On 1st Jan 2017 'Sai Industries Nagpur, purchased a Machine costing ₹1,65,000 and spent ₹15,000 for its installation charges. the estimated life of the machine is to be 10 years and the scrap value at the end of its life would be ₹30,000. On 1st Oct 2018 the entire Machine was sold for ₹1,50,000 | Show Machinery Account, Depreciation Account for the years 2016-2017, 2017-2018 and 2018-2019, assuming that the accounts are closed on 31st March every year.

2. On 1st Jan 2017 'Sai Industries Nagpur, purchased a Machine costing ₹1,65,000 and spent ₹15,000 for its installation charges. the estimated life of the machine is to be 10 years and the scrap value at the end of its life would be ₹30,000. On 1st Oct 2018 the entire Machine was sold for ₹1,50,000. 


Show Machinery Account, Depreciation Account for the years 2016-2017, 2017-2018 and 2018-2019, assuming that the accounts are closed on 31st March every year.

Solution:

Under Straight Line Method depreciation is charged at a specific percentage on the original cost of the asset every year. 

Depreciation= Original Cost (-) Scrap value / Estimated life of the asset (in years) 

Original Cost= Purchasing price of an asset (+) Installation Charges (other expenses of asset)

Using original cost formula to take out the original cost of Machine.
ஃ Original cost= 1,65,000 (+) 15,000 = 1,80,000

Afterward, find the depreciation of the Machine.
ஃ  Depreciation= 1,80,000 (-) 30,000 / 10 = 15,000 p.a.


Machine Account

Date Particulars JF Amount Date Particulars JF Amount 
Jan     March By Depreciation  3,750 
2017 31 
1 To Cash / Bank A/c  1,80,000     
    31 By Balance c/d  1,76,250 
   1,80,000    1,80,000 
April
2018 		   1st Oct By sales  1,50,000 
1 To Balance b/d  1,76,250 31st
March 		By Depreciation  15,000 
    31st  By Balance   11,250 
March 
        
   1,76,250    1,76,250 
April
2019  		To Balance b/d  11,250 31st
March 		By depreciation   75,000 
    31 By Loss   3,750 
        
   11,250    11,250 


Depreciation Account
Date Particulars JF Amount Date Particulars JF Amount 
2017    2017    
31st
March 		To Machinery A/c  15,000 31st
March 		By Profit & Loss A/c  15,000 
   15,000    15,000 
        
2018    2018    
31st
March 		To Machinery A/c  15,000 31st
March 		By Profit & Loss A/c  15,000 
   15,000    15,000 
        
2019    2019    
31st
March 		To Machinery A/c  15,000 31st
March 		By Profit & Loss A/c  15,000 
   15,000    15,000
Depreciation Calculator Tool 

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