1

CP-103
Accounting and Financial Analysis
~HOME ASSIGNMENT~
Prepare a comparative chart of Straight line, Written down value , Mileage ,Depreciation Fund and Machine hour rate
methods of depreciation. Solve three sums of depreciation (Assets account & Depreciation account), covering at least
5 methods of depreciation.

UNDER THE GUIDANCE OF:

Professor Amrit Lal Ghosh

Submitted by Ankita Paul

1ST SEMESTER,Roll No – 09

Department of business Administration , Assam University

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Contents

Sl.No Topic Page No.

1. Comparative Chart of five methods of 3-5
depreciation.
2. Sums on Depreciation – Q.1 5-14
a) Straight Line Method 5-7
b) Written Down Value 8-9
c) Mileage Method 9-11
d) Machine Hour Method 11-12
e) Sinking Fund Method 13-14
3. Sums on Depreciation – Q.2 14-22
a) Straight Line Method 14-16
b) Written Down Value 16-17
c) Mileage Method 17-19
d) Machine Hour Method 19-21
e) Sinking Fund Method 21-22

4. Sums on Depreciation – Q.3 22-30

a) Straight Line Method 22-24
b) Written Down Value 24-26
c) Mileage Method 26-28
d) Machine Hour Method 28-29
e) Sinking Fund Method 29-30
5. Reference 30
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COMPARATIVE CHART OF: Straight Line Method, Written Down Value Method, Mileage Methods,
Depreciation Fund Method and Machine Hour Rate Method of Depreciation.

Solution:

BASIS STRAIGHT LINE WRITTEN DOWN MILEAGE DEPRECIATION MACHINE HOUR

METHOD VALUE METHOD METHOD FUND METHOD RATE METHOD
MEANING It is the method It is the method It is the method of It is a technique for It is called an
where the amount where the rate of depreciation which depreciating an service hour
of depreciation is depreciation is is carried out on asset while method. In this
fixed and equal given in vehicles (car, generating enough method active
every year and is percentage and the buses etc) and it is money to replace it hour of machine
deducted from the depreciation is calculated based at the end of its are taken into
original cost of the charged at a on the number of useful life. account for
asset as well as specific rate every kilometres calculation of
written off from year. travelled by the depreciation.
the profit & loss vehicle.
account.
USED IN/FOR This method is This method is This method is This method is This method is
used for fixed used for those used for used to finance the used specifically
assets which assets (movable or calculating the replacement of an for machines in
reduces gradually immovable) for business use of a asset at the ends of sectors like
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over its useful life. purpose of vehicle. its life. chemicals, steel
taxation. and other heavy
industries.
SUITABILITY This method is This method is Mileage users need It helps to It helps to reveal
more suitable for suitable for such not keep a record calculate the the extent to which
assets which are assets which of actual expenses depreciation value the machines
fully depreciated require more or retain receipts of wasting assets remained idle.
on the expiry of its repairs in the later where required. i.e. which has short
working life. part of its working life span
life.
ZERO BALANCE At the end of its Value of asset Initially the value o Value of the assets The value of the
life, the value of never reduces to mileage remains cannot be reduced asset cannot be
asset is reduced to zero at the end of zero. But once it to zero. reduced to zero.
zero or scrap its life. get started, the
value. value cannot be
zero.
BASIS OF Depreciation is Depreciation is Depreciation is Under this method Depreciation is
CALCULATION calculated on the calculated on the based on variable only the purchase charged primarily
original cost of reducing balance and fixed costs of cost of long –lived on machines,
asset. of a fixed asset. operating a motor assets adjusted for basically where the
vehicle. additions and work is performed.
improvements and
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also add in an
interest charge
equal to the cost of
a loan to pay for
the asset.
EASY AND Computation of Depreciation can Depreciation is Depreciation Depreciation is
SIMPLE depreciation is be computed easily easy to calculated under this method easy to calculate
comparatively but the calculation if the accurate life is comparatively but the life of the
easy and simple. of rate of of an asset in complicated to asset is not to be
depreciation is kilometres is calculate. found out years
difficult. known but in hours.

