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#### Question 1:

On 1st April, 2007, a limited company purchased a Machine for ₹ 1,90,000 and spent ₹ 10,000 on its installation. At the date of purchase, it was estimated that the scrap value of the machine would be ₹ 50,000 at the end of sixth year.
Give Machine Account and Depreciation A/c in the books of the Company for 4 years after providing depreciation by Fixed Installment Method. The books are closed on 31st March every year.

 Machinery Account Dr. Cr. Date Particulars Amount (Rs) Date Particulars Amount (Rs) 2007 2008 Apr. 01 Bank A/c (1,90,000 + 10,000) 2,00,000 Mar. 31 Depreciation A/c 25,000 Mar. 31 Balance c/d 1,75,000 2,00,000 2,00,000 2008 2009 Apr. 01 Balance b/d 1,75,000 Mar. 31 Depreciation A/c 25,000 Mar. 31 Balance c/d 1,50,000 1,75,000 1,75,000 2009 2010 Apr. 01 Balance b/d 1,50,000 Mar. 31 Depreciation A/c 25,000 Mar. 31 Balance c/d 1,25,000 1,50,000 1,50,000 2010 2011 Apr. 01 Balance b/d 1,25,000 Mar. 31 Depreciation A/c 25,000 Mar. 31 Balance c/d 1,00,000 1,25,000 1,25,000

 Depreciation Account Dr. Cr. Date Particulars Amount (Rs) Date Particulars Amount (Rs) 2008 2008 Mar. 31 Machinery A/c 25,000 Mar. 31 Profit and Loss A/c 25,000 25,000 25,000 2009 2009 Mar. 31 Machinery A/c 25,000 Mar. 31 Profit and Loss A/c 25,000 25,000 25,000 2010 2010 Mar. 31 Machinery A/c 25,000 Mar. 31 Profit and Loss A/c 25,000 25,000 25,000 2011 2011 Mar. 31 Machinery A/c 25,000 Mar. 31 Profit and Loss A/c 25,000 25,000 25,000

Working Note: Calculation of Depreciation

#### Question 2:

On 1st April, 2009, a Company bought Plant and Machinery costing ₹ 68,000. It is estimated that its working life is 10 years, at the end of which it will fetch ₹ 8,000. Additions are made on 1st April, 2010 to the value of ₹ 40,000 (Residual value ₹ 4,000). More additions are made on Oct. 1, 2011 to the value of ₹ 9,800 (Break up value ₹ 800). The working life of both the additional Plant and machinery is 20 years.
Show the Plant and Machinery account for the first four years, if depreciation is written off according to Straight Line Method. The accounts are closed on 31st March every year.

 Plant & Machinery Account Dr. Cr. Date Particulars Amount (Rs) Date Particulars Amount (Rs) 2009 2010 Apr. 01 Bank A/c (P1) 68,000 Mar. 31 Depreciation A/c 6,000 Mar. 31 Balance c/d 62,000 68,000 68,000 2010 2011 Apr. 01 Balance b/d (P1) 62,000 Mar. 31 Depreciation A/c Apr. 01 Bank A/c (P2) 40,000 P1 6,000 P2 1,800 7,800 Mar. 31 Balance c/d P1 56,000 P2 38,200 94,200 1,02,000 1,02,000 2011 2012 Apr. 01 Balance b/d Mar. 31 Depreciation A/c P1 56,000 P1 6,000 P2 38,200 94,200 P2 1,800 Oct. 01 Bank A/c (P3) 9,800 P3 (for 6 months) 225 8,025 Mar. 31 Balance c/d P1 50,000 P2 36,400 P3 9,575 95,975 1,04,000 1,04,000 2012 2013 Apr. 01 Balance b/d Mar. 31 Depreciation A/c P1 50,000 P1 6,000 P2 36,400 P2 1,800 P3 9,575 95,975 P3 450 8,250 Mar. 31 Balance c/d P1 44,000 P2 34,600 P3 9,125 87,725 95,975 95,975

