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Question No 40 Chapter No 13
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Creation of Provision for Depreciation Account
40. The following balances appear in the books of Jain Mills:
| April.1 2018 | Machinery Account | Rs 80,000 |
| Provision for Depreciation | Rs 30,000 |
On April 1, 2018 they decided to sell machinery for Rs 8,350. this machine was purchased for Rs 16,000 on 1st April 2014.
You are required to prepare Machinery Account and provision for depreciation Account for the year 2018-19, assuming the firm has been charging depreciation at 10% p.a. on original cost method
The solution of Question No 40 Chapter No 13:-
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| Dr. | Machinery A/c | Cr. | |||||
| Dat | Particulars | J.F. | Amount | Date | Particulars | J.F. | Amount |
| 01/03/18 | To Balance b/f | 80,000 | 01/03/18 | By Machinery Disposal A/c | 16,000 | ||
| 31/03/19 | By Balance C/d | 64,000 | |||||
| 80,000 | 80,000 | ||||||
| Dr. | Provision for Depreciation A/c | Cr. | |||||
| Date | Particulars | J.F. | Amount | Date | Particulars | J.F. | Amount |
| 01/03/18 | To Machinery Disposal A/c | 6,400 | 01/03/18 | By Balance b/f | 30,000 | ||
| 31/03/19 | To Balance c/d | 30,000 | 31/03/19 | By Depreciation A/c | 6,400 | ||
| 36,400 | 36,400 | ||||||
| Dr. | Machinery Disposal A/c | Cr. | |||||
| Date | Particulars | J.F. | Amount | Date | Particulars | J.F. | Amount |
| 01/03/18 | By Balance b/f | 8,350 | |||||
| 01/03/18 | By Provision for Dep. A/c | 6,400 | |||||
| 01/03/18 | By Profit/Loss A/c | 1,250 | |||||
| 31/03/19 | To Balance c/d | 16,000 | |||||
| 16,000 | 16,000 | ||||||
Working note:-
| Statement Showing profit or loss on the sale of Machinery | |
| Particulars | Amount |
| Purchase value of Equipment as on 1st Apr, 2014 | 16,000 |
| Less: – Amount of Depreciation charged on the year 2014-15 | |
| 16,000 *10%* 12/12 | 1,600 |
| Amount of Depreciation charged on the year 2015-16 | |
| 16,000 *10%* 12/12 | 1,600 |
| Amount of Depreciation charged on the year 2016-17 | |
| 16,000 *10%* 12/12 | 1,600 |
| Amount of Depreciation charged on the year 2017-18 | |
| 16,000 *10%* 12/12 | 1,600 |
| Book value of the asset as on 1st March 2018 | 9,600 |
| Sale Price of Machinery | 8,350 |
| Loss on the sale of the asset | 1,250 |
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Depreciation | Meaning | Methods | Examples
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Also, Check out the solved question of all Chapters: –
Chapter No. 2 – Theory Base of Accounting
Chapter No. 3 – Vouchers and transactions
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Chapter No. 4 – Journal
Chapter No. 5 – Ledger
Chapter No. 6 – Cash Book
Chapter No. 7 – Other Subsidiary Books
Chapter No. 8 – Journal Proper
Chapter No. 9 – Trial Balance
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Chapter No. 10 – Bank Reconciliation Statement
Chapter No. 11 – Depreciation
Chapter No. 12 – Provisions and Reserves
Chapter No. 13 – Bills of Exchange
Chapter No. 14 – Rectification of Errors
Chapter No. 15 – Financial Statements – (Without Adjustments)
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Chapter No. 16 – Financial Statements – (With Adjustments)