Question No 35 Chapter No 14
35. On 1st April 2015, Amit Kumar purchased five machines for ₹ 60,000 each. Depreciation @ 10% p.a. on initial cost has been changed from the Profit and Loss Account and credited to Provision for Depreciation Account.
On 1st April 2016, one machine was sold for ₹ 50,000 and on 1st April 2017, another machine was sold for ₹ 50,000. An improved model costing ₹ 1,00,000 was purchased on 1st October 2016. IGST was paid @ 12%. Amit Kumar closes his books on 31st March each year. You are required to show: (i) Machinery Account: (ii) Machinery Disposal Account and (iii) Provision for Depreciation Account for the period of three accounting years ended 31st March 2018.
The solution of Question No 35 Chapter No 14: –
| Dr. | Machinery A/c | Cr. | |||||
| Date | Particulars |
J.F. | Amount | Date | Particulars |
J.F. | Amount |
| 01/04/15 | To Bank A/c | 3,00,000 | |||||
| 31/03/16 | By Balance C/d | 3,00,000 | |||||
| 3,00,000 | 3,00,000 | ||||||
| 01/04/16 | To Balance b/d | 3,00,000 | 01/04/16 | By Machinery Disposal A/c | 60,000 | ||
| 01/10/16 | To Bank A/c | 1,00,000 | 31/03/17 | By Balance C/d | 3,40,000 | ||
| 4,00,000 | 4,00,000 | ||||||
| 01/04/17 | To Balance b/d | 3,40,000 | 31/03/18 | By Machinery Disposal A/c | 60,000 | ||
| 31/03/18 | By Balance C/d | 2,80,000 | |||||
| 3,40,000 | 3,40,000 | ||||||
| Dr. | Accumulated Depreciation Account A/c | Cr. | |||||
| Date | Particulars |
J.F. | Amount | Date | Particulars |
J.F. | Amount |
| 31/03/15 | By Deprecation A/c*1 | 30,000 | |||||
| 31/03/16 | To Balance c/d | 30,000 | |||||
| 30,000 | 30,000 | ||||||
| 30/09/13 | To Machinery disposal A/c | 6,000 | 31/03/16 | To Balance b/d | 30,000 | ||
| 01/04/17 | To Balance c/d | 53,000 | 31/03/16 | By Deprecation A/c*2 | 29,000 | ||
| 59,000 | 59,000 | ||||||
| 30/09/13 | To Machinery disposal A/c | 12,000 | 01/12/17 | To Balance b/d | 53,000 | ||
| 31/03/18 | To Balance c/d | 69,000 | 31/03/18 | By Deprecation A/c*3 | 28,000 | ||
| 81,000 | 81,000 | ||||||
| Dr. | Machinery Disposal Account | Cr. | |||||
| Date | Particulars |
J.F. | Amount | Date | Particulars |
J.F. | Amount |
| 30/09/17 | To Machinery A/c | 60,000 | 30/09/17 | By Provision for Depreciation A/c | 6,000 | ||
| 30/09/17 | By Bank A/c | 50,000 | |||||
| 30/09/17 | By Loss on sale of Machinery A/c | 4,000 | |||||
| 60,000 | 60,000 | ||||||
| Dr. | Machinery Disposal Account | Cr. | |||||
| Date | Particulars |
J.F. | Amount | Date | Particulars |
J.F. | Amount |
| 30/09/17 | To Machinery A/c | 60,000 | 01/04/17 | By Provision for Depreciation A/c | 12,000 | ||
| 01/04/17 | By Bank A/c | 50,000 | |||||
| 01/04/17 | To Profit on sale of Machinery A/c | 2,000 | |||||
| 62,000 | 62,000 | ||||||
Working Note:-
*1:- Calculation of the amount of Depreciation on furniture for the year 2015-16
Purchased on 1st October 2015
Depreciation = Value of Asset X Rate of Depreciation X Period
Value of Asset = 6,00,000
Rate of Depreciation = 10%
Period = from 01/010/2015 to 31/03/2016 i.e.6months
(from the date of purchase/Beginning balance to the end of the financial year)
=6,00,000 X10/100 X 12/12
Depreciation = 30,000
Total Depreciation for the year = 30,000
*2:- Calculation of the amount of Depreciation on furniture for the year 2016-17
Purchased on 1st October 2015
Depreciation = Value of Asset X Rate of Depreciation X Period
Value of Asset = 2,40,000
Rate of Depreciation = 10%
Period = from 01/04/2016 to 31/03/2017 i.e.12months
(from the date of purchase/Beginning balance to the end of the financial year)
=2,40,000 X10/100 X 12/12