Working Note: Calculation of Depreciation

 P1 P2 P3

#### Question 3:

Question

 Machinery Account Dr. Cr. Date Particulars Amount (Rs) Date Particulars Amount (Rs) 2009 2010 July 01 Bank A/c (8,000 + 3,500) 11,500 Mar. 31 Depreciation A/c (for 9 months) 863 Balance c/d 10,637 11,500 11,500 2010 2011 Apr. 01 Balance b/d 10,637 Mar. 31 Depreciation A/c 1,150 Balance c/d 9,487 10,637 10,637 2011 2012 Apr. 01 Balance b/d 9,487 Mar. 31 Depreciation A/c 1,150 Balance c/d 8,337 9,487 9,487 2012 2012 Apr. 01 Balance b/d 8,337 Sept. 30 Depreciation A/c 575 Bank A/c (Sale) 6,500 Profit and Loss A/c (Loss on Sale) 1,262 8,337 8,337

Working Note: Calculation of Profit or Loss on Sale

 Particulars Amount Value of Machinery on Apr. 01, 2012 8,337 Less: Depreciation for 6 months 575 Value of Machinery on Sept. 30, 2012 7,762 Less: Sale Value 6,500 Loss on Sale 1,262

#### Question 4:

Question

 Machinery Account Dr. Cr. Date Particulars Amount (Rs) Date Particulars Amount (Rs) 2010 2011 July 01 Bank A/c (M1) 30,000 Mar. 31 Depreciation A/c 2011 M1 (for 9 months) 2,250 Jan. 01 Bank A/c (M2) 20,000 M2 (for 3 months) 500 2,750 Mar. 31 Balance c/d M1 27,750 M2 19,500 47,250 50,000 50,000 2011 2012 Apr. 01 Balance b/d Mar. 31 Depreciation A/c M1 27,750 M1 3,000 M2 19,500 47,250 M2 2,000 Oct. 01 Bank A/c (M3) 10,000 M3 (for 6 months) 500 5,500 Mar. 31 Balance c/d M1 24,750 M2 17,500 M3 9,500 51,750 57,250 57,250 2012 2012 Apr. 01 Balance b/d Apr. 01 Bank A/c (Sale of M1 ) 3,000 M1 24,750 Profit and Loss A/c (Loss on Sale M1) 21,750 M2 17,500 2013 M3 9,500 51,750 Mar. 31 Depreciation A/c M2 2,000 M3 1,000 3,000 Balance c/d M2 15,500 M3 8,500 24,000 51,750 51,750

Working Note: Calculation of Profit or Loss on Sale

 Particulars Amount Value of Machinery on April 01, 2012 24,750 Less: Sale Value 3,000 Loss on Sale 21,750

#### Question 5:

On 1st January, 2006, A Ltd. Purchased a machine for ₹ 2,40,000 and spent ₹ 10,000 on its erection. On 1st July, 2006 an additional machinery costing ₹ 1,00,000 was purchased. On 1st July, 2008 the machine purchased on 1st January, 2006 was sold for ₹ 1,43,000 and on the same date, a new machine was purchased at a cost of ₹ 2,00,000.
Show the Machinery Account for the first three calendar years after charging depreciation at 5% by the Straight Line Method.

 Machinery Account Dr. Cr. Date Particulars Amount (Rs) Date Particulars Amount (Rs) 2006 2006 Jan. 01 Bank A/c (M1) (2,40,000 + 10,000) 2,50,000 Dec. 31 Depreciation A/c 2011 M1 12,500 July 01 Bank A/c (M2) 1,00,000 M2 (for 6 months) 2,500 15,000 Balance c/d M1 2,37,500 M2 97,500 3,35,000 3,50,000 3,50,000 2007 2007 Jan. 01 Balance b/d Dec. 31 Depreciation A/c M1 2,37,500 M1 12,500 M2 97,500 3,35,000 M2 5,000 17,500 Balance c/d M1 2,25,000 M2 92,500 3,17,500 3,35,000 3,35,000 2008 2008 Jan. 01 Balance b/d July 01 Depreciation A/c (M1) 6,250 M1 2,25,000 Bank A/c (Sale of M1 ) 1,43,000 M2 92,500 3,17,500 Profit and Loss A/c (Loss on Sale of M1) 75,750 July 01 Bank A/c (M3) 2,00,000 Dec. 31 Depreciation A/c M2 5,000 M3 (for 6 months) 5,000 10,000 Balance c/d M2 87,500 M3 1,95,000 2,82,500 5,17,500 5,17,500