Sums Of Depreciation:

Q. 1. X ltd. Purchased a machinery on 1 st January’ 2009 for ₹ 1 ,50,000 and spent ₹ 10,000 on its erection. X Ltd
writes off depreciation @ 10% per annum. The accounts are closed every year 31 st December. It’s life is estimated
for 5 years. . The expected working life of the machine in kilometres is 48000 KM and 40,000 hours. ₹ 0.180975 was
annual depreciation fund which was invested in securities yielding 5% interest per annum. The following 2 table shows the
total running kilometres and hours worked by the machine during the particular year in the next 4 year:

Year Kilometres
2009 9,000
2010 10,000
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2011 11,000
2012 12,000

Year Hours
2009 5,000
2010 7,000
2011 10,000
2012 12,000

Solution: Calculation Of Depreciation :

Under Straight Line Method: In the books of X Ltd.

Dr Machinery Account Cr

Date Particulars J/ Amount Date Particulars J/F Amount

F
2009 To Bank A/c 1,50,000 2009 By Depreciation A/c 16,000
Jan 1 To Bank A/c 10,000 Dec 31 By Balance c/d 1,44,000
160000 160000
2010 2010 By Depreciation A/c 16,000
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Jan 1 To Balance b/d 1,44,000 Dec 31 By Balance c/d 1,28,000

144000 144000
2011 2011 By Depreciation A/c 16,000
Jan 1 To Balance b/d 1,28,000 Dec 31 By Balance c/d 1,12,000
128000 128000
2012 2012 By Depreciation A/c 16,000
Jan 1 To Balance b/d 1,12,000 Dec 31 By Balance c/d 96,000
112000 112000
2013
Jan 1 To Balance b/d 96,000

Dr Depreciation Account Cr

Date Particulars J/F Amount Date Particulars J/F Amount

2009 2009
Jan 1 To Machinery A/c 16,000 Dec 31 By Profit and Loss A/c 16,000
2010 2010
Jan 1 To Machinery A/c 16,000 Dec 31 By Profit and Loss A/c 16,000
2011 2011
Jan 1 To Machinery A/c 16,000 Dec 31 By Profit and Loss A/c 16,000
2012 2012
Jan 1 To Machinery A/c 16,000 Dec 31 By Profit and Loss A/c 16,000

Under Written Down Value Method: In the books of X Ltd

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Dr Machinery Account Cr

Date Particulars J/F Amount Date Pariculars J/F Amount

2009 To Bank A/c 1,50,000 2009 By Depreciation A/c 16,000
Jan 1 To Bank A/c 10,000 Dec 31 By Balance c/d 1,44,000
1,60,000 1,60,000

2010 To Balance b/d 144000 2010 By Depreciation A/c 14400

Jan 1 Dec 31 By Balance c/d 129600
144000 144000
2011 To Balance b/d 129600 2011 By Depreciation A/c 12960
Jan 1 Dec 31 By Balance c/d 116640
129600 129600
2012 To Balance b/d 116640 2012 By Depreciation A/c 11664
Jan 1 Dec 31 By Balance c/d 104976
116640 116640
2013 To Balance b/d 104976
Jan 1

Dr Depreciation Account Cr

Date Particulars J/F Amount Date Particulars J/F Amount

2009 2009
Jan 1 To Machinery A/c 16000 Dec 31 By Profit and Loss A/c 16000
2010 2010
Jan 1 To Machinery A/c 14400 Dec 31 By Profit and Loss A/c 14400
2011 2011
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Jan 1 To Machinery A/c 12960 Dec 31 By Profit and Loss A/c 12960
2012 2012
Jan 1 To Machinery A/c 11664 Dec 31 By Profit and Loss A/c 11664

Mileage Method:

Machine Cost = ₹ 150000 + ₹ 10000

= ₹ 160000

Kilometres = 48,000 Km

Depreciation Rate = ₹ 160000/ 48000 = 3.33

Dr Machinery Account Cr

Date Particulars J/F Amount Date Particulars J/F Amount

2009 To Bank A/c 1,50,000 2009 By Depreciation A/c 29,970
(9,000*3.33)
Jan 1 To Bank A/c 10,000 Dec 31 By Balance c/d 1,30,030
1,60,000 1,60,000
2010 2010 By Depreciation A/c 33,300
(10,000*3.33)
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Jan 1 To Balance b/d 1,30,030 Dec 31 By Balance c/d 96,730

