done

Illustration 1 (When Provision for Depreciation Account is Maintained).

A second-hand machinery was purchased on 1st July, 2020 from abroad for ` 50,000, shipping
and forwarding charges amounted to ` 8,000 and custom duty ` 12,000. ` 10,000 was spent
on its repairs and installation. Installation was completed by 30th September, 2020. Show the
Machinery Account and Provision for Depreciation Account for the first two financial years
when depreciation is charged @ 20% per annum by written down value method. Accounts are
closed each year on 31st March.
Solution:
Dr. MACHINERY ACCOUNT Cr.
Date Particulars ` Date Particulars `

2020 2021
July 1 To Bank A/c (Purchase Price) 50,000 March 31 By Balance c/d
80,000
July 1 To Bank A/c (Shipping and 8,000
forwarding charges)
July 1 To Bank A/c (Custom duty) 12,000
Sept. 30 To Bank A/c (Repairs and installation) 10,000
80,000 80,000
2021 2022
April 1 To Balance b/d 80,000 March 31 By Balance c/d 80,000
2022
April 1 To Balance b/d 80,000

Dr. PROVISION FOR DEPRECIATION ACCOUNT Cr.

Date Particulars ` Date Particulars `

2021 2021
March 31 To Balance c/d 8,000 March 31 By Depreciation A/c 8,000
(` 80,000 × 20/100 × 6/12)
8,000 8,000
2022 2021
March 31 To Balance c/d
22,400 April 1 By Balance b/d 8,000
2022
March 31 By Depreciation A/c 14,400
(` 72,000 × 20/100)
22,400 22,400
2022
April 1 By Balance b/d 22,400

Illustration 2.

ABC Ltd. purchased on 1st April, 2020, a plant for ` 1,00,000. On 1st October, 2020, an additional
plant was purchased costing ` 50,000. On 1st October, 2021, the plant purchased on 1st April,
2020, having become obsolete, was sold for ` 40,000. Depreciation is provided @ 10% p.a. on
cost on 31st March every year. Show the Machinery, Machinery Disposal and Provision for
Depreciation Accounts for the years ended 31st March, 2021 and 2022.
1
Solution:
Dr. MACHINERY ACCOUNT Cr.
Date Particulars ` Date Particulars `

2020 2021
April 1 To Bank A/c (Machine I) 1,00,000 March 31 By Balance c/d 1,50,000
Oct. 1 To Bank A/c (Machine II) 50,000
1,50,000 1,50,000
2021 2021
April 1 To Balance b/d 1,50,000 Oct. 1 By Machinery Disposal A/c 1,00,000
2022
March 31 By Balance c/d 50,000
1,50,000 1,50,000
2022
April 1 To Balance b/d 50,000

Dr. PROVISION FOR DEPRECIATION ACCOUNT Cr.

Date Particulars ` Date Particulars `

2021 2021
March 31 To Balance c/d 12,500 March 31 By Depreciation A/c:
Machine I (` 1,00,000 × 10/100) 10,000
Machine II 2,500
(` 50,000 × 10/100 × 6/12)
12,500 12,500
2021 2021
Oct. 1 To Machinery Disposal A/c 15,000 April 1 By Balance b/d 12,500
(` 10,000 + ` 5,000) Oct. 1 By Depreciation A/c:
Machine I 5,000
(` 1,00,000 × 10/100 × 6/12)
2022 2022
March 31 To Balance c/d 7,500 March 31 By Depreciation A/c:
Machine II (` 50,000 × 10/100) 5,000
22,500 22,500

Dr. MACHINERY DISPOSAL ACCOUNT Cr.

Date Particulars ` Date Particulars `

2021 2021
Oct. 1 To Machinery A/c 1,00,000 Oct. 1 By Provision for
Depreciation A/c 15,000
Oct. 1 By Bank A/c—Sale 40,000
Oct. 1 By Loss on Sale of Machinery A/c 45,000
(Profit & Loss A/c) (Bal. Fig.)
1,00,000 1,00,000

