on july 01,2000, asok ltd. purchased a machine for Rs.1,08,000 and spent Rs.12000 on its installation.At the time of purchase it was estimated that the effective commercial life of the machine will be 12 years and after 12 years its salvage value will be Rs.12,000.prepare machine account and depriciation account in the books of ashok Ltd. for first three years,if depriciation is written off to straight line method.the accounts are closed on december 31st,every year
To prepare the Machine Account and Depreciation Account in the books of Ashok Ltd. for the first three years, we will follow these steps:
1. Determine the annual depreciation expense:
- Subtract the salvage value (Rs.12,000) from the initial cost of the machine (Rs.1,08,000 + Rs.12,000).
- Divide the resulting value by the useful life of the machine (12 years).
- This will help us determine the annual depreciation expense, which is Rs.9,000 per year ((Rs.1,08,000 + Rs.12,000 - Rs.12,000) / 12).
2. Prepare the Machine Account:
- The Machine Account will show the details of the machine's cost, installation expenses, and accumulated depreciation.
- Here's an example of the Machine Account for the first three years:
Year | Particulars | Amount (Rs.) | Amount (Rs.) |
------|----------------- |--------------|--------------|
2000 | To Cash / Bank | 1,08,000 | |
| To Installation | 12,000 | |
| | | 1,20,000 |
|-----------------|--------------|--------------|
2001 | By Depreciation | 9,000 | 9,000 |
|-----------------|--------------|--------------|
2002 | By Depreciation | 9,000 | 18,000 |
|-----------------|--------------|--------------|
2003 | By Depreciation | 9,000 | 27,000 |
|-----------------|--------------|--------------|
3. Prepare the Depreciation Account:
- The Depreciation Account will record the annual depreciation expense for each year.
- Here's an example of the Depreciation Account for the first three years:
Year | Particulars | Amount (Rs.) |
------|----------------- |--------------|
2001 | To Machine | 9,000 |
|-----------------|--------------|
2002 | To Machine | 9,000 |
|-----------------|--------------|
2003 | To Machine | 9,000 |
|-----------------|--------------|
Note: The above example assumes that the accounts are closed on December 31st every year. Therefore, the annual depreciation expense is calculated accordingly. Please adjust the amounts and years as per your requirement.