Working Note: Calculation of Profit or Loss on Sale of M1

 Particulars Amount Value of Machinery on Jan. 01, 2008 2,25,000 Less: Depreciation for 6 months 6,250 Value of Machinery on July 01, 2008 28,750 Less: Sale Value 1,43,000 Loss on Sale 75,750

#### Question 6:

A company purchased on 1st April, 2009, a machinery for ₹ 80,000. On 1st October, 2010, it purchased another machine for ₹ 50,000 and on 1st October, 2011, it sold off the first machine purchased in 2009 for ₹ 23,000. Depreciation was provided on the machinery at the rate of 20% p.a. on the original cost annually.
Give the Machinery Account for four years commencing from 1st April, 2009.
Accounts are closed on 31st March every year.

 Machinery Account Dr. Cr. Date Particulars Amount (Rs) Date Particulars Amount (Rs) 2009 2010 Apr. 01 Bank A/c (M1) 80,000 Mar. 31 Depreciation A/c 16,000 Mar. 31 Balance c/d 64,000 80,000 80,000 2010 2011 Apr. 01 Balance b/d 64,000 Mar. 31 Depreciation A/c Oct. 01 Bank A/c (M2) 50,000 M1 16,000 M2 (for 6 months) 5,000 21,000 Mar. 31 Balance c/d M1 48,000 M2 45,000 93,000 1,14,000 1,14,000 2011 2011 Apr. 01 Balance b/d Oct. 01 Depreciation A/c (M1) 8,000 M1 48,000 Bank A/c (Sale of M1) 23,000 M2 45,000 93,000 Profit and Loss A/c  (Loss on Sale of M1) 17,000 2012 Mar. 31 Depreciation A/c 10,000 Balance c/d 35,000 93,000 93,000 2012 2013 Apr. 01 Balance b/d 35,000 Mar. 31 Depreciation A/c 10,000 Mar. 31 Balance c/d 25,000 35,000 35,000

Working Note: Calculation of Profit or Loss on Sale of M1

 Particulars Amount Value of Machinery on Apr. 01, 2011 48,000 Less: Depreciation for 6 months 8,000 Value of Machinery on Oct. 01, 2011 40,000 Less: Sale Value 23,000 Loss on Sale 17,000

#### Question 7:

Bhushan & Company purchased a Machinery on 1st April, 2009, for ₹ 54,000 and spent ₹ 6,000 on its installation. On 1st December, 2010, it purchased another machine for ₹ 30,000.
On 30th June 2011, the first machine purchased on 1st April, 2009, is sold for ₹ 36,000 and on the same date it purchased a new machinery for ₹ 80,000.
On December 1, 2012, the second machine (purchased on December 1, 2010) was also sold off for ₹ 26,000.
Depreciation was provided on machinery @ 10% p.a. on Original Cost Method annually o 31st March. Give the machinery account for four years.

 Machinery Account Dr. Cr. Date Particulars Amount (Rs) Date Particulars Amount (Rs) 2009 2010 Apr. 01 Bank A/c (M1)  (54,000 + 6,000) 60,000 Mar. 31 Depreciation A/c 6,000 Mar. 31 Balance c/d 54,000 60,000 60,000 2010 2011 Apr. 01 Balance b/d 54,000 Mar. 31 Depreciation A/c Dec. 01 Bank A/c (M2) 30,000 M1 6,000 M2 (for 4 months) 1,000 7,000 Mar. 31 Balance c/d M1 48,000 M2 29,000 77,000 84,000 84,000 2011 2011 Apr. 01 Balance b/d June 30 Depreciation A/c (M1) 1,500 M1 48,000 Bank A/c (Sale of M1) 36,000 M2 29,000 77,000 Profit and Loss A/c  (Loss on Sale of M1) 10,500 June 30 Bank A/c (M3) 80,000 2012 Mar. 31 Depreciation A/c M2 3,000 M3 (for 9 months) 6,000 9,000 Balance c/d M2 26,000 M3 74,000 1,00,000 1,57,000 1,57,000 2012 2012 Apr. 01 Bank A/c Dec. 01 Depreciation A/c (M2) 2,000 M2 26,000 Bank A/c (Sale of M2) 26,000 M3 74,000 1,00,000 2013 Dec. 01 Profit and Loss A/c (Profit on sale of M2) 2,000 Mar. 31 Depreciation A/c (M3) 8,000 Balance c/d 66,000 1,02,000 1,02,000