2

Illustration 3.
On 1st April, 2019, a firm purchased a machinery for ` 2,00,000. On 1st October in the same
accounting year, additional machinery costing ` 1,00,000 was purchased. On 1st October, 2020,
the machinery purchased on 1st April, 2019, having become obsolete, was sold for ` 90,000.
On 1st October, 2021, new machinery was purchased for ` 2,50,000 while the machinery
purchased on 1st October, 2019 was sold for ` 85,000 on the same day. The firm provides
depreciation on its machinery @ 10% per annum on original cost. Accounts are closed on
31st March every year.
Show Machinery Account, Provision for Depreciation Account and Depreciation Account
from 1st April, 2019 to 31st March, 2022.
Solution:
Dr. MACHINERY ACCOUNT Cr.
Date Particulars ` Date Particulars `
2019 2020
April 1 To Bank A/c (Machine I) 2,00,000 March 31 By Balance c/d 3,00,000
Oct. 1 To Bank A/c (Machine II) 1,00,000
3,00,000 3,00,000
2020 2020
April 1 To Balance b/d: Oct. 1 By Bank A/c (Sale) (Machine I) 90,000
Machine I 2,00,000 Oct. 1 By Provision for Depreciation A/c 30,000
Machine II 1,00,000 3,00,000 Oct. 1 By Loss on Sale of Machinery A/c 80,000
2021
March 31 By Balance c/d (Machine II) 1,00,000
3,00,000 3,00,000
2021 2021
April 1 To Balance b/d (Machine II) 1,00,000 Oct. 1 By Bank A/c (Sale) (Machine II) 85,000
Oct. 1 To Bank A/c (Machine III) 2,50,000 Oct. 1 By Provision for Depreciation A/c 20,000
Oct. 1 To Gain (Profit) on Sale 2022
of Machinery A/c 5,000 March 31 By Balance c/d 2,50,000
3,55,000 3,55,000

Dr. DEPRECIATION ACCOUNT Cr.

Date Particulars ` Date Particulars `
2020 2020
March 31 To Provision for Depreciation A/c 25,000 March 31 By Profit & Loss A/c 25,000
25,000 25,000
2020 2021
Oct. 1 To Provision for Depreciation A/c 10,000 March 31 By Profit & Loss A/c 20,000
(on the machinery sold)
2021
March 31 To Provision for Depreciation A/c 10,000
20,000 20,000
2021 2022
Oct. 1 To Provision for Depreciation A/c 5,000 March 31 By Profit & Loss A/c 17,500
(on the machinery sold)
2022
March 31 To Provision for Depreciation A/c 12,500
17,500 17,500

3
Dr. PROVISION FOR DEPRECIATION ACCOUNT Cr.
Date Particulars ` Date Particulars `

2020 2020
March 31 To Balance c/d 25,000 March 31 By Depreciation A/c
(Machine I) 20,000
(Machine II) 5,000 25,000
25,000 25,000
2020 2020
Oct. 1 To Machinery A/c (Machine I) 30,000 April 1 By Balance b/d 25,000
(` 20,000 + ` 10,000) Oct. 1 By Depreciation A/c 10,000
2021 Machine I (For 6 Months)
March 31 To Balance c/d 15,000 2021
March 31 By Depreciation A/c 10,000
(Machine II)
45,000 45,000
2021 2021
Oct. 1 To Machinery A/c (Machine II) 20,000 April 1 By Balance b/d 15,000
(` 5,000 + ` 10,000 + ` 5,000) Oct. 1 By Depreciation A/c 5,000
(Machine II) (For 6 Months)
2022 2022
March 31 To Balance c/d 12,500 March 31 By Depreciation A/c 12,500
(Machine III)
32,500 32,500

Illustration 4.
On 1st April, 2019 a firm purchased machinery for ` 3,00,000. On 1st October, 2019, additional
machinery costing ` 1,50,000 was purchased. On 1st October, 2020, the machinery purchased
on 1st April, 2019 having become obsolete, was sold for ` 1,35,000. On 1st October, 2021,
new machinery was purchased for ` 3,75,000 while the machinery purchased on 1st October,
2019 was sold for ` 1,27,500 on the same day.
The firm provides depreciation on its machinery @ 10% per annum on original cost on
31st March every year.
Show Machinery Account, Provision for Depreciation Account and Depreciation Account for
the period of three accounting years ending 31st March, 2022.

