(a) On 1st April 2020, Sudha and Company purchased machinery for ₹ 32,000. To install the machinery expenses incurred was ₹ 14,000. Depreciate machinery @ 10% p.a. under Straight Line method. On 30th June 2022, the worn out machinery was sold for ₹ 26,000. The books are closed on

Question

(a) On 1st April 2020, Sudha and Company purchased machinery for ₹ 32,000. To install the machinery expenses incurred was ₹ 14,000. Depreciate machinery @ 10% p.a. under Straight Line method. On 30th June 2022, the worn out machinery was sold for ₹ 26,000. The books are closed on 31st December every year. Show Machinery account.

OR

(b) From the following balances obtained from the books of Selvi, prepare Trading and Profit or Loss account.

| Particulars | ₹ |
| --- | --- |
| Stock on 01.01.2022 | 16,000 |
| Purchases for the year | 44,000 |
| Sales for the year | 84,000 |
| Expenses on purchases | 5,000 |
| Financial charges paid | 7,000 |
| Expenses on sales | 2,000 |
| Bad debts | 2,400 |
| Trade expenses | 2,400 |
| Discount allowed | 1,200 |
| Commission allowed | 2,200 |
| Selling expenses | 1,200 |
| Repairs on office vehicles | 1,200 |

Closing stock on 31.12.2022 was ₹ 9,000

Accepted Answer

>

> [!TLDR]
> (a) Machinery a/c: dep ₹4,600 p.a., book value ₹35,650 at sale, sold ₹26,000 → **loss ₹9,650**; (b) Selvi — Gross profit ₹28,000, Net profit ₹8,400.
>
> ## (a) Machinery Account — Sudha and Company
>
> **Cost of machinery:** ₹32,000 + installation ₹14,000 = **₹46,000** (installation is capitalised).
> **Depreciation @10% p.a. (SLM):** 10% × 46,000 = **₹4,600 for a full year** (time-apportioned as the books close on 31 December).
>
> | Period | Months | Depreciation ₹ |
> | --- | --- | --- |
> | 1 Apr 2020 – 31 Dec 2020 | 9 | 4,600 × 9/12 = 3,450 |
> | 2021 (full year) | 12 | 4,600 |
> | 1 Jan 2022 – 30 Jun 2022 | 6 | 4,600 × 6/12 = 2,300 |
>
> **Machinery Account**
>
> | Dr | ₹ | Cr | ₹ |
> | --- | --- | --- | --- |
> | 2020 Apr 1 To Bank A/c (32,000+14,000) | 46,000 | 2020 Dec 31 By Depreciation A/c | 3,450 |
> | | | 2020 Dec 31 By Balance c/d | 42,550 |
> | **Total** | **46,000** | **Total** | **46,000** |
> | 2021 Jan 1 To Balance b/d | 42,550 | 2021 Dec 31 By Depreciation A/c | 4,600 |
> | | | 2021 Dec 31 By Balance c/d | 37,950 |
> | **Total** | **42,550** | **Total** | **42,550** |
> | 2022 Jan 1 To Balance b/d | 37,950 | 2022 Jun 30 By Depreciation A/c | 2,300 |
> | | | 2022 Jun 30 By Bank A/c (sale) | 26,000 |
> | | | 2022 Jun 30 By P&L A/c (loss on sale) | 9,650 |
> | **Total** | **37,950** | **Total** | **37,950** |
>
> **Loss on sale:** book value on 30 Jun 2022 = 37,950 − 2,300 = ₹35,650; sale ₹26,000 → **loss ₹9,650**.
>
> ## (b) Trading and Profit & Loss Account of Selvi (year ended 31 Dec 2022)
>
> **Trading Account**
>
> | Dr — Particulars | ₹ | Cr — Particulars | ₹ |
> | --- | --- | --- | --- |
> | To Opening stock | 16,000 | By Sales | 84,000 |
> | To Purchases | 44,000 | By Closing stock | 9,000 |
> | To Expenses on purchases | 5,000 | | |
> | To Gross profit c/d | 28,000 | | |
> | **Total** | **93,000** | **Total** | **93,000** |
>
> **Profit and Loss Account**
> …

Particulars	₹
Stock on 01.01.2022	16,000
Purchases for the year	44,000
Sales for the year	84,000
Expenses on purchases	5,000
Financial charges paid	7,000
Expenses on sales	2,000
Bad debts	2,400
Trade expenses	2,400
Discount allowed	1,200
Commission allowed	2,200
Selling expenses	1,200
Repairs on office vehicles	1,200

Period	Months	Depreciation ₹
1 Apr 2020 – 31 Dec 2020	9	4,600 × 9/12 = 3,450
2021 (full year)	12	4,600
1 Jan 2022 – 30 Jun 2022	6	4,600 × 6/12 = 2,300

Dr	₹	Cr	₹
2020 Apr 1 To Bank A/c (32,000+14,000)	46,000	2020 Dec 31 By Depreciation A/c	3,450
		2020 Dec 31 By Balance c/d	42,550
Total	46,000	Total	46,000
2021 Jan 1 To Balance b/d	42,550	2021 Dec 31 By Depreciation A/c	4,600
		2021 Dec 31 By Balance c/d	37,950
Total	42,550	Total	42,550
2022 Jan 1 To Balance b/d	37,950	2022 Jun 30 By Depreciation A/c	2,300
		2022 Jun 30 By Bank A/c (sale)	26,000
		2022 Jun 30 By P&L A/c (loss on sale)	9,650
Total	37,950	Total	37,950

Dr — Particulars	₹	Cr — Particulars	₹
To Opening stock	16,000	By Sales	84,000
To Purchases	44,000	By Closing stock	9,000
To Expenses on purchases	5,000
To Gross profit c/d	28,000
Total	93,000	Total	93,000

(a) Machinery Account — Sudha and Company

(b) Trading and Profit & Loss Account of Selvi (year ended 31 Dec 2022)

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