Working Notes:

WN1: Calculation of Profit or Loss on Sale on M1

 Particulars Amount Value of Machinery on Apr. 01, 2011 48,000 Less: Depreciation for 3 months 1,500 Value of Machinery on June 30, 2011 46,500 Less: Sale Value 36,000 Loss on Sale 10,500

WN2: Calculation of Profit or Loss on Sale of M2

 Particulars Amount Value of Machinery on Apr. 01, 2012 26,000 Less: Depreciation for 8 months 2,000 Value of Machinery on Dec. 01, 2012 24,000 Less: Sale Value 26,000 Profit on Sale 2,000

#### Question 8:

On 1st October, 2009, Raj & Co. purchased machinery worth ₹ 40,000. On 1st October, 2011, it buys additional machinery worth ₹ 10,000. On 30th September, 2012, half of the machinery purchased on 1st Oct., 2009, is sold for ₹ 8,200. The company writes off 10 per cent p.a. on the original cost. The accounts are closed every year on 31st March.
Show the Machinery Account for four years.

 Machinery Account Dr. Cr. Date Particulars Amount (Rs) Date Particulars Amount (Rs) 2009 2010 Oct. 01 Bank A/c Mar. 31 Depreciation A/c M1 20,000 M1 (for 6 months) 1,000 M2 20,000 40,000 M2 (for 6 months) 1,000 2,000 Balance c/d M1 19,000 M2 19,000 38,000 40,000 40,000 2010 2011 Apr. 01 Balance b/d Mar. 31 Depreciation A/c M1 19,000 M1 2,000 M2 19,000 38,000 M2 2,000 4,000 Balance c/d M1 17,000 M2 17,000 34,000 38,000 38,000 2011 2012 Apr. 01 Balance b/d Mar. 31 Depreciation A/c M1 17,000 M1 2,000 M2 17,000 34,000 M2 2,000 Oct. 01 Bank A/c (M3) 10,000 M3 (for 6 months) 500 4,500 Mar. 31 Balance c/d M1 15,000 M2 15,000 M3 9,500 39,500 44,000 44,000 2012 2012 Apr. 01 Balance b/d Sept. 30 Depreciation A/c (M1) 1,000 M1 15,000 Bank A/c (Sale of M1) 8,200 M2 15,000 Profit and Loss A/c (Loss on Sale of M1) 5,800 M3 9,500 39,500 2013 Mar.31 Depreciation A/c M2 2,000 M3 1,000 3,000 Balance c/d M2 13,000 M3 8,500 21,500 39,500 39,500

Working Note: Calculation of Profit or Loss on Sale of M1

 Particulars Amount Value of Machinery on Apr. 01, 2012 15,000 Less: Depreciation for 6 months 1,000 Value of Machinery Sept. 30, 2012 14,000 Less: Sale Value 8,200 Loss on Sale 5,800

Note: In order to make easy calculation machinery purchased on October 01, 2009 has been divided into two parts i.e. M1 and M2

Thus, M1 represents the first part i.e. sold for Rs 8,200

M2 represents the second part, which remains in the business

#### Question 9:

On 1st April, 2010, Plant and Machinery was purchased for ₹ 1,20,000. New machinery was purchased on 1st Oct., 2010, for ₹ 50,000 and on 1st July, 2011, for ₹ 25,000.
On 1st January, 2013, a machinery of the original value of ₹ 20,000 which was included in the machinery purchased on 1st April, 2010, was sold for ₹ 6,000. Prepare Plant & Machinery A/c for three years after providing depreciation at 10% p.a. on Straight Line Method. Accounts are closed on 31st March every year.