Solution:
Dr. MACHINERY ACCOUNT Cr.
Date Particulars ` Date Particulars `

2019 2020
April 1 To Bank A/c (Mach. I) 3,00,000 March 31 By Balance c/d 4,50,000
Oct. 1 To Bank A/c (Mach. II) 1,50,000
4,50,000 4,50,000

4

2020 2020
April 1 To Balance b/d 4,50,000 Oct. 1 By Bank A/c (Mach. I) (Sale) 1,35,000
Oct. 1 By Provision for Depreciation A/c 45,000
Oct. 1 By Loss on Sale of Machinery A/c 1,20,000
(Profit & Loss A/c) (WN 3)
2021
March 31 By Balance c/d 1,50,000
4,50,000 4,50,000
2021 2021
April 1 To Balance b/d 1,50,000 Oct. 1 By Bank A/c (Mach. II) (Sale) 1,27,500
Oct. 1 To Bank A/c (Mach. III) 3,75,000 Oct. 1 By Provision for Depreciation A/c 30,000
Oct. 1 To Gain on Sale of Machinery A/c 7,500 2022
(Profit & Loss A/c) (WN 3) March 31 By Balance c/d 3,75,000
5,32,500 5,32,500

Dr. PROVISION FOR DEPRECIATION ACCOUNT Cr.

Date Particulars ` Date Particulars `

2020 2020
March 31 To Balance c/d 37,500 March 31 By Depreciation A/c 37,500
2020 2020
Oct. 1 To Machinery A/c (Mach. I) 45,000 April 1 By Balance b/d 37,500
(` 30,000 + ` 15,000) Oct. 1 By Depreciation A/c (Mach. I) 15,000
2021 2021
March 31 To Balance c/d 22,500 March 31 By Depreciation A/c 15,000
67,500 67,500
Oct. 1 To Machinery A/c (Mach. II) 30,000 2021
(` 7,500 + ` 15,000 + ` 7,500) April 1 By Balance b/d 22,500
Oct. 1 By Depreciation A/c (Mach. II) 7,500
2022 2022
March 31 To Balance c/d 18,750 March 31 By Depreciation A/c 18,750
48,750 48,750
2022
April 1 By Balance b/d 18,750

Dr. DEPRECIATION ACCOUNT Cr.

Date Particulars ` Date Particulars `

2020 2020
March 31 To Provision for Depreciation A/c 37,500 March 31 By Profit & Loss A/c 37,500
2020 2021
Oct. 1 To Provision for Depreciation A/c 15,000 March 31 By Profit & Loss A/c 30,000
2021
March 31 To Provision for Deprecation A/c 15,000
30,000 30,000
2021 2022
Oct. 1 To Provision for Depreciation A/c 7,500 March 31 By Profit & Loss A/c 26,250
2022
March 31 To Provision for Depreciation A/c 18,750
26,250 26,250

5
Working Notes:
. Calculation of Accumulated Depreciation on Machine I:
1 `
Depreciation for 2019–20 30,000
Depreciation for 2020–21 (Sold on 1st October, 2020) 15,000
Accumulated Depreciation 45,000
. Calculation of Depreciation on Machine II:
2
Depreciation for 2019–20 (Purchased on 1st October, 2019) 7,500
Depreciation for 2020–21 15,000
Depreciation for 2021–22 (Sold on 1st October, 2021) 7,500
Accumulated Depreciation 30,000
. Calculation of Gain/(Loss) on Sale of Machines:
3 Machine I (`) Machine II (`)
Cost of Machinery 3,00,000 1,50,000
Less: Accumulated Depreciation (till date of sale) 45,000 30,000
Book Value on Date of Sale (A) 2,55,000 1,20,000
Sales Proceeds (B) 1,35,000 1,27,500
Gain/(Loss) on Sale (B – A) (1,20,000) 7,500

Illustration 5.
In Mr. Gupta’s Ledger, the Written Down Value of a machine as on 1st April, 2021 is ` 2,80,000.
The rate of depreciation is 15% p.a. as per Written Down Value Method.
The machine is under an annual repairs and maintenance contract with Mr. Mahesh, who
charges ` 5,000 per quarter.
A new machine was bought and the cheque issued for ` 3,90,000 and the cash paid
` 10,000 to Mr. Fixer for its immediate erection and subsequent use on 1st July, 2021.
The annual maintenance contract of the new machine bought was to be signed after the one
year guarantee period was over. Show Machinery Account, as it would appear in the Ledger
for the year ended 31st March, 2022.