1,30,030 1,30,030
2011 2011 By Depreciation A/c 36630
(11,000 * 3.33)
Jan 1 To Balance b/d 96730 Dec 31 By Balance c/d 60100
96730 96730
2012 2012 By Depreciation A/c 39960
(12,000* 3.33)
Jan 1 To Balance b/d 60100 Dec 31 By Balance c/d 20140
60100 60100
2013
Jan 1 To Balance b/d 20140

Dr Depreciation Account Cr

Date Particulars J/F Amount Date Particulars J/F Amount

2009 2009
Jan 1 To Machinery A/c 29970 Dec 31 By Depreciation A/c 29970
2010 2010
Jan 1 To Machinery A/c 33300 Dec 31 By depreciation A/c 33300
2011 2011
Jan 1 To Machinery A/c 36630 Dec 31 By Depreciation A/c 36630
2012 2012
Jan 1 To Machinery A/c 39960 Dec 31 By Depreciation A/c 39960
Under Machine Hour Method :
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Solution : Calculation of Machine hour rate:

Machine Hour Rate = Cost Of Machine/ Estimated Total Hours Of life

= ₹ 150,000 + ₹ 10,000/ ₹40,000

= ₹ 1,60,000 /₹ 40,000

= ₹ 4 per hour

In the Books of X Ltd

Dr Machine Account Cr

Date Particulars J/F Amount Date Particulars J/F Amount

2009 To Bank A/c 1,50,000 2009 By Depreciation A/c 20,000
Jan 1 To Bank A/c 10,000 Dec 31 (5000 hrs * ₹ 4)
Dec 31 By Balance c/d 140000
1,60,000 160000
2010 2010 By Depreciation A/c 28,000
Jan 1 To Balance c/d 140000 Dec 31 (7,000 hrs * ₹4)
Dec 31 By Balance c/d 1,12,000
140000 140000
2011 2011 By Depreciation A/c 40,000
Jan 1 To Balance c/d 1,12,000 Dec 31 (10,000 * ₹ 4)
Dec 31 By Balance c/d 72000
1,12,000 1,12,000
2012 2012 By Depreciation A/c 48000
Jan 1 To Balance c/d 72000 Dec 31 (12,000 * ₹ 4)
Dec 31 By Balance c/d 24,000
72,000 72,000
2013
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Jan 1 To Balance c/d 24,000

Dr Depreciation Account Cr

Date Particulars J/F Amount Date Particulars J/F Amount

2009 2009
Jan 1 To Machinery A/c 20,000 Dec 31 By Profit and loss A/c 20,000
2010 2010
Jan 1 To Machinery A/c 28,000 Dec 31 By Profit and Loss A/c 28,000
2011 2011
Jan 1 To Machinery A/c 40,000 Dec 31 By Profit and Loss A/c 40,000
2012 2012
Jan 1 To Machinery A/c 48,000 Dec 31 By Profit and Loss A/c 48,000

Under Sinking Fund Method:

The amount to be charged to the profit and loss A/c has been arrived as follows:

Original Cost of the Machinery ₹ 1,50,000

Add: Erection ₹ 10,000

Depreciation on the machinery ₹ 1,60,000

for the whole life
The amount to be charged to the Profit and Loss A/c = ₹ 1,60,000 * 0.180975
= ₹ 28,956
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Dr Machinery Account Cr

Date Particulars J/F Amount Date Particulars J/F Amount

2009 2009
Jan 1 To Bank A/c 1,60,000 Dec 31 By Balance c/d 1,60,000
2010 2010
Jan 1 To Balance b/d 1,60,000 Dec 31 By Balance c/d 1,60,000
2011 2011
Jan 1 To Balance b/d 1,60,000 Dec 31 By Balance c/d 1,60,000
2012 2012
Jan 1 To Balance b/d 1,60,000 Dec 31 By Depreciation Fund A/c 1,60,000

Dr Depreciation Account Cr

Date Particulars J/F Amount Date Particulars J/F Amount

2009 2009
Jan 1 To Sinking Fund A/c 28,956 Dec 31 By Profit and Loss A/c 28,956

2010 2010
Jan 1 To Sinking Fund A/c 28,956 Dec 31 By Profit and Loss A/c 28,956

2011 2011
Jan 1 To Sinking Fund A/c 28,956 Dec 31 By Profit and Loss A/c 28,956
2012 2012
Jan 1 To Sinking Fund A/c 28,956 Dec 31 By Profit and Loss A/c 28,956

