On 1st Jan 2017 'Sai Industries Nagpur, purchased a Machine costing ₹1,65,000 and spent ₹15,000 for its installation charges. the estimated life of the machine is to be 10 years and the scrap value at the end of its life would be ₹30,000. On 1st Oct 2018 the entire Machine was sold for ₹1,50,000 | Show Machinery Account, Depreciation Account for the years 2016-2017, 2017-2018 and 2018-2019, assuming that the accounts are closed on 31st March every year.

2. On 1st Jan 2017 'Sai Industries Nagpur, purchased a Machine costing ₹1,65,000 and spent ₹15,000 for its installation charges. the estimated life of the machine is to be 10 years and the scrap value at the end of its life would be ₹30,000. On 1st Oct 2018 the entire Machine was sold for ₹1,50,000. 

Show Machinery Account, Depreciation Account for the years 2016-2017, 2017-2018 and 2018-2019, assuming that the accounts are closed on 31st March every year.

Solution:

Under Straight Line Method depreciation is charged at a specific percentage on the original cost of the asset every year. 

Depreciation= Original Cost (-) Scrap value / Estimated life of the asset (in years) 

Original Cost= Purchasing price of an asset (+) Installation Charges (other expenses of asset)

Using original cost formula to take out the original cost of Machine.

ஃ Original cost= 1,65,000 (+) 15,000 = 1,80,000

Afterward, find the depreciation of the Machine.

ஃ  Depreciation= 1,80,000 (-) 30,000 / 10 = 15,000 p.a.

Machine Account

Date	Particulars	JF	Amount	Date	Particulars	JF	Amount
Jan				March	By Depreciation		3,750
2017				31
1	To Cash / Bank A/c		1,80,000
				31	By Balance c/d		1,76,250
			1,80,000				1,80,000
April 2018				1st Oct	By sales		1,50,000
1	To Balance b/d		1,76,250	31st March	By Depreciation		15,000
				31st	By Balance		11,250
				March
			1,76,250				1,76,250
April 2019	To Balance b/d		11,250	31st March	By depreciation		75,000
				31	By Loss		3,750
			11,250				11,250

Depreciation Account

Date	Particulars	JF	Amount	Date	Particulars	JF	Amount
2017				2017
31st March	To Machinery A/c		15,000	31st March	By Profit & Loss A/c		15,000
			15,000				15,000
2018				2018
31st March	To Machinery A/c		15,000	31st March	By Profit & Loss A/c		15,000
			15,000				15,000
2019				2019
31st March	To Machinery A/c		15,000	31st March	By Profit & Loss A/c		15,000
			15,000				15,000

Depreciation Calculator Tool 

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