Solution:
Dr. MACHINERY ACCOUNT Cr.
Date Particulars ` Date Particulars `
2022 2022
April 1 To Balance b/d 2,80,000 March 31 By Depreciation A/c (WN 1) 87,000
July 1 To Bank A/c 3,90,000 March 31 By Balance c/d 5,93,000
July 1 To Cash A/c 10,000
6,80,000 6,80,000

Working Notes:
1. Calculation of Depreciation: `
On old machine @ 15% p.a. on ` 2,80,000 for 1 year 42,000
On new machine @ 15% p.a. on ` 4,00,000 for 9 months (` 4,00,000 × 15/100 × 9/12) 45,000
Total Depreciation 87,000
2. Repairs and maintenance charges are Revenue Expenses so they are charged to the Profit & Loss Account.

6

Illustration 6.
On 1st April, 2018, machinery was purchased for ` 80,000. On 1st April, 2019 new machinery
costing ` 40,000 was purchased. On 30th June, 2020, machinery purchased on 1st April, 2018
was sold for ` 65,000 and on 30th September, 2020 machinery purchased on 1st April, 2019
was sold for ` 26,750. On 1st October, 2020 another machinery for ` 50,000 was acquired. On
1st October, 2021 new machinery costing ` 40,000 was purchased. Depreciation was charged
@ 10% p.a. on the Diminishing Balance Method. Prepare Machinery Account for four years
ending on 31st March, 2022.
Solution:
Dr. MACHINERY ACCOUNT Cr.
Date Particulars ` Date Particulars `
2018 2019
April 1 To Bank A/c (Mach. I) 80,000 March 31 By Depreciation A/c (Mach. I) 8,000
(@ 10% on ` 80,000)
March 31 By Balance c/d 72,000
80,000 80,000
2019 2020
April 1 To Balance b/d 72,000 March 31 By Depreciation A/c:
April 1 To Bank A/c (Mach. II) 40,000 Mach. I (10% of ` 72,000) 7,200
Mach. II (10% of ` 40,000) 4,000 11,200
March 31 By Balance c/d:
—Mach. I
(` 72,000 – ` 7,200) 64,800
—Mach. II
(` 40,000 – ` 4,000) 36,000 1,00,800
1,12,000 1,12,000
2020 2020
April 1 To Balance b/d: June 30 By Bank A/c (Sale) 65,000
—Mach. I 64,800 June 30 By Depreciation A/c (Mach. I) 1,620
—Mach. II 36,000 1,00,800 (` 64,800 × 10/100 × 3/12) (WN 1)
June 30 To Gain (Profit) on Sale Sept. 30 By Bank A/c (Sale) 26,750
of Machinery A/c (WN 1) 1,820 Sept. 30 By Depreciation A/c 1,800
Oct. 1 To Bank A/c (Mach. III) 50,000 (For 6 months on machine sold)
(` 36,000 ╫× 10/100 × 6/12)
Sept. 30 By Loss on Sale of Machinery (WN 2) 7,450
2021
March 31 By Depreciation A/c 2,500
(` 50,000 × 10/100 × 6/12)
March 31 By Balance c/d (Mach. III) 47,500
1,52,620 1,52,620
2021 2022
April 1 To Balance b/d 47,500 March 31 By Depreciation A/c:
Oct. 1 To Bank A/c (Mach. IV) 40,000 —Mach. III
(` 47,500 × 10/100) 4,750
—Mach. IV
(` 40,000 × 10/100 × 6/12) 2,000 6,750
March 31 By Balance c/d:
—Mach. III
(` 47,500 – ` 4,750) 42,750
—Mach. IV
(` 40,000 – ` 2,000) 38,000 80,750
87,500 87,500

7
Working Notes:
1. Calculation of Depreciation and Gain/(Loss) on Sale of Machinery sold on 30th June, 2020: `
Book value on 1st April, 2020 64,800
Less: Depreciation up to date of sale (` 64,800 × 10/100 × 3/12) 1,620
Book value on date of sale 63,180
Less: Sale Proceeds of Machinery 65,000
Profit on Sale of Machinery 1,820
2. Calculation of Depreciation and Gain/(Loss) on Machinery sold on 30th September, 2020: `
Book value on 1st April, 2020 36,000
Less: Depreciation for 6 Months 1,800
Book value on date of sale 34,200
Less: Sale proceeds of Machinery 26,750
Loss on Sale of Machinery 7,450
Illustration 7.
Harish Traders purchased machinery for ` 6,00,000 on 1st October, 2019. On 31st May, 2021 a
part of the machinery purchased on 1st October, 2019 for ` 80,000 was sold for ` 25,000. On the
same date it acquired additional machinery at the cost of ` 2,40,000. Depreciation is to be charged
@ 20% per annum on the written-down value and books are closed on 31st March, every year.
You are required to prepare (a) Machinery Account from 1st October, 2019 to 31st March, 2022,
(b) Provision for Depreciation Account, and (c) Machinery Disposal Account.
Solution:
Dr. MACHINERY ACCOUNT Cr.
Date Particulars ` Date Particulars `
2019 2020
Oct. 1 To Bank A/c 6,00,000 March 31 By Balance c/d 6,00,000
2020 2021
April 1 To Balance b/d
6,00,000 March 31 By Balance c/d 6,00,000
2021 2021
April 1 To Balance b/d 6,00,000 May 31 By Machinery Disposal A/c 80,000
May 31 To Bank A/c 2,40,000 2022
March 31 By Balance c/d 7,60,000
8,40,000 8,40,000

