Q.A trader purchased machinery on 1st April 2021 for ₹1,00,000. Its estimated scrap value is ₹10,000 and its estimated useful life is 9 years. Calculate the amount and rate of annual depreciation under the Straight Line Method, and prepare the Machinery Account for three years ending 31st March 2022, 2023 and 2024.

Since the scrap value and useful life are both known, the standard SLM formula gives a clean, unchanging annual figure.

Step 1 — Annual depreciation.

Annual Depreciation = (Cost − Scrap Value) ÷ Useful Life = (1,00,000 − 10,000) ÷ 9 = 90,000 ÷ 9 = ₹10,000 per year.

Step 2 — Rate of depreciation.

Rate = (Annual Depreciation ÷ Cost) × 100 = (10,000 ÷ 1,00,000) × 100 = 10% p.a. on original cost.

Step 3 — Machinery Account.

For the year ending 31st March 2022:

For the year ending 31st March 2023:

For the year ending 31st March 2024:

Verification: 90,000 → 80,000 → 70,000, each step falling by exactly ₹10,000, confirming the SLM's equal-instalment property.

An alternative check: over 9 years at ₹10,000/year, total depreciation = ₹90,000, and Cost − Total Depreciation = 1,00,000 − 90,000 = ₹10,000, exactly the estimated scrap value — confirming the figures are internally consistent.

Dividing cost by useful life without first deducting the scrap value (giving a wrong, too-high annual figure); forgetting to bring forward the balance b/d correctly in the second and third years.