plus CGST and SGST @ 6% each. On 1st January, 2018, another machine was purchased for 4,00,000 plus IGST @ 12%.
Prepare the Machinery Account for the years ended 31st March, 2016 to 2018 after charging Depreciation @ 10% p.a. by Diminishing Balance Method.
Accounts are closed on 31st March every year.
Solution:
Book of Astha Engineering Works
Machinery Account
Dr.
Date
2015-16
July 01 Bank
I
Particulars J.F.
Amount
()
Date
2015-16
ID Particulars

2,00,000 Mar.31 Depreciation (for 9 months)

J.F.
Amount
()
Cr.
U
1, 80, 000 + 20, 000 15,000
Mar.31 Balance c/d 1,85,000
2,00,000 2,00,000
2016-17 2016-17
YG

Apr.01 Balance b/d 1,85,000 Mar.31 Depreciation

I
Apr.01 Bank 2,40,000 I 18,500
II
II 24,000 42,500
Mar.31 Balance c/d
I 1,66,500
II 2,16,000 3,82,500
4,25,000 4,25,000
D

2017-18 2017-18
Apr.01 Balance b/d Oct. 01 Depreciation 8,325
I (for 6 months)
I 1,66,500 Oct. 01 Bank
U

I 1,45,000
II 2,16,000 3,82,500 Oct. 01 Profit and Loss (Loss) 13,175
Jan.01 Bank 4,00,000 Mar.31 Depreciation
III
II 21,600
ST

III (for 3 months) 10,000 31,600

Mar.31 Balance c/d
II 1,94,400
III 3,90,000 5,84,400
7,82,500 7,82,500

Working Note:
1 Calculation of profit or loss on sale of Machine I:

Particulars Amount ( )
Book Value of as on Apr. 01, 2017 1,66,500
Less: Depreciation (for 6 Months) 8, 325
Book Value on Oct 01, 2017 1,58,175
Less: Sale Value 1, 45, 000
Loss on Sale 13,175

2 Journal entry for purchase with GST

 Journal
Debit Credit
Date Particulars L.F. Amount Amount

2018
Jan 01 Machinery A/c Dr. 4,00,000
Input IGST A/c Dr. 48,000
To Bank A/c 4,48,000
MachinerypurchasedwithIGST@12

Question:27
Following balances appear in the books of M/s. Amrit as on 1st April, 2018:

2018

60
1st April Machinery A/c 60,000
Provision for Depreciation A/c 36,000

On 1st April, 2018, they decided to dispose off a machinery for 8,400 which was purchased on 1st April, 2014 for 16,000.
You are required to prepare the Machinery Account, Provision for Depreciation Account and Machinery Disposal Account for the year ended 31st March,
2019. Depreciation was charged at 10% p.a on Cost following Straight Line Method.

E3
Solution:
Books of M/s. Amrit
Machinery Account
Dr. Cr.
Amount Amount
Date Particulars J.F. Date Particulars J.F.
() ()
2018 2018
April 01 Balance b/d
44, 000 + 16, 000 60,000

60,000
2019
ID
April 01 Machinery Disposal

Mar.31 Balance c/d

16,000

44,000
60,000
U
Provision for Depreciation Account
Dr. Cr.
YG

Amount Amount
Date Particulars J.F. Date Particulars J.F.
() ()
2018 2018
April 01 Machinery Disposal 6,400 April 01 Balance b/d 36,000
4years
2019 2019
Mar.31 Balance c/d 34,000 Mar.31 Depreciation
onMachinecostingRs44, 000
4,400
D

40,400 40,000
U

Machinery Disposal Account

Dr. Cr.
Amount Amount
Date Particulars J.F. Date Particulars J.F.
() ()
ST

2018 2018
April 01 Machinery 16,000 April 01 Provision for Depreciation 6,400
2019
Mar.31 Bank
Sale 8,400
Profit and Loss (Loss) 1,200
16,000 16,000

Working Note
1. Calculation of profit or loss on Machine Sold:
Amount
Particulars
()
Original Cost of Machine Sold on April 01, 2014 16,000
Less: Accumulated Depreciation on Machine 6, 400
Sold
1, 600 × 4
Book Value of April 01, 2018 9,600
Less: Sale Value 8, 400
 Loss on Sale 1,200