Dr. PROVISION FOR DEPRECIATION ACCOUNT Cr.

Date Particulars ` Date Particulars `
2020 2020
March 31 To Balance c/d 60,000
March
31
By
Depreciation 60,000
2021 2020
March 31 To Balance c/d 1,68,000 April 1 By Balance b/d 60,000
2021
March 31 By Depreciation A/c 1,08,000
[(` 6,00,000 – 60,000) × 20/100]
1,68,000 1,68,000
2021 2021
May 31 To Machinery Disposal A/c (WN 1) 24,320 April 1 By Balance b/d 1,68,000
May 31 By Depreciation (WN 2) 1,920
2022 2022
March 31 To Balance c/d 2,60,480 March 31 By Depreciation A/c (WN 2) 1,14,880
2,84,800 2,84,800

8

Dr. MACHINERY DISPOSAL ACCOUNT Cr.
Date Particulars ` Date Particulars `
2021 2021
May 31 To Machinery A/c 80,000 May 31 By Provision for
Depreciation A/c (WN 1) 24,320
May 31 By Bank A/c (Sale) 25,000
By Loss on Sale of Machine A/c 30,680
(Profit & Loss A/c) (Bal. Fig.)
80,000 80,000

Working Notes:
1. Calculation of Depreciation provided on machinery sold:

Particulars Book Value Accumulated

` Depreciation (`)
Original Cost as on 1st October, 2019 80,000
Less: Depreciation for 2019–20 for 6 months @ 20% p.a. 8,000 8,000
Book Value on 1st April, 2020 72,000
Less: Depreciation for 2020–21 (` 72,000 × 20/100) 14,400 14,400
Book Value on 1st April, 2021 57,600
Less: Depreciation for 2021–22 for 2 months @ 20% p.a. 1,920 1,920
55,680 24,320

2. Calculation of Depreciation on machinery in use:

`
Balance of remaining Machinery (` 6,00,000 – ` 80,000) 5,20,000
Less: Depreciation for 6 months 2019–20 @ 20% p.a. (` 5,20,000 × 20/100 × 6/12) 52,000
Book Value on 1st April, 2020 4,68,000
Less: Depreciation 2020–21 93,600
Book Value on 1st April, 2021 3,74,400
Less: Depreciation 2021–22 (A) 74,880
Book Value on 1st April, 2022 2,99,520
Depreciation on New Machine = ` 2,40,000 × 20/100 × 10/12 = ` 40,000 (B)
Total Depreciation = A+ B = ` 74,880 + ` 40,000 = ` 1,14,880

Advanced Level Questions

8. Hopefull Ltd. write off depreciation @ 10% per annum on the diminishing balance. On 1st April, 2021, the
Machinery Account showed a balance of ` 2,98,000. It was discovered in the year 2021–22 that:
(i) Heavy repairs affected to Plant and Machinery (completed on 30th September, 2019) were debited
to Machinery Account. The amount was ` 30,000; and
(ii) A machine costing ` 12,000 was entered in the Purchase Book on 1st January, 2020. The expenses
on installation, ` 800, were debited to General Expenses Account.
Necessary corrections were made in the year 2021–22. On 30th September, 2021 a machine which had
costed ` 40,000 on 1st April, 2019 was sold for ` 29,000 and a new machine costing ` 58,000 was purchased
on the same date, the expenses on installing the machine were ` 3,000.
Show the Machinery Account for the year ended 31st March, 2022.
9
Solution:
Dr. MACHINERY ACCOUNT Cr.
Date Particulars ` Date Particulars `

