Q.Dheeraj and Co. purchased machinery on 1st April, 2017 for ₹ 3,00,000 and spent ₹ 20,000 for its installation. Depreciation is provided @ 10% p.a. on Reducing Balance Method. Books are closed on 31st March every year.
Prepare Machinery account for first three years.

Capitalise the machinery at 3,20,000 (3,00,000 cost + 20,000 installation) and charge 10% on the reducing balance each year. Depreciation is 32,000, 28,800 and 25,920 for the three years, leaving a closing book value of 2,33,280 at the end of the third year (31-3-2020).

This is a depreciation question from the AP Inter 2nd-year (Class 12) Accountancy previous-year paper; the AP commerce syllabus follows the same NCERT/CBSE treatment of the written down value method.

Working

• Cost of machinery = 3,00,000 + 20,000 installation = 3,20,000.
• Year 1 (2017-18): 3,20,000 x 10% = 32,000 -> WDV 2,88,000.
• Year 2 (2018-19): 2,88,000 x 10% = 28,800 -> WDV 2,59,200.
• Year 3 (2019-20): 2,59,200 x 10% = 25,920 -> WDV 2,33,280.

Machinery Account