The following are the details of machineries held by a firm: Machine Purchase Date Purchase Value (₹) Useful Life Scrap Value (₹) M 1 01/04/2021…

CA Foundation · Accounting · MTP · May 2026
The following are the details of machineries held by a firm: Machine Purchase Date Purchase Value (₹) Useful Life Scrap Value (₹) M 1 01/04/2021 22,00,000 8 years 40,000 M 2 01/04/2023 18,80,000 8 years 80,000 M 3 01/04/2025 16,20,000 5 years The firm uses 'sum of years digits' method for charging depreciation and maintains a separate account for it. On 1st April, 2025 , the M 1 machine has become obsolete and has been sold for 2,68,000 /-. On the same date the estimated useful remaining life of M 2 machine is reassessed at 3 years with - 20,000 as scrap value. You are required to prepare the Machinery Account, Provision for Depreciation Account and Machinery Disposal Account for the year ending 31st March, 2025 and 31st March, 2026 .

Suggested Answer and Working Notes:

Dr. Machinery Account (at original cost) Cr. Date Particulars ₹ Date Particulars ₹ 01.04.2024 To Bal b/d M 1-22,00,000 M 2-18,80,000 40,80,000 31.03.2025 By Balance c/d M 1-22,00,000 M 2-18,80,000 40,80,000 40,80,000 40,80,000 01.04.2025 To Balance b/d 40,80,000 01.04.2025 By Machinery Disposal A/c 22,00,000 01.04.2025 To Bank A/c 16,20,000 31.03.2026 By Balance c/d M 2-18,80,000 M 3-16,20,000 35,00,000 57,00,000 57,00,000 Dr. Provision for Depreciation Account Cr. Date Particulars ₹ Date Particulars ₹ 31.03.2025 To Balance c/d M 1-15,60,000 M 2-7,50,000 23,10,000 01.04.2024 By Balance b/d M 1-12,60,000 M 2-4,00,000 16,60,000 31.03.2025 By Depreciation A/c (WN - 1) M 1-3,00,000 M 2-3,50,000 6,50,000 23,10,000 23,10,000 01.04.2025 To Machinery Disposal A/c (M 1) (WN - 3) 15,60,000 01.04.2025 By Balance b/d M 1-15,60,000 M 2-7,50,000 23,10,000 31.03.2026 To Balance c/d M 2-13,05,000 M 3-5,40,000 18,45,000 31.03.2026 By Depreciation A/c (WN - 2) M 2-5,55,000 M 3-5,40,000 10,95,000 34,05,000 34,05,000 Dr. Machinery Disposal Account Cr. Date Particulars ₹ Date Particulars ₹ 01.4.2024 To Machinery Disposal A/c 22,00,000 01.04.2025 By Provision for Depreciation A/c 15,60,000 01.04.2025 By Bank A/c 2,68,000 01.04.2025 By Profit and Loss A/c (Loss on sale of machinery) 3,72,000 22,00,000 22,00,000 Working Notes: (1) Calculation of total of sum of digit of depreciation of Machine 1 and2from 1st April, 2021-31st March,24 Machinery (M 1) Machinery (M 2) Cost 22,00,000 18,80,000 Depreciation (₹ 12,60,000) [₹ 21,60,000 x (₹ 8+7+6)/36] (₹ 4,00,000) [₹ 18,00,000 x 8/36] (2) Calculation of Depreciation for the year 2024-25 and2025-26 2024-2025 2025-2026 Machine 1 (M 1) 21,60,000 x 5/36 = 3,00,000 Machine 2 (M 2) 18,00,000 x 7/36 = 3,50,000 11,10,000 X 3/6 = 5,55,000 Machine 3 (M 3) 16,20,000 X 5/15 = 5,40,000 TOTAL 6,50,000 10,95,000 (3) Calculation of Depreciation on the machinery disposed 21,60,000 * (₹ 8 +7+6 +5)/36 = 15,60,000

Topics: Depreciation and Amortisation

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