Q. 2. A plant was purchased on 1st Jan’ 2009 for ₹ 1,80,000 and spent ₹ 20,000 for its installation. The firm writes off depreciation
@10% every year. The estimated life of the machine in kilometres will be 50,000 km and 40,000 hours . ₹ 0.31728 was annual
depreciation which was invested in securities yielding 5% interest. The firm closes its book of accounts on 31st Dec every year.
Charge depreciation.
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Year Kilometres
2009 10,000
2010 11,000
2011 12,000
2012 13,000

Year Hours
2009 6,000
2010 7,000
2011 8,000
2012 9,000

Solution : Calculation of depreciation :

Under Straight Line Method:

Dr Plant A/c Cr
Date Particulars J/ Amount Date Particulars J/F Amount
F
2009 To Bank A/c 1,80,000 2009 By Depreciation A/c 20,000
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Jan 1 To Bank A/c 20,000 Dec 31 By Balance c/d 1,80,000

2,00,000 2,00,000
2010 2010 By Depreciation A/c 20,000
Jan 1 To Balance b/d 1,80,000 Dec 31 By Balance c/d 1,60,000
1,80,000 180,000
2011 2011 By Depreciation A/c 20,000
Jan 1 To Balance b/d 1,60,000 Dec 31 By Balance c/d 1,40,000
1,60,000 1,60,000
2012 2012 By Depreciation A/c 20,000
Jan 1 To Balance b/d 1,40,000 Dec 31 By Balance c/d 1,20,000
1,40000 1,40,000
2013
Jan 1 To Balance b/d 1,20,000

Dr Depreciation Account Cr

Date Particulars J/F Amount Date Particulars J/F Amount

2009 2009
Jan 1 To Machinery A/c 20,000 Dec 31 By Profit and Loss A/c 20,000
2010 2010
Jan 1 To Machinery A/c 20,000 Dec 31 By Profit and Loss A/c 20,000
2011 2011
Jan 1 To Machinery A/c 20,000 Dec 31 By Profit and Loss A/c 20,000
2012 2012
Jan 1 To Machinery A/c 20,000 Dec 31 By Profit and Loss A/c 20,000
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Under Written Down Value Method:

In the books of ..........

Dr Plant Account Cr

Date Particulars J/F Amount Date Particulars J/F Amount

2009 To Bank A/c 1,50,000 2010 By Depreciation A/c 16,000
Jan 1 To Bank A/c 10,000 Dec 31 By Balance c/d 1,44,000

160000 160000
2010 To Balance b/d 144000 2010 By Depreciation A/c 14400
Jan 1 Dec 31 By Balance c/d 129600
144000 144000
2011 To Balance b/d 1,29,600 2011 By Depreciation A/c 12960
Jan 1 Dec 31 By Balance c/d 116640
1,29,600 1,29,600
2012 To Balance b/d 116640 2012 By Depreciation a/c 11664
Jan 1 Dec 31 By Balance c/d 104976
116640 116640
2013 To Balance b/d 104976
Jan 1
Dr Depreciation Account Cr

Date Particulars J/F Amount Date Particulars J/F Amount

2009 2009
Jan 1 To Plant A/c 16000 Dec 31 By Profit and Loss A/c 16000
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2010 2010
Jan 1 To Plant A/c 14400 Dec 31 By Profit and Loss A/c 14400
2011 2011
Jan 1 To Machinery A/c 12960 Dec 31 By Profit and Loss A/c 12960
2012 2012
Jan 1 To Machinery A/c 11664 Dec 31 By Profit and Loss A/c 11664
Under Mileage Method:
Machine cost = ₹ 1,80, 000 + ₹ 20,000

= ₹ 2,00, 000

Kilometres = 50,000 km

Depreciation Rate = ₹ 2,00,000/ 40,000 = 5

In the Books of ..........