Depreciation = 24,000
Purchased on 1st October 2016
Depreciation = Value of Asset X Rate of Depreciation X Period
Value of Asset =1,00,000
Rate of Depreciation = 10%
Period = from 01/10/2016 to 31/03/2017 i.e.6months
(from the date of purchase/Beginning balance to end of the financial year)
=1,00,000 X10/100 X 6/12
Depreciation = 5,000
Total Depreciation for the year = 29,000
| Statement Showing profit or loss on the sale of Machinery | |
| Particulars |
Amount |
| Purchase value of machinery as on 1st October, 2015 | 60,000 |
| Less: – Amount of Depreciation charged on the year 2015-16 | |
| 60,000*10%*12/12 | 6,000 |
| Book value of an asset as on 1st September 2016 | 54,000 |
| Sale Price of Machinery | 50,000 |
| Loss on the sale of the asset | 4,000 |
*3:– Calculation of the amount of Depreciation on furniture for the year 2016-17
Purchased on 1st October,2015
Depreciation = Value of Asset X Rate of Depreciation X Period
Value of Asset = 1,80,000
Rate of Depreciation = 10%
Period = from 01/04/2016 to 31/03/2017 i.e.12months
(from the date of purchase/Beginning balance to end of the financial year)
=1,80,000 X10/100 X 12/12
Depreciation = 18,000
Purchased on 1st October,2016
Depreciation = Value of Asset X Rate of Depreciation X Period
Value of Asset =1,00,000
Rate of Depreciation = 10%
Period = from 01/03/2017 to 31/03/2018 i.e.12months
(from the date of purchase/Beginning balance to end of the financial year)
=1,00,000 X10/100 X 6/12
Depreciation = 10,000
Total Depreciation for the year = 28,000
| Statement Showing profit or loss on the sale of Machinery | |
| Particulars |
Amount |
| Purchase value of machinery as on 1st October, 2015 | 60,000 |
| Less: – Amount of Depreciation charged on the year 2015-16 | |
| 60,000*10%*12/12 | 6,000 |
| Amount of Depreciation charged on the year 2016-17 | 6,000 |
| Book value of an asset as on 1st September 2016 | 48,000 |
| Sale Price of Machinery | 50,000 |
| Profit on the sale of the asset | 2,000 |
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Also, Check out the solved question of previous Chapters: –
- Chapter No. 1 – Introduction to Accounting
- Chapter No. 2 – Basic Accounting Terms
- Chapter No. 3 – Theory Base of Accounting, Accounting Standards and International Financial Reporting Standards(IFRS)
- Chapter No. 4 – Bases of Accounting
- Chapter No. 5 – Accounting Equation
- Chapter No. 6 – Accounting Procedures – Rules of Debit and Credit
- Goods and Services Tax(GST)
- Chapter No. 7 – Origin of Transactions – Source Documents and Preparation of Vouchers
- Chapter No. 8 – Journal
- Chapter No. 9 – Ledger
- Chapter No. 10 – Special Purpose Books I – Cash Book
- Chapter No. 11 – Special Purpose Books II – Other Books
- Chapter No. 12 – Bank Reconciliation Statement
- Chapter No. 13 – Trial Balance
- Chapter No. 14 – Depreciation
- Chapter No. 15 – Provisions and Reserves
- Chapter No. 16 – Accounting for Bills of Exchange
- Chapter No. 17 – Rectification of Errors
- Chapter No. 18 – Financial Statements of Sole Proprietorship
- Chapter No. 19 – Adjustments in preparation of Financial Statements
- Chapter No. 20 – Accounts from incomplete Records – Single Entry System
- Chapter No. 21 – Computers in Accounting
- Chapter No. 22 – Accounting Software – Tally
- Chapter No. 5 – Accounting Equation
- Chapter No. 6 – Accounting Procedures – Rules of Debit and Credit
- Goods and Services Tax(GST)
- Chapter No. 8 – Journal
- Chapter No. 9 – Ledger
- Chapter No. 10 – Special Purpose Books I – Cash Book
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