2021 2021
April 1 To Balance b/d 2,98,000 April 1 By Profit & Loss A/c 25,650
To Profit & Loss A/c 11,232 (Repairs) (WN 1)
(For machine purchased on Sept. 30 By Bank A/c (Sale) 29,000
1st Jan. 2020) (WN 2) By Depreciation A/c (WN 3) 1,620
Sep. 30 To Bank A/c (` 58,000 + ` 3,000) 61,000 (for 6 months)
By Loss on Sale of Machinery A/c 1,780
(WN 3) (Profit & Loss A/c)
2022
March 31 By Depreciation A/c (WN 5) 28,168
March 31 By Balance c/d 2,84,014
3,70,232 3,70,232

Working Notes:
1. Calculation of Book Value of Heavy Repairs: `
Machine Account wrongly debited for repairs on 30th September, 2019 30,000
Less: Depreciation for 2019–20 (` 30,000 ×10/100 × 6/12) 1,500
Book Value as on 1st April, 2020 28,500
Less: Depreciation for 2020–21 (` 28,500 × 10/100) 2,850
Book Value as on 1st April, 2021 25,650
Amount credited to Machinery A/c and debited to Profit & Loss A/c
2. Calculation of Book Value of New Machine wrongly entered in the Purchases and Installation Expenses debited
to General Expenses Account: `
Machine purchased on 1st January, 2020 (` 12,000 + ` 800) 12,800
Less: Depreciation for 3 months (2019–20) (` 12,800 × 10/100 × 3/12) 320
Book Value as on 1st April, 2020 12,480
Less: Depreciation for 2020–21 (` 12,480 × 10/100) 1,248
Book Value as on 1st April, 2021 11,232
Amount debited to Machinery A/c and credited to Profit & Loss A/c
3. Calculation of Profit/Loss on Sale of Machine: `
Cost on 1st April, 2019 40,000
Less: Depreciation for 2019–20 4,000
Book Value on 1st April, 2020 36,000
Less: Depreciation for 2020–21 3,600
Book Value on 1st April, 2021 32,400
Less: Depreciation for 2021–22 for 6 months 1,620
Book Value as on 30th September, 2021 30,780
Less: Sale Price 29,000
Loss on Sale of Machine 1,780

10

 4. Calculation of Book Value of Machinery (other than scrapped) (After Rectification of Errors) As on
1st April 2021: `
Unadjusted Book Value as on 1st April, 2021 2,98,000
Add: Book Value of machine purchased on 1st January, 2020 (WN 2) 11,232
3,09,232
Less: Book Value of repairs wrongly debited to Machinery A/c (WN 1) 25,650
2,83,582
Less: Book Value of Machine Sold (WN 3) 32,400
2,51,182

5. Calculation of Depreciation for 2021–22: `

A. On Old Machine (10% on ` 2,51,182) (WN 4) 25,118
B. On New Machine (` 61,000 ×10/100 × 6/12) 3,050
28,168

9. Gupta & Co. closes its accounts on 31st March, every year. It purchased the machineries as follows:
(i) Purchased machinery costing ` 1,20,000 on 1st July, 2019.
(ii) On 1st October, 2019, some machines purchased costing ` 1,20,000.
(iii) On 1st October, 2020, again purchased some machines costing ` 20,000.
(iv) On 1st January, 2022, purchased a new machine for ` 60,000.
(v) A machine costing ` 40,000 which was purchased on 1st July, 2019 was sold for ` 12,000
on 1st April, 2021.
1
(vi) It charges depreciation @ 33 % on the Written Down Value Method.
3
(vii) It is the practice of the company to charge depreciation for the full year even if the machinery is
used for a part of the year.
Prepare the Machinery Account in the books of Gupta & Co. for three years ending 31st March, 2022.