 Plant & Machinery Account Dr. Cr. Date Particulars Amount (Rs) Date Particulars Amount (Rs) 2010 2011 Apr. 01 Bank A/c Mar. 31 Depreciation A/c M1 20,000 M1 2,000 M2 1,00,000 1,20,000 M2 10,000 Oct. 01 Bank A/c (M3) 50,000 M3 (for 6 months) 2,500 14,500 Mar. 31 Balance c/d M1 18,000 M2 90,000 M3 47,500 1,55,500 1,70,000 1,70,000 2011 2012 Apr. 01 Balance b/d Mar. 31 Depreciation A/c M1 18,000 M1 2,000 M2 90,000 M2 10,000 M3 47,500 1,55,500 M3 5,000 July 01 Bank A/c (M4) 25,000 M4 (for 9 months) 1,875 18,875 Mar. 31 Balance c/d M1 16,000 M2 80,000 M3 42,500 M4 23,125 1,61,625 1,80,500 1,80,500 2012 2013 Apr.01 Balance b/d Jan. 01 Depreciation A/c (M1) 1,500 M1 16,000 Bank A/c (Sale of M1) 6,000 M2 80,000 Profit and Loss A/c (Loss on Sale of M1) 8,500 M3 42,500 Mar. 31 Depreciation A/c M4 23,125 1,61,625 M2 10,000 M3 5,000 M4 2,500 17,500 Mar. 31 Balance c/d M2 70,000 M3 37,500 M4 20,625 1,28,125 1,61,625 1,61,625

Working Note:  Calculation of Profit or Loss on Sale of M1

 Particulars Amount Value of Machinery on Apr. 01, 2012 16,000 Less: Depreciation for 9 months 1,500 Value of Machinery on Jan.01, 2013 14,500 Less: Sale Value 6,000 Loss on Sale 8,500

Note: In order to make easy calculation plant and machinery purchased on April 01, 2010 has been divided into two parts i.e. M1 and M2.

Thus, M1: Rs 20,000 (sold for Rs 6,000)

M2: Rs 1,00,000 (remains in the business)

#### Question 10:

From the following transactions of a concern, prepare Machinery Account for the year ending 31st March, 2013 :-

 2012 April 1 : Purchased a second-hand machinery for ₹ 40,000. April 1 : Spent ₹ 10,000 on prepairs for making it serviceable. Sept. 30 : Purchased additional new machinery for ₹ 20,000. Dec. 31 : Repairs and renewals of machinery ₹ 2,000. 2013 March 31 : Depreciate the machinery at 10% p.a.

 Machinery Account Dr. Cr. Date Particulars Amount (Rs) Date Particulars Amount (Rs) 2012 2013 Apr. 01 Bank A/c (M1) (40,000 + 10,000) 50,000 Mar. 31 Depreciation A/c Sept.30 Bank A/c (M2) 20,000 M1 5,000 M2 (for 6 months) 1,000 6,000 Balance c/d M1 45,000 M2 19,000 64,000 70,000 70,000

Note: Repair charges of Rs 2,000 are categorised under revenue expenditure because these are incurred on December 31, 2012 but machinery has been purchased on September 30, 2012.

#### Question 11:

A plant is purchased for ₹ 60,000 on 1st April, 2009. It is estimated that the residual value of this plant at the end of its working life of 10 years will be ₹ 20,920. Depreciation is to be provided at 10% p.a. on diminishing balance method.
You are required to show the Plant Account for 4 years, assuming that the books are closed on 31st March every year.

 Plant Account Dr. Cr. Date Particulars Amount (Rs) Date Particulars Amount (Rs) 2009 2010 Apr. 01 Bank A/c 60,000 Mar. 31 Depreciation A/c 6,000 Mar. 31 Balance c/d 54,000 60,000 60,000 2010 2011 Apr. 01 Balance b/d 54,000 Mar. 31 Depreciation A/c 5,400 Mar. 31 Balance c/d 48,600 54,000 54,000 2011 2012 Apr. 01 Balance b/d 48,600 Mar. 31 Depreciation A/c 4,860 Mar. 31 Balance c/d 43,740 48,600 48,600 2012 2013 Apr. 01 Balance b/d 43,740 Mar. 31 Depreciation A/c 4,374 Mar. 31 Balance c/d 39,366 43,740 43,740

Note: When deprecation is charged as per written down value method, scrap value of asset is ignored.

