how we make machinery account with provision account..?
The following example will help you understand how Asset A/c is prepared when Provision for Depreciation A/c is maintained.
Example- On 1 April 1996, ABC Ltd. purchases four machines for Rs. 80,000 each. The accounting year of the company ends on 31 December every year. Depreciation is provided at the rate of 15% p.a. on original cost. On 1 Jan 1998, one of the machine was sold for Rs 50,000 and on 1 October 1999, a second hand machine was sold for Rs 40,000. Another machine with a higher capacity which costs Rs 2, 00,000 was purchased on 1 October 1999.
You are required to show : (i) Machinery A/c and (iii) Provision for Depreciation A/c for the years 1996 to 1999.
Machinery Account | ||||||
Dr. | Cr. | |||||
Date | Particulars | Amount (Rs) | Date | Particulars | Amount (Rs) | |
1996 |
|
| 1996 |
|
| |
Apr. 01 | Bank A/c (80,000 × 4) | 3,20,000 | Dec. 31 | Balance c/d | 3,20,000 | |
|
| 3,20,000 |
|
| 3,20,000 | |
1997 |
|
| 1997 |
|
| |
Apr. 01 | Balance b/d | 3,20,000 | Dec. 31 | Balance c/d | 3,20,000 | |
|
| 3,20,000 |
|
| 3,20,000 | |
1998 |
|
| 1998 |
|
| |
Jan. 01 | Balance b/d | 3,20,000 | Jan. 01 | Provision for Depreciation A/c ( WN1 ) | 21,000 | |
Nov. 30 |
|
| Jan. 01 | Bank A/c (Sale) | 50,000 | |
|
|
| Jan. 01 | Profit and Loss A/c (Loss on sale) | 9,000 | |
|
|
| Dec. 31 | Balance c/d | 2,40,000 | |
|
| 3,20,000 |
|
| 3,20,000 | |
1999 |
|
| 1999 |
|
| |
Jan. 01 | Balance b/d | 2,40,000 | Oct 01 | Provision for Depreciation A/c | 42,000 | |
Oct. 01 | Profit and Loss A/c (Profit) | 2,000 | Oct. 01 | Bank A/c | 40,000 | |
Oct. 01 | Bank A/c | 2,00,000 | Dec. 31 | Balance c/d | 3,60,000 | |
|
| 4,42,000 |
|
| 4,42,000 | |
|
|
|
|
|
| |
Provision Depreciation Account | |||||||
Dr. | Cr. | ||||||
Date | Particulars | Amount (Rs) | Date | Particulars | Amount (Rs) | ||
1996 |
|
| 1996 |
|
| ||
Dec. 31 | Balance c/d | 36,000 | Dec. 31 | Depreciation A/c (3,20,000 × 15%×9/12) | 36,000 | ||
|
| 36,000 |
|
| 1,80,000 | ||
1997 |
|
| 1997 |
|
| ||
Dec.31 | Balance c/d | 84,000 | Jan.01 | Balance b/d | 36,000 | ||
|
|
| Dec.31 | Depreciation A/c | 48,000 | ||
|
| 84,000 |
|
| 84,000 | ||
1998 |
|
| 1998 |
|
| ||
Jan.01 | Machine A/c | 21,000 | Jan. 01 | Balance b/d | 84,000 | ||
Dec. 31 | Balance c/d | 99,000 | Dec. 31 | Depreciation- |
| ||
|
|
|
| On 2,40,000 | 36,000 | 36,000 | |
|
| 1,20,000 |
|
| 1,20,000 | ||
1999 |
|
| 1999 |
|
| ||
Oct.01 | Machine A/c | 42,000 | Jan. 01 | Balance b/d | 99,000 | ||
Dec. 31 | Balance c/d | 97,500 | Oct. 01 | Depreciation A/c (15 % on 80,000 for 9 months) | 9,000 | ||
|
|
| Dec. 31 | Depreciation- |
| ||
|
|
|
| On 2,00,000 (for 3 months) | 7,500 |
| |
|
|
|
| On 1,60,000 | 24,000 | 31,500 | |
|
| 1,39,500 |
|
| 1,39,500 | ||
Working Notes :
WN1 : Machine purchased for Rs 80,000 on April 01, 1996 has been sold on January 01, 1998. Therefore, depreciation on machine for 9+12 months i.e. Rs 21,000 [ 9,000 (for 1996) + 12,000 (for 1997)] is credited to Machine Account by making a debit to Provision for Depreciation Account.
WN2 : Calculation of Profit or Loss on Sale
Particulars | Amount (Rs) |
Value of Machine Sold as on Jan. 01, 1999 (80,000) | 80,000 |
Less : Depreciation for 9 months+ 2 years+ 9months (9,000+24,000+9,000) | (42,000) |
Value of Machine on October 01,1999 | 38,000 |
Less : Sale Value | (40,000) |
Profit on Sale | 2,000 |
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