Question

On 1^st April, 1995 Avadhoot Traders, Ajara, purchased machinery for Rs. 40,000. On 1^st October, 1995 they purchased further machinery costing Rs. 20,000. On 1^st October, 1997 they sold machinery which was purchased on 1^st April, 1995 for Rs. 28,780. Depreciation on machinery was provided at the rate of 10% p. a. on Diminishing Balance Method. The financial year closes on every 31^st March. Prepare: Machinery A/c and Depreciation A/c for three years: 1995-96, 1996-97 and 1997-98.

Answer 1

In the Books of Avadhoot Traders, Ajara
Machinery Account
Dr.					Cr.
Date	Particulars			Amount (Rs)	Date	Particulars				Amount (Rs)
1995					1996
Apr. 01	Bank A/c (M1)			40,000	Mar. 31	Depreciation A/c
Oct. 01	Bank A/c (M2)			20,000		M1	4,000
						M2	1,000			5,000
						Balance c/d
						M1		36,000
						M2		19,000		55,000
				60,000						60,000
1996					1997
Apr. 01	Balance b/d				Mar. 31	Depreciation A/c
	M1	36,000				M1			3,600
	M2	19,000		55,000		M2			1,900	5,500
						Balance c/d
						M1			32,400
						M2			17,100	49,500
				55,000						55,000
1997					1997
Apr. 01	Balance b/d				Oct. 01	Depreciation A/c (on M1 for 6 months)				1,620
	M1		32,400			Bank A/c (Sale of M1)				28,780
	M2		17,100	49,500		Profit and Loss A/c (Loss on Sale)				2,000
					1998
					Mar. 31	Depreciation A/c (M2)				1,710
						Balance c/d (M2)				15,390
				49,500						49,500

 

Depreciation Account
Dr.			Cr.
Date	Particulars	Amount (Rs)	Date	Particulars	Amount (Rs)
1996			1996
Mar. 31	Machinery A/c	5,000	Mar. 31	Profit and Loss A/c	5,000
		5,000			5,000
1997			1997
Mar. 31	Machinery A/c	5,500	Mar. 31	Profit and Loss A/c	5,500
		5,500			5,500
1998			1998
Mar. 31	Machinery A/c (1,620 + 1,710)	3,330	Mar. 31	Profit and Loss A/c	3,330
		3,330			3,330

Working Notes:

WN1 Calculation of Profit or Loss on Sale

Particulars	Amount
Value of M1 as on Apr. 01, 1997	32,400
Less: Depreciation for 6 months	1,620
Value of M1 as on Oct. 01, 1997	30,780
Less: Sale Value	28,780
Loss on Sale	2,000

WN2 Calculation of Depreciation

Years	Depriciation on M1	Depriciation on M2
1995-96	40,000 x `10/100`= Rs 4,000	20,000 x `10/100xx6/12`Rs 1,000
1996-97	36,000 x `10/100`= Rs 3,600	19,000 x `10/100`= Rs 1,900
1997-98	32,400 x `10/100xx6/12`=Rs 1,620	17,100 x `10/100`= Rs 1,710