Page 122 - ISCDEBK-XI

Depreciation 15.7

Illustration 5.

M Ltd., which depreciates its machinery at 10% p.a. according to Diminishing Balance Method,
had balance on 1st April, 2019 of ` 9,82,000 (cost) in its Machinery Account and balance of
` 2,76,000 in Provision for Depreciation Account.
On 1st September, 2019, a new machine was purchased at ` 3,20,000 and paid ` 30,000 for its
carriage and installation. The machine started functioning from 1st September, 2019.

On 1st October, 2019, an old machinery was sold at ` 2,15,000 which was installed on
1st July, 2017 costing ` 3,88,000.
Show Machinery Account and Provision for Depreciation Account for the year ended
31st March, 2020.

Solution:
Dr. MACHINERY ACCOUNT Cr.
Date Particulars ` Date Particulars `

2019 2019
April 1 To Balance b/d (cost) 9,82,000 Oct. 1 By Provision for Depreciation A/c 81,140
Sept. 1 To Bank A/c—Purchase 3,20,000 Oct. 1 By Bank A/c—Sale 2,15,000
To Cash A/c—Carriage and 30,000 Oct. 1 By Loss on Sale of Machine A/c (WN 1) 91,860
Installation (Profit & Loss A/c)
2020
March 31 By Balance c/d 9,44,000

13,32,000 13,32,000
2020
April 1 To Balance b/d 9,44,000

Dr. PROVISION FOR DEPRECIATION ACCOUNT Cr.
Date Particulars ` Date Particulars `
2019 2019
Oct. 1 To Machinery (WN 2) 81,140 April 1 By Balance b/d 2,76,000
2020 Oct. 1 By Depreciation A/c 16,150
March 31 To Balance c/d 2,69,726 2020
March 31 By Depreciation A/c (WN 3) 58,716
3,50,866 3,50,866
2020
April 1 By Balance b/d 2,69,726