Question:28
On 1st October, 2011, X Ltd. purchased a machinery for 2,50,000. A part of machinery which was purchased for 20,000 on 1st October, 2011 became
obsolete and was disposed off on 1st January, 2014 havingabookvalue 17, 100on1stApril, 2013
for 2,000. Depreciation is charged @ 10% annually on written down value. Prepare Machinery Disposal Account and also show your workings. The
books being closed on 31st March of every year.
Solution:
Books of X Ltd.
Machinery Account
Dr. Cr.
Amount Amount
Date Particulars J.F. Date Particulars J.F.
Rs Rs
2011 2012
Oct 01 Bank Mar.31 Depreciation
I part1 I part1

60
2,30,000 11,500
(for 6 months)
I part2 20,000 2,50,000 I part2 1,000
(for 6 months) 12,500
Mar.31 Balance c/d
I part1 2,18,500

E3
I part2 19,000 2,37,500
2,50,000 2,50,000
2012 2013
Apr.01 Balance b/d Mar.31 Depreciation
I part1 2,18,500 I part1 21,850
I part2 19,000 2,37,500 I part2 1,900 23,750
Mar.31 Balance c/d

2013
Apr.01 Balance b/d
2,37,500
2014
ID
I part1
I part2

Jan.01 Depreciation I
1,96,650
17,100 2,13,750
2,37,500

1,283
U
part2
(for 9 Months)
I part1 1,96,650 Jan.01 Bank I
part2 2,000
YG

I part2 17,100 2,13,750 Jan.01 Profit and Loss (Loss) 13,817

Mar.31 Depreciation I part1 19,665
Mar.31 Balance c/d 1,76,985
2,13,750 2,13,750
D

Question:29
Sharma & Co. whose books are closed on 31st March, purchased a machinery for 1,50,000 on 1st April, 2016, Additional machinery was acquired for
U

50,000 on 1st October, 2016. Certain machinery which was purchased for 50,000 on 1st October, 2016 was sold for 40,000 on 30th September, 2018.

Prepare the Machinery Account and Accumulated Depreciation Account for all the years up to the year ended 31st March, 2019. Depreciation is charged
@ 10% p.a. on Straight Line Method. Also, show the Machinery Disposal Account.
ST

Solution:
Books of Sharma & Co.
Machinery Account
Dr. Cr.
Amount Amount
Date Particulars J.F. Date Particulars J.F.
() ()
2016 2017
Apr.01 Bank
I 1,50,000
Oct 01 Bank 50,000 Mar.31 Balance c/d
II 2,00,000
2,00,000 2,00,000
2017 2018
Apr.01 Balance b/d 2,00,000 Mar.31 Balance c/d 2,00,000

2,00,000 2,00,000
2018 2018
Apr.01 Balance b/d Sep 30 Machinery Disposal 50,000
2,00,000 A/c
Mar.31,2019 Balance c/d 1,50,000
 2,00,000 2,00,000

Accumulated Depreciation Account

Dr. Cr.
Amount Amount
Date Particulars J.F. Date Particulars J.F.
() ()
2017 2017
Mar.31 Balance c/d Mar. 31 Depreciation
I 15,000 I 15,000
II 2,500 17,500 II (for 6 months) 2,500 17,500
17,500 17,500
2018 2017
Mar.31 Balance c/d Apr. 01 Balance b/d
I 30,000 I 15,000
II 7,500 37,500 2018 II 2,500 17,500
Mar. 31 Depreciation

60
I 15,000
II 5,000 20,000
37,500 37,500

2018 2018
Sep 30 Machinery disposal 10,000 Apr. 01 Balance b/d
II

E3
Mar.31, Balance c/d 45,000 I 30,000
2019 I
II 7,500 37,500
Sep 30 Depreciation
II 2,500
Mar. 31, Depreciation
2019 I 15,000
55,000

Machinery Disposal Account

ID 55,000
U
Dr. Cr.
Amount Amount
Date Particulars J.F. Date Particulars J.F.
() ()
2018 2018
YG

Sep 30 Machinery 50,000 Sep 30 Accumulated 10,000

Depreciation
Sep 30 Bank 40,000
50,000 50,000

Working note
D

1. Calculation of Profit or Loss on sale of Machine II:

Amount
Particulars
()
Original Cost Oct 01, 2016 50,000
U

Less: Accumulated Depreciation 10, 000

Book Value on Sept 30, 2018 40,000
Less: Sale Value 40, 000
Profit / Loss NIL
ST