Solution:
Dr. MACHINERY ACCOUNT Cr.
Date Particulars ` Date Particulars `
2019 2020
July 1 To Bank A/c 1,20,000 March 31 By Depreciation A/c 80,000
1
Oct. 1 To Bank A/c 1,20,000 (33 % of ` 2,40,000)
3
March 31 By Balance c/d 1,60,000
2,40,000 2,40,000
2020 2021
April 1 To Balance b/d 1,60,000 March 31 By Depreciation A/c 60,000
1
Oct. 1 To Bank A/c 20,000 (33 % of ` 1,80,000)
3
March 31 By Balance c/d 1,20,000
1,80,000 1,80,000
2021 2021
April 1 To Balance b/d 1,20,000 April 1 By Bank A/c (Sale) 12,000
By Loss on Sale of Machinery A/c 5,778
2022 2022 (Profit & Loss A/c) (WN 1)
Jan. 1 To Bank A/c 60,000 March 31 By Depreciation A/c (WN 2) 54,074
By Balance c/d 1,08,148
1,80,000 1,80,000

11
Working Notes:

1. Calculation of Loss on Sale of Machinery: `

Cost of Machinery on 1st July, 2019 40,000

Less: Depreciation for 2019–20 13,333

Book Value on 1st April, 2020 26,667

Less: Depreciation for 2020–21 8,889

Book Value on 1st April, 2021 17,778

Less: Amount realised on Sale 12,000

Loss on Sale of Machinery 5,778

2. Depreciation for 2021–22:

1
33 % on ` 1,62,222 (i.e., ` 1,20,000 + ` 60,000 – ` 17,778) = ` 54,074.
3

Illustration 10.
Vandana Traders purchased a machinery for ` 8,00,000 on 1st July, 2019 and decided to
depreciate it @ 10% annually on the Diminishing Balance Method. On 1st October, 2021, a
part of the machinery valued in the books of the firm at ` 1,60,000 on 1st July, 2019 was sold
for ` 1,00,000.
Show Machinery Account in the books of the company for the years ended 31st March, 2020,
2021 and 2022.
Solution:
Dr. MACHINERY ACCOUNT Cr.
Date Particulars ` Date Particulars `
2019 2020
July 1 To Bank A/c 8,00,000 March 31 By Depreciation A/c 60,000
(` 8,00,000 × 10/100 × 9/12)
March 31 By Balance c/d 7,40,000
8,00,000 8,00,000
2020 2021
April 1 To Balance b/d 7,40,000 March 31 By Depreciation A/c 74,000
March 31 By Balance c/d 6,66,000
7,40,000 7,40,000
2021 2021
April 1 To Balance b/d 6,66,000 Oct. 1 By Bank A/c—Sale 1,00,000
Oct. 1 By Depreciation A/c (WN 1) 6,660
Oct. 1 By Loss on Sale of Machinery A/c 26,540
(Profit & Loss A/c) (WN 1)
2022
March 31 By Depreciation A/c (WN 2) 53,280
(After Sale of Machinery)
March 31 By Balance c/d 4,79,520
6,66,000    6,66,000

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Working Notes:
1. Calculation of Loss on Sale of Machinery:
`
Book Value of Machinery (1st July, 2019) 1,60,000
Less: Depreciation (2019–20) (` 1,60,000 × 10/100 × 9/12) 12,000
Book Value of Machinery (1st April, 2020) 1,48,000
Less: Depreciation (2020–21) (` 1,48,000 × 10/100) 14,800
Book Value of Machinery (1st April, 2021) 1,33,200
Less: Depreciation (2021–22) (` 1,33,200 × 10/100 × 6/12) 6,660
Book Value of Machinery (1st October, 2021) 1,26,540
Less: Sale Proceeds 1,00,000
Loss on Sale of Machinery 26,540
2. Calculation of Depreciation after Sale of Machinery:
Book Value of Machinery (1st April, 2021) 6,66,000
Less: Book Value of Machinery sold (1st April, 2021) (WN 1) 1,33,200
Book Value of Machinery after sale of Machinery (1st April, 2021) 5,32,800
Depreciation on Balance Machinery = ` 5,32,800 × 10/100 = ` 53,280.

Illustration 11.
Green Ltd. purchased a machinery on 1st August, 2017 for ` 60,000. On 1st October, 2018, it
purchased another machine for ` 20,000.
On 30th June, 2019, it sold the first machine purchased in 2017 for ` 38,500 and on the same
date purchased a new machinery for ` 50,000. Depreciation is provided @ 20% p.a. on cost each
year. Accounts are closed each year on 31st March.
Show Machinery Account from 1st August 2017 to 31st March, 2020.
Solution:
Dr. MACHINERY ACCOUNT Cr.
Date Particulars ` Date Particulars `
2017 2018
August 1 To Bank A/c 60,000 March 31 By Depreciation A/c 8,000
—Machine I —Machine I (for 8 months)
March 31 By Balance c/d 52,000
60,000 60,000
2018 2019
April 1 To Balance b/d 52,000 March 31 By Depreciation A/c:
Oct. 1 To Bank A/c 20,000 —Machine I 12,000
—Machine II —Machine II 2,000 14,000
March 31 By Balance c/d:
—Machine I
` (52,000 – 12,000) 40,000
—Machine II
` (20,000 – 2,000) 18,000 58,000
72,000 72,000