Dr Plant Account Cr

Date Particulars J/F Amount Date Particulars J/F Amount

2009 To Bank A/c 1,80,000 2009 By Depreciation A/c 40,000

20,000 (10,000*4)
Jan 1 To Bank A/c Dec 31 By Balance c/d 1,60,000

2,00,000 2,00,000
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2010 2010 By Depreciation A/c 44,000

(11,000*4)
Jan 1 To Balance b/d 1,60,000 Dec 31 By Balance c/d 1,16,000
1,60,000 1,16,000
2011 2011 By Depreciation A/c 48,000
(12,000*4)
Jan 1 To Balance b/d 1,16,000 Dec 31 By Balance c/d 68,000
1,16,000 1,16,000
2012 2012 By Depreciation A/c 52,000
(13,000*4)
Jan 1 To Balance b/d 68,000 Dec 31 By Balance c/d 16,000
68,000 68,000
2013
Jan 1 To Balance b/d 16,000

Dr Depreciation Account Cr

Date Particulars J/F Amount Date Particulars J/f Amount

2009 2009
Jan 1 To Plant A/c 40,000 Dec 31 By Depreciation A/c 40,000
2010 2010
Jan 1 To Plant A/c 44,000 Dec 31 By depreciation A/c 44,000
2011 2011
Jan 1 To Plant A/c 48,000 Dec 31 By Depreciation A/c 48,000
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2012 2012
Jan 1 To Plant A/c 52,000 Dec 31 By Depreciation A/c 52,000
Under Machine Hour Method:

Machine Hour Rate = Cost Of Machine/ Estimated Total Hours Of life

= ₹ 1,80 ,000 + ₹ 20,000/ ₹40,000

= ₹ 2,00, 000/₹ 40,000

= ₹ 5 per hour.

In the Books of X Ltd

Dr Machine Account Cr

Date Particulars J/F Amount Date Particulars J/F Amount

2009 To Bank A/c 1,80,000 2009 By Depreciation A/c 24,000
Jan 1 To Bank A/c 20,000 Dec 31 (6000 hrs * ₹ 4)
Dec 31 By Balance c/d 1,76,000
2,00,000 2,00,000
2010 2010 By Depreciation A/c 28,000
Jan 1 To Balance c/d 1,76,000 Dec 31 (7,000 hrs * ₹4)
Dec 31 By Balance c/d 1,48,000
1,76,000 1,76,000
2011 2011 By Depreciation A/c 32,000
Jan 1 To Balance c/d 1,48,000 Dec 31 (8,000 * ₹ 4)
Dec 31 By Balance c/d 1,16,000
1,48,000 1,48,000
2012 2012 By Depreciation A/c 36,000
Jan 1 To Balance c/d 1,16,000 Dec 31 (9,000 * ₹ 4)
Dec 31 By Balance c/d 80,000
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1,16,000 1,16,000
2013
Jan 1 To Balance c/d 80,000

Dr Depreciation Account Cr

Date Particulars J/F Amount Date Particulars J/F Amount

2009 2009
Jan 1 To Machinery A/c 24,000 Dec 31 By Profit and loss A/c 24,000
2010 2010
Jan 1 To Machinery A/c 28,000 Dec 31 By Profit and Loss A/c 28,000
2011 2011
Jan 1 To Machinery A/c 48,000 Dec 31 By Profit and Loss A/c 32,000
2012 2012
Jan 1 To Machinery A/c 36,000 Dec 31 By Profit and Loss A/c 36,000

Under Sinking Method:

Solution: The amount to be charged to the profit and loss A/c has arrived as follows:

Original Cost of plant .........₹ 1,80,000

Add: Erection ....................... ₹ 20,000

Depreciation on the plant ₹2,00,000

For its whole life
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The amount to be charged to the Profit and loss A/c = ₹ 2,00,000 * ₹ 0.31728
= ₹ 63,456.
Dr Plant Account Cr
Date Particulars J/F Amount Date Particulars J/F Amount
2009 2009 2,00,000
Jan 1 To Bank A/c 2,00,000 Dec 31 By Balance c/d
2010 2010
Jan 1 To Balance b/d 2,00,000 Dec 31 By Balance c/d 2,00,000
2011 2011
Jan 1 To Balance b/d 2,00,000 Dec 31 By Balance c/d 2,00,000
2012 2012
Jan 1 To Balance b/d 1,60,000 Dec 31 By Depreciation Fund A/c 1,24,520
Dec 31 To Profit and loss A/c 16,000 Dec 31 By Bank a/c (Scrap Value) 16,000
(profit)
1,76,000 1,76,000

