Siddhartha bought a plant and machine on 1st April 2012 for Rs. 2,300 and paid Rs. 2,000 for its installation. Depreciation is to be allowed at 10% under the straight-line method. On 31-03-2015 the plant was sold for Rs. 18,000. Assuming that the account is closed at the end of t

Question

Siddhartha bought a plant and machine on 1st April 2012 for Rs. 2,300 and paid Rs. 2,000 for its installation. Depreciation is to be allowed at 10% under the straight-line method. On 31-03-2015 the plant was sold for Rs. 18,000. Assuming that the account is closed at the end of the financial year. Prepare plant and machine a/c.

Accepted Answer

>

> [!TLDR]
> The plant is bought on 1-4-2012 and sold on 31-3-2015 (three full years) under straight-line depreciation at 10%. Cost including installation is taken as Rs. 25,000, giving yearly depreciation of Rs. 2,500 and a written-down value of Rs. 17,500 on the sale date. Sold for Rs. 18,000, it yields a profit on sale of Rs. 500. This is a TS Intermediate 2nd-year Accountancy depreciation problem.
>
> **Honest note on the figures.** As transcribed the stem reads 'bought ... for Rs. 2,300 and paid Rs. 2,000 for installation' (total Rs. 4,300) yet is 'sold for Rs. 18,000'. An asset costing Rs. 4,300 cannot sensibly be sold for Rs. 18,000 three years later — the purchase figure is clearly truncated. It has almost certainly lost a digit and should read Rs. 23,000 (cost Rs. 23,000 + installation Rs. 2,000 = Rs. 25,000), which makes the problem internally consistent and gives a sensible small profit on sale. The solution below uses Rs. 25,000 as total cost; the method is identical whatever the true cost figure.
>
> **Working**
>
> - Total cost = 23,000 + 2,000 = Rs. 25,000.
> - Straight-line depreciation = 10% of 25,000 = Rs. 2,500 per year.
> - Period held = 1-4-2012 to 31-3-2015 = 3 years, so total depreciation = Rs. 7,500.
> - Written-down value on 31-3-2015 = 25,000 − 7,500 = Rs. 17,500.
> - Sale proceeds Rs. 18,000 − WDV Rs. 17,500 = profit on sale Rs. 500.
>
> **Plant and Machine Account**
>
> | Date | Particulars | Amount (Rs.) | Date | Particulars | Amount (Rs.) |
> |---|---|---|---|---|---|
> | 01-04-2012 | To Bank (cost + installation) | 25,000 | 31-03-2013 | By Depreciation | 2,500 | …

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)

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