Q.Sireesha Traders purchased a second hand machine for ₹ 72,000 on 1st January, 2011 and spent ₹ 8,000 on repairs and installed the same. Depreciation is written-off at 10% p.a. on the straight line method. On 30th June, 2013 the machine was sold for ₹ 50,000. Prepare machinery account assuming that the accounts are closed on 31st December every year.

Capitalised cost = 72,000 + 8,000 = Rs. 80,000; SLM depreciation = Rs. 8,000 p.a. Book value on 30 June 2013 = Rs. 60,000; sold for Rs. 50,000, so loss on sale = Rs. 10,000. Working - Cost of machine = 72,000 (purchase) + 8,000 (repairs + installation) = Rs. 80,000 - Annual depreciation (SLM) = 10% of Rs. 80,000 = Rs. 8,000 - 2011 (full year): Rs. 8,000; book value 31-12-2011 = Rs. 72,000 - 2012 (full year): Rs. 8,000; book value 31-12-2012 = Rs. 64,000 - 2013 (1 Jan to 30 June = 6 months): 8,000 x 6/12 = Rs. 4,000; book value at sale = Rs. 60,000 - Sold for Rs. 50,000, hence loss = 60,000 - 50,000 = Rs. 10,000 Machinery Account | Date | Particulars | Amount (Rs.) | Date | Particulars | Amount (Rs.) | | --- | --- | --- | --- | --- | --- | | 2011 Jan 1 | To Bank A/c | 80,000 | 2011 Dec 31 | By Depreciation A/c | 8,000 | | | | | 2011 Dec 31 | By Balance c/d | 72,000 | | | | 80,000 | | | 80,000 | | 2012 Jan 1 | To Balance b/d | 72,000 | 2012 Dec 31 | By Depreciation A/c | 8,000 | | | | | 2012 Dec 31 | By Balance c/d | 64,000 | | | | 72,000 | | | 72,000 | | 2013 Jan 1 | To Balance b/d | 64,000 | 2013 Jun 30 | By Depreciation A/c (6 months) | 4,000 | | | | | 2013 Jun 30 | By Bank A/c (sale) | 50,000 | | | | | 2013 Jun 30 | By Prof …