As per Accounting Standard no. 6: Accounting for depreciation, every asset is depreciated apart from the land.
ques: Now for ex: if a person brought the machinery of rupees 1,00,000 and depreciation rate 10% as per the straight-line method and he uses his machinery for 5 years. and after 5 years he sold machinery
1. of 60,000
2. of 35,000
ANSWER:
Machinery Account: entries with steps:
1. he brought the machinery of 100,000
Machinery A/C dr. 100000
To cash A/C 100000
2. Depreciation A/c dr. 50000
To machinery acc 50000
(being machinery is depreciated 100000*10% = 10,000 for 1 year and for 5 year 50,000)
3. a) if machinery is sold 60000
then
cash acc dr 60000
TO sale of Machinery 50000
to gain on machinery 10000
(being the cost of machinery 100000 - 50000(depreciation amount) = 50000 and machinery sold at 60000 i.e. 10000 profit.
and case b)
cash acc dr 35000
loss on machinery dr 15000
to sale on machinery 50000
(being machinery balance cost of 50000, sold at 35000 loss booked 15000)
Now, make a machinery account and put the above entries into machinery and depreciation accounts.
Note: I am making journal entries to show the easy way and clear way so that you can understand from basics how machinery account is made through journal entries.
Thankyou