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2019 2019
April 1 To Balance b/d: June 30 By Bank A/c—Sale 38,500
—Machine I 40,000 June 30 By Depreciation A/c (for 3 months) 3,000
—Machine II 18,000 58,000 —Machine I
June 30 To Bank A/c 50,000 2020
—Machine III March 31 By Depreciation A/c:
June 30 To Gain (Profit) on Sale of —Machine II 4,000
Machinery A/c (WN) 1,500 —Machine III 7,500 11,500
March 31 By Balance c/d:
—Machine II
` (18,000 – 4,000) 14,000
—Machine III
` (50,000 – 7,500) 42,500 56,500
1,09,500 1,09,500
2020
April 1 To Balance b/d 56,500

Working Note: Calculation of Gain (Profit)/Loss on Sale of the Machine I:

Particulars `
Book Value of Machine I as on 1st April, 2019 40,000
Less: Depreciation for 2019–20 (up to 30th June, 2019) (` 60,000 × 20/100 ×3/12) 3,000
Book Value of Machine I as on 30th June, 2019 37,000
Gain (Profit) on Sale = ` 38,500 (Sale Proceeds) – ` 37,000 (Book Value) 1,500

Illustration 12.
On 1st January, 2018, Jaipur Transport Co. purchased a truck for ` 8,00,000. On 1st July, 2019,
this truck was involved in an accident and was destroyed and ` 6,00,000 were received by a
cheque from the Insurance Company in full settlement on 1st October, 2019. On 1st July, 2019,
another truck was purchased by the company for ` 10,00,000. The company charges depreciation
@ 20% per annum under the Written Down Value Method.
Prepare Truck Account and Depreciation Account for 2018 to 2020 when books of account are
closed on 31st March every year.
Solution:
Dr. TRUCK ACCOUNT Cr.
Date Particulars ` Date Particulars `
2018 2018
Jan. 1 To Bank A/c 8,00,000 March 31 By Depreciation A/c 40,000
(20% on ` 8,00,000 for 3 months)
March 31 By Balance c/d 7,60,000
8,00,000 8,00,000
2018 2019
April 1 To Balance b/d 7,60,000 March 31 By Depreciation A/c 1,52,000
(20% of ` 7,60,000)
March 31 By Balance c/d 6,08,000
7,60,000 7,60,000

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2019 2019
April 1 To Balance b/d 6,08,000 Oct. 1 By Bank A/c 6,00,000
July 1 To Bank A/c (WN 3) 10,00,000 2020
Oct. 1 To Gain (Profit) on Truck A/c 22,400 March 31 By Depreciation A/c (WN 1) 1,80,400
(Profit & Loss A/c) (WN 2) March 31 By Balance c/d 8,50,000
16,30,400 16,30,400
2020
April 1 To Balance b/d 8,50,000

Dr. DEPRECIATION ACCOUNT Cr.

Date Particulars ` Date Particulars `

2018 2018
March 31 To Truck A/c 40,000 March 31 By Profit & Loss A/c 40,000
2019 2019
March 31 To Truck A/c 1,52,000 March 31 By Profit & Loss A/c 1,52,000
2020 2020
March 31 To Truck A/c 1,80,400 March 31 By Profit & Loss A/c 1,80,400

Working Notes:
1. Calculation of Depreciation: `
(i) 20% on ` 6,08,000 for 3 months (` 6,08,000 × 20/100 × 3/12) 30,400
(ii) 20% on ` 10,00,000 for 9 months (` 10,00,000 × 20/100 × 9/12) 1,50,000
Total Depreciation 1,80,400

2. Calculation of Gain (Profit) on the Destroyed Truck:

(i) Original cost 8,00,000
Less: Depreciation charged (` 40,000 + ` 1,52,000 + ` 30,400) 2,22,400
Book value or W.D.V. on the accident date 5,77,600

(ii) Insurance claim 6,00,000

Less: Book value as per [WN 2(i)] 5,77,600
Gain (Profit) on Destroyed Truck 22,400

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