Dr Depreciation Account Cr

Date Particulars J/F Amount Date Particulars J/F Amount

2009 2009
Jan 1 To Sinking Fund A/c 850 Dec 31 By Profit and Loss A/c 850

2010 2010
Jan 1 To Sinking Fund A/c 850 Dec 31 By Profit and Loss A/c 850

2011 2011
Jan 1 To Sinking Fund A/c 850 Dec 31 By Profit and Loss A/c 850
2012 2012
Jan 1 To Sinking Fund A/c 850 Dec 31 By Profit and Loss A/c 850
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Q.3. A trader bought machinery on 1st April, 2012 for ₹ 1,25, 000 whose useful life has been estimated 5 years.
After the expiry of useful life, the scrap will realise ₹ 25,000.The expected working life of the machine in
kilometres will be 45,000 km and 40,000 hrs. A depreciation fund account was opened and ₹ 0.23541 was
annual epreciation which was invested in securities yielding 5% interest per annum. Charge depreciation for 3
years. The firms close their books of accounts are closed on 31 st March every year. The following 2 tables show
the total running of the machine during the particular year in the next 3 years:

Years Kilometres
2013 8,000
2014 9,000
2015 10,000

Years Hours
2013 7,000
2014 8,000
2015 9,000
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Solution : Calculation of depreciation :

Under Straight line method:

Solution : Calculation of depreciation :

Annual Depreciation = ₹ (1 ,25,000 – 25,000)/ 5

= ₹ 20,000

Dr Machinery Account Cr

Date Particulars J/F Amount Date Particulars J/F Amount

2012 2013 By Depreciation A/c 20,000
Apr 1 To Bank A/c 1,25,000 Mar 31
Mar 31 By Balance c/d 1,05,000
1,25,000 1,25,000
2013 2014 By Depreciation A/c 20,000
Apr 1 To Balance c/d 1,05,000 Mar 31
Mar 31 By Balance c/d 85,000
1,05,000 1,76,000
2015 2015 By Depreciation A/c 20,000
Apr 1 To Balance c/d 85, 000 Mar 31
Mar31 By Balance c/d 65,000
85,000 85,000
2015
Apr 1 To Balance c/d 65,000

Dr Depreciation Cr
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Date Particulars J/F Amount Date Particulars J/F Amount

2013 2013
Mar To Machinery A/c 20,000 Mar 31 By Profit and Loss A/c 20,000
31
2014 2014
Mar To Machinery A/c 20,000 Mar 31 By Profit and Loss A/c 20,000
31
2015 2015
Mar 31 To Machinery A/c 20,000 Mar 31 By Profit and Loss A/c 20,000
Under Written Down Value Method:

r = 1- n √s/c * 100

= 1 - 5 √ 25,000/ 1,25,000 * 100

= 1 – 1/(5) 1/5 * 100

= 1 – 1/1.37 * 100
= 1 – 0.72 * 100
= 0.28 * 100 = 28%
Dr Machine Account Cr

Date Particulars J/F Amount Date Particulars J/F Amount

2012 2013 By Depreciation A/c 35,000
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Apr 1 To Bank A/c 1,25,000 Mar 31

Mar 31 By Balance c/d 90,000
1,25,000 1,25,000
2013 2014 By Depreciation A/c 25,200
Apr 1 To Balance c/d 90,000 Mar 31
Mar 31 By Balance c/d 64,800
90,000 90,000
2015 2015 By Depreciation A/c 18,144
Apr 1 To Balance c/d 64,800 Mar 31
Mar31 By Balance c/d 46,656
64,800 64,800
2015
Apr 1 To balance c/d 46,656

Dr Depreciation Cr

Date Particulars J/F Amount Date Particulars J/F Amount

2013 2013
Mar To Machinery A/c 35,000 Mar 31 By Profit and Loss A/c 35,000
31
2014 2014
Mar To Machinery A/c 25,200 Mar 31 By Profit and Loss A/c 25,200
31
2015 2015
Mar 31 To Machinery A/c 18,144 Mar 31 By Profit and Loss A/c 18,144
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Under Mileage Method :