#### Question 12:

On 1st July, 2005, Geeta Paper Limited purchased a Plant for ₹ 1,50,000 and paid ₹ 10,000 as freight on its carriage. Depreciation was provided at 10% p.a. on the Written Down Value Method on this plant. On 1st Oct., 2008, this plant was sold for ₹ 80,000.
Prepare Plant A/c for 4 years, assuming that the books are closed on 31st March every year.

 Plant Account Dr. Cr. Date Particulars Amount (Rs) Date Particulars Amount (Rs) 2005 2006 July 01 Bank A/c (1,50,000 + 10,000) 1,60,000 Mar. 31 Depreciation A/c (for 9 months) 12,000 Balance c/d 1,48,000 1,60,000 1,60,000 2006 2007 Apr. 01 Balance b/d 1,48,000 Mar. 31 Depreciation A/c 14,800 Mar. 31 Balance c/d 1,33,200 1,48,000 1,48,000 2007 2008 Apr. 01 Balance b/d 1,33,200 Mar. 31 Depreciation A/c 13,320 Mar. 31 Balance c/d 1,19,880 1,33,200 1,33,200 2008 2008 Apr. 01 Balance b/d 1,19,880 Oct. 01 Depreciation A/c 5,994 Bank A/c (Sale) 80,000 Profit and Loss A/c (Loss on Sale) 33,886 1,19,880 1,19,880

Working Note:  Calculation of Profit or Loss on Sale

 Particulars Amount Value of Plant on Apr. 01, 2008 1,19,880 Less: Depreciation for 6 months 5,994 Value of Plant on Oct. 01, 2008 1,13,886 Less: Sale Value 80,000 Loss on Sale 33,886

#### Question 13:

Question

 Machinery Account Dr. Cr. Date Particulars Amount (Rs) Date Particulars Amount (Rs) 2003 2004 Apr. 01 Bank A/c (30,000 +4,000 + 1,000) 35,000 Mar. 31 Depreciation A/c 3,500 Balance c/d 31,500 35,000 35,000 2004 2005 Apr. 01 Balance b/d 31,500 Mar. 31 Depreciation A/c 3,150 Mar. 31 Balance c/d 28,350 31,500 31,500 2005 2005 Apr. 01 Balance b/d 28,350 Oct. 01 Depreciation A/c 1,418 Bank A/c (Sale) 25,000 Profit and Loss A/c (Loss on Sale) 1,932 28,350 28,350

Working Note:  Calculation of Profit or Loss on Sale

 Particulars Amount Value of Machinery on Apr. 01, 2005 28,350 Less: Depreciation for 6 months 1,418 Value of Machinery on Oct. 01, 2005 26,932 Less: Sale Value 25,000 Loss on Sale 1,932

#### Question 14:

A firm purchased on 1st April, 2009, a second-hand Machinery for ₹ 36,000 and spent ₹ 4,000 on its installation. On 1st Oct. in the same year another Machinery costing ₹ 20,000 was purchased. On 1st Oct., 2011, the Machinery bought on 1st April, 2009 was sold off for ₹ 12,000 and on the same date a fresh Machine was purchased for ₹ 64,000. Depreciation is provided annually on 31st March, @ 10% p.a. on the Written Down Value Method. Show the Machine A/c from 1st April, 2009 to 31st March, 2013.

 Machinery Account Dr. Cr. Date Particulars Amount (Rs) Date Particulars Amount (Rs) 2009 2010 Apr. 01 Bank A/c (M1) (36,000 + 4,000) 40,000 Mar. 31 Depreciation A/c Oct. 01 Bank A/c (M2) 20,000 M1 4,000 M2 (for 6 months) 1,000 5,000 Mar. 31 Balance c/d M1 36,000 M2 19,000 55,000 60,000 60,000 2010 2011 Apr. 01 Balance b/d Mar. 31 Depreciation A/c M1 36,000 M1 3,600 M2 19,000 55,000 M2 1,900 5,500 Mar. 31 Balance c/d M1 32,400 M2 17,100 49,500 55,000 55,000 2011 2011 Apr. 01 Balance b/d Oct. 01 Depreciation A/c (M1) 1,620 M1 32,400 Bank A/c (Sale of M1) 12,000 M2 17,100 49,500 Profit and Loss A/c (Loss on Sale of M1) 18,780 Oct. 01 Bank A/c (M3) 64,000 2012 Mar. 31 Depreciation A/c M2 1,710 M3 (for 6 months) 3,200 4,910 Mar. 31 Balance c/d M2 15,390 M3 60,800 76,190 1,13,500 1,13,500 2012 2013 Apr. 01 Balance b/d Mar. 31 Depreciation A/c M2 15,390 M2 1,539 M3 60,800 76,190 M3 6,080 7,619 Mar. 31 Balance c/d M2 13,851 M3 54,720 68,571 76,190 76,190

