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Question -

On July 01, 2010, Ashok Ltd. Purchased a Machine for Rs 1,08,000 and spent Rs 12,000 on its installation. At the time of purchase it was estimated that the effective commercial life of the machine will be 12 years and after 12 years its salvage value will be Rs 12,000.

Prepare machine account and depreciation Account in the books of Ashok Ltd. For first three years, if depreciation is written off according to straight line method. The account are closed on December 31st, every year.



Answer -

Books of Ashok Ltd.

Machinery Account

Dr.

 

 

 

 

 

 

Cr.

Date

Particulars

J.F.

Amount

Rs

Date

Particulars

J.F.

Amount

Rs

2010

 

 

 

2010

 

 

 

Jul.01

Bank

 

1,20,000

Dec.31

Depreciation

 

4,500

 

 

 

 

Dec.31

Balance c/d

 

1,15,500

 

 

 

1,20,000

 

 

 

1,20,000

 

 

 

 

 

 

 

 

2011

 

 

 

2011

 

 

 

Jan.01

Balance b/d

 

1,15,500

Dec.31

Depreciation

 

9,000

 

 

 

 

Dec.31

Balance c/d

 

1,06,500

 

 

 

1,15,000

 

 

 

1,15,500

 

 

 

 

 

 

 

 

2012

 

 

 

2012

 

 

 

Jan.01

Balance b/d

 

1,06,500

Dec.31

Depreciation

 

9,000

 

 

 

 

Dec.31

Balance c/d

 

97,500

 

 

 

1,06,500

 

 

 

1,06,500

2013 

 

 

 

 

 

 

 

Jan.01

Balance b/d

 

97,500

 

 

 

 

 

 

 

 

 

 

 

 

  

Depreciation Account

Dr.

 

 

 

 

 

 

Cr.

Date

Particulars

J.F.

Amount

 Rs

Date

Particulars

J.F.

Amount

Rs

2010

 

 

 

2010

 

 

 

Dec.31

Machinery

 

4,500

Dec.31

Profit and Loss

 

4,500

 

 

 

 

 

 

 

 

 

 

 

4,500

 

 

 

4,500

 

 

 

 

 

 

 

 

2011

 

 

 

2011

 

 

 

Dec.31

Machinery

 

9,000

Dec.31

Profit and Loss

 

9,000

 

 

 

 

 

 

 

 

 

 

 

9,000

 

 

 

9,000

 

 

 

 

 

 

 

 

2012

 

 

 

2012

 

 

 

Dec.31

Machinery

 

9,000

Dec.31

Profit and Loss

 

9,000

 

 

 

 

 

 

 

 

 

 

 

9,000

 

 

 

9,000

 

 

 

 

 

 

 

 

 

Working Note:

Calculation of annualdepreciation

Depreciation (p.a.)

=

(1,08,000 + 12,000 – 12,000)

12 years

 

=

Rs 9,000 per annum

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