Solution : Calculation of depreciation :

Machine cost = ₹ 1,25,000

Kilometres = 45,000 km
Depreciation = ₹ 1,25,000 – 25,000 / 45,000 = 2.22 (approx) = 2 per km
Dr Plant Account Cr

Date Particulars J/F Amount Date Particulars J/F Amount

2012 2013 By Depreciation A/c 16,000
Apr 1 To Bank A/c 1,25,000 (8,000*2)
Mar 31 By Balance c/d 1,09,000
1,25,000 1,25,000
2013 2014 By Depreciation A/c 18,000
(9,000*2)
Apr 1 To Balance b/d 1,09,000 Mar 31 By Balance c/d 91,000
1,09,000 1,09,000
2014 2015 By Depreciation A/c 20,000
(10,000*2)
Apr 1 To Balance b/d 91,000 Mar 31 By Balance c/d 71,000
91,000 91,000
2015
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Apr 1 To Balance b/d 71,000

Dr Depreciation Cr

Date Particulars J/F Amount Date Particulars J/F Amount

2013 2013
Mar To Machinery A/c 16,000 Mar 31 By Profit and Loss A/c 16,000
31
2014 2014
Mar To Machinery A/c 18,000 Mar 31 By Profit and Loss A/c 18,000
31
2015 2015
Mar 31 To Machinery A/c 20,000 Mar 31 By Profit and Loss A/c 20,000

Under Machine Hour Method:

Machine Hour Rate = ₹1,25,000/40,000 = ₹ 3 per hour

In the Books of X Ltd

Dr Machine Account Cr

Date Particulars J/F Amount Date Particulars J/F Amount

2012 2013 By Depreciation A/c 21,000
Apr 1 To Bank A/c 1,25,000 Mar 31 (7000*₹3)
Mar 31 By Balance c/d 1,04,000
1,25,000 1,25,000
2013 2014 By Depreciation A/c 24,000
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Apr 1 To Balance c/d 1,04,000 Mar 31 (8,000 hrs * ₹3)

Mar31 By Balance c/d 80,000
1,04,000 1,04,000
2014 2015 By Depreciation A/c 36,000
Apr 1 To Balance c/d 80,000 Mar 31 (9,000 * ₹ 3)
Mar 31 By Balance c/d 44,000
80,000 80,000
2016
Mar 3 1 To Balance c/d 44,000

Dr Depreciation Cr

Date Particulars J/F Amount Date Particulars J/F Amount

2013 2013
Mar To Machinery A/c 21,000 Mar 31 By Profit and Loss A/c 21,000
31
2014 2014
Mar To Machinery A/c 24,000 Mar 31 By Profit and Loss A/c 24,000
31
2015 2015
Mar 31 To Machinery A/c 36,000 Mar 31 By Profit and Loss A/c 36,000
Under Sinking Method:

Solution: The amount to be charged to the profit and loss A/c has arrived as follows:

Original Cost of plant .........₹ 1,25,000

Less : Scrap Value ................ ₹ 25,000

 29

Depreciation on the plant ₹1,00,000

For its whole life

The amount to be charged to the Profit and loss A/c = ₹ 1,00,000 * ₹ 0.23541
= ₹ 63,456.
Dr Machinery Account Cr

Date Particulars J/F Amount Date Particulars J/F Amount

2012 2013
Apr 1 To Bank A/c 1,25,000 Mar 31 By Balance c/d 1,25,000
2013 2014
Apr 1 To Balance b/d 1,25,000 Mar 31 By Balance c/d 1,25,000
2014 2015
Apr 1 To Balance b/d 1,25,000 Mar 31 By Balance c/d 1,25,000
Dr Depreciation Account Cr

Date Particulars J/F Amount Date Particulars J/F Amount

2012 2013
Apr 1 To Sinking Fund A/c 63,456 Mar 31 By Profit and Loss A/c 63,456

2013 2014
Apr 1 To Sinking Fund A/c 63,456 Mar 31 By Profit and Loss A/c 63,456

2014 2015
Apr 1 To Sinking Fund A/c 63,456 Mar 31 By Profit and Loss A/c 63,456

Reference :
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