Working Note: Calculation of Profit or Loss on Sale

 Particulars Amount Value of Machinery on Apr. 01, 2011 32,400 Less: Depreciation for 6 months 1,620 Value of Machinery on Oct. 01, 2011 30,780 Less: Sale Value 12,000 Loss on Sale 18,780

#### Question 15(A):

State four main causes of providing depreciation.

The four main causes of depreciation are as follows.

1. Constant use: Due to constant use of the fixed assets there exists normal wear and tear that leads to fall in the value of fixed assets.

2. Expiry of time: With the passage of time, whether assets are used or not, its effective life decreases. The natural forces like rain, weather, etc. lead to deterioration of the fixed assets.

3. Obsolescence: Due to the fast technological innovations and inventions today’s assets may be outdated by tomorrow’s sophisticated assets. This leads to the obsolescence of fixed assets.

4. Expiry of legal rights: If an asset is acquired for a specific period of time, then, whether the asset is put to use or not, its value becomes zero at the end of its useful life.

#### Question 15(B):

A Company purchased a machinery for ₹ 50,000 on 1st Oct., 2007. Another machinery costing ₹ 10,000 was purchased on 1st Dec., 2008. On 31st March, 2010, the machinery purchased in 2007 was sold at a loss of ₹ 5,000. The Company charges depreciation at the rate of 15% p.a. on Diminishing Balance Method. Accounts are closed on 31st March every year.
Prepare Machinery account for 3 years.

 Machinery Account Dr. Cr. Date Particulars Amount (Rs) Date Particulars Amount (Rs) 2007 2008 Oct. 01 Bank A/c (M1) 50,000 Mar. 31 Depreciation A/c (for 6 months) 3,750 Mar. 31 Balance c/d 46,250 50,000 50,000 2008 2009 Apr. 01 Balance b/d 46,250 Mar. 31 Depreciation A/c Dec. 01 Bank A/c (M2) 10,000 M1 6,938 M2 (for 4 months) 500 7,438 Mar. 31 Balance c/d M1 39,312 M2 9,500 48,812 56,250 56,250 2009 2010 Apr. 01 Balance b/d Mar. 31 Depreciation A/c 5,897 M1 39,312 Bank A/c (Sale of M1) 28,415 M2 9,500 48,812 Profit and Loss A/c (Loss on Sale of M1) 5,000 Mar. 31 Depreciation A/c (M2) 1,425 Mar. 31 Balance c/d 8,075 48,812 48,812

Working Note: Calculation of Sale Price of M1

 Particulars Amount Value of Machinery on Apr. 01, 2009 39,312 Less: Depreciation for 12 months 5,897 Value of Machinery on Mar. 31, 2010 33,415 Less: Loss on Sale (given) 5,000 Sale Value (Balancing Figure) 28,415

#### Question 16:

Ashoka Ltd. bought a machine on 1st April, 2010 for ₹ 2,40,000 and spent ₹ 4,000 on its carriage and ₹ 6,000 towards installation cost. On 1st July, 2011 it purchased a second hand machinery for ₹ 75,000 and spent ₹ 25,000 on its overhauling.
On 1st January, 2013 it decided to sell the machinery bought on 1st April, 2010 at a loss of ₹ 20,000. It bought another machine on the same date for ₹ 40,000. Company decided to charge depreciation @ 15% p.a. on written down value method. Prepare machinery account for 3 years. Books are closed each year on 31st March.