On 1st January, 2021 a machinery was purchased by Golak Nath for Rs. 50,000. On July, 2022 addition were made to the extent of Rs. 10,000. On April, 2023 further addition was made to the extent of Rs. 6,400.

On 30th June, 2024 machinery, the original value of which was Rs. 8,000

Question

On 1st January, 2021 a machinery was purchased by Golak Nath for Rs. 50,000. On July, 2022 addition were made to the extent of Rs. 10,000. On April, 2023 further addition was made to the extent of Rs. 6,400.

On 30th June, 2024 machinery, the original value of which was Rs. 8,000 in 1st January, 2021 was sold for Rs. 6,000. Depreciation is charged @ 195 p.a. on the original cost.

Show the Machinery A/c for the year from 2021 to 2024 in the books of Golak Nath. He closed his books on 31st December every year.

OR

A company had bought machinery for Rs. 2,00,000 including a boiler worth Rs. 20,000. The Machinery account had been credited for depreciation on the reducing instalment system for the past four years @ 10% p.a. During the fifth i.e. the present year, the boiler becomes useless on account of damage to some vital parts, the damaged boiler being sold for Rs. 4,000.

Write up machinery account.

Accepted Answer

>

> [!TLDR]
> Machinery Account, 2021-2024, Fixed Instalment (Original Cost) Method.
>
> ⚠️ **Transcription note**: the printed paper states the rate as "Depreciation is charged @ 195 p.a. on the original cost" — the "%" sign and decimal point appear to be missing in the print (a likely printing defect), since a bare "195 p.a." is not a usable rate. This solution assumes the intended rate is **19.5% p.a.** (the same digits, 1-9-5, with the decimal point/percent sign restored) as the most defensible reading; this assumption is flagged honestly rather than silently guessed.
>
> **Blocks of machinery and their annual depreciation @ 19.5% p.a. on original cost:**
> - Block sold (part of original machinery, cost Rs. 8,000, from 1 Jan 2021): 19.5% × 8,000 = Rs. 1,560/year
> - Remaining original machinery (Rs. 50,000 − 8,000 = Rs. 42,000, from 1 Jan 2021): 19.5% × 42,000 = Rs. 8,190/year
> - Addition of July 2022 (Rs. 10,000): 19.5% × 10,000 = Rs. 1,950/year (half year in 2022 = Rs. 975)
> - Addition of April 2023 (Rs. 6,400): 19.5% × 6,400 = Rs. 1,248/year (9 months in 2023 = Rs. 936)
>
> **Profit/Loss on sale of the Rs. 8,000 block (sold 30 June 2024):**
> Depreciation accumulated: 2021 (1,560) + 2022 (1,560) + 2023 (1,560) + 2024, Jan-June half year (780) = Rs. 5,460
> Book value on date of sale = 8,000 − 5,460 = Rs. 2,540
> Sale proceeds = Rs. 6,000
> **Profit on sale = 6,000 − 2,540 = Rs. 3,460** (credited to Profit and Loss A/c)
>
> **Machinery Account (in the books of Golak Nath)**
>
> | Dr. | 2021 | Rs. | | Cr. | 2021 | Rs. |
> |---|---|---|---|---|---|---|
> | Jan. 1 | To Bank A/c | 50,000 | | Dec. 31 | By Depreciation A/c (19.5% × 50,000) | 9,750 |
> | | | | | Dec. 31 | By Balance c/d | 40,250 |
> | | **Total** | **50,000** | | | **Total** | **50,000** |
>
> | Dr. | 2022 | Rs. | | Cr. | 2022 | Rs. |
> |---|---|---|---|---|---|---|
> | Jan. 1 | To Balance b/d | 40,250 | | Dec. 31 | By Depreciation A/c (9,750 + 975) | 10,725 |
> | July 1 | To Bank A/c (addition)

Particulars	Debit (₹)	Credit (₹)
Depreciation A/c ……… Dr.	xxx
To Asset A/c		xxx
(Being depreciation charged on asset)

Particulars	Debit (₹)	Credit (₹)
Profit & Loss A/c ……… Dr.	xxx
To Depreciation A/c		xxx
(Being depreciation transferred to P&L)

Item	Amount (₹)
Cost of the asset	80,000
Less: Scrap value	10,000
Depreciable amount	70,000
Useful life	10 years
…

Concept understanding — Depreciation Accounting

Depreciation Accounting — A First Look

The precise meaning

Why does it matter?

The accounting treatment

The two main methods

Straight Line Method (SLM)

Written Down Value Method (WDV)

Dr.	2021	Rs.	Cr.	2021	Rs.
Jan. 1	To Bank A/c	50,000	Dec. 31	By Depreciation A/c (19.5% × 50,000)	9,750
			Dec. 31	By Balance c/d	40,250
	Total	50,000		Total	50,000

Dr.	2022	Rs.	Cr.	2022	Rs.
Jan. 1	To Balance b/d	40,250	Dec. 31	By Depreciation A/c (9,750 + 975)	10,725
July 1	To Bank A/c (addition)	10,000	Dec. 31	By Balance c/d	39,525
	Total	50,250		Total	50,250

Dr.	2024	Rs.	Cr.	2024	Rs.
Jan. 1	To Balance b/d	33,289	June 30	By Depreciation A/c (sold block, H1, 1,560÷2)	780
Dec. 31	To Profit and Loss A/c (profit on sale)	3,460	June 30	By Bank A/c (sale proceeds)	6,000
			Dec. 31	By Depreciation A/c (8,190 + 1,950 + 1,248, remaining blocks, full year)	11,388
			Dec. 31	By Balance c/d	18,581
	Total	36,749		Total	36,749

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