Question

On April 01, 2010, Bajrang Marbles purchased a Machine for ₹ 2,80,000 and spent ₹ 10,000 on its carriage and ₹ 10,000 on its installation. It is estimated that its working life is 10 years and after 10 years its scrap value will be ₹ 20,000.
(a) Prepare Machine account and Depreciation account for the first four years by providing depreciation on straight line method. Accounts are closed on March 31^st every year.
(b) Prepare Machine account, Depreciation account and Provision for depreciation account (or accumulated depreciation account) for the first four years by providing depreciation using straight line method accounts are closed on March 31^st every year.

Answer 1

(a)

Dr.	Books of Bajrang Marbles Machinery Account						Cr.
Date	Particulars	J.F.	Amount (₹)	Date	Particulars	J.F.	Amount (₹)
2010				2011
Apr.01	Bank (1,80,0000 + 20,000)		2,00,000	Mar.31	Depreciation		18,000
					Balance c/d		1,82,000
			2,00,000				2,00,000
2011				2012
Apr.01	Balance b/d		1,82,000	Mar.31	Depreciation		18,000
				Mar.31	Balance c/d		1,64,000
			1,82,000				1,82,000
2012				2013
Apr.01	Balance b/d		1,64,000	Mar.31	Depreciation		18,000
				Mar.31	Balance c/d		1,46,000
			1,64,000				1,64,000
2013				2014
Apr.01	Balance b/d		1,46,000	Mar.31	Depreciation		18,000
				Mar.31	Balance c/d		1,28,000
			1,46,000				1,46,000

 

Working notes: Calculation of annual depreciation

Depreciation (p.a) = `(("Orginal cost" - "Scrap Value"))/("Estimated Life of Asset" ("years"))`

= `((1","80","000 + 10","000 + 10","000 - 20","000))/10`

= ₹ 18,000 per annum

 

Dr.	Depreciation Account						Cr.
Date	Particulars	J.F.	Amount (₹)	Date	Particulars	J.F.	Amount (₹)
2011				2011
Mar.31	Machinery		18,000	Mar.31	Profit and Loss		18,000
			18,000				18,000
2012				2012
Mar.31	Machinery		18,000	Mar.31	Profit and Loss		18,000
			18,000				18,000
2013				2013
Mar.31	Machinery		18,000	Mar.31	Profit and Loss		18,000
			18,000				18,000
2014				2014
Mar.31	Machinery		18,000	Mar.31	Profit and Loss		18,000
			18,000				18,000

 

(b)

Dr.	Books of Bajrang Marbles Machinery Account						Cr.
Date	Particulars	J.F.	Amount (₹)	Date	Particulars	J.F.	Amount (₹)
2010				2011
Apr.01	Bank		2,00,000	Mar.31	Balance c/d		2,00,000
			2,00,000				2,00,000
2011				2012
Apr.01	Balance b/d		2,00,000	Mar.31	Balance c/d		2,00,000
			2,00,000				2,00,000
2012				2013
Apr.01	Balance b/d		2,00,000	Mar.31	Balance c/d		2,00,000
			2,00,000				2,00,000
2013				2014
Apr.01	Balance b/d		2,00,000	Mar.31	Balance c/d		2,00,000
			2,00,000				2,00,000

 

Dr.	Provision for Depreciation Account						Cr.
Date	Particulars	J.F.	Amount (₹)	Date	Particulars	J.F.	Amount (₹)
2011				2011
Mar.31	Balance c/d		18,000	Mar.31	Depreciation		18,000
			18,000				18,000
2012				2011
				Apr.01 2012	Balance b/d		18,000
Mar.31	Balance c/d		36,000	Mar.31	Depreciation		18,000
			36,000				36,000
2013				2012
				Apr.01 2013	Balance b/d		36,000
Mar.31	Balance c/d		54,000	Mar.31	Depreciation		18,000
			54,000				54,000
2014				2013
				Apr.01 2014	Balance b/d		54,000
Mar.31	Balance c/d		72,000	Mar.31	Depreciation		18,000
			72,000				72,000

 

Dr.	Depreciation Account						Cr.
Date	Particulars	J.F.	Amount (₹)	Date	Particulars	J.F.	Amount (₹)
2011				2011
Mar.31	Provision for Depreciation		18,000	Mar.31	Profit and Loss		18,000
			18,000				18,000
2012				2012
Mar.31	Provision for Depreciation		18,000	Mar.31	Profit and Loss		18,000
			18,000				18,000
2013				2013
Mar.31	Provision for Depreciation		18,000	Mar.31	Profit and Loss		18,000
			18,000				18,000
2014				2014
Mar.31	Provision for Depreciation		18,000	Mar.31	Profit and Loss		18,000
			18,000				18,000