Following transactions relating to machinery are given: 2072, Baishakh 1 Machinery purchased Rs. 2,00,000 2073, Poush 1 Machinery purchased Rs. 3,00,000 2074, Chaitra 31 First machinery sold Rs.…

Machinery Account (2072–2074)

The Fixed Instalment Method (Straight-Line Method) calculates depreciation uniformly over the asset's useful life. Here, we assume a useful life of 5 years (since no life is given, this is a standard assumption for NEB exams). Depreciation is charged annually on 31 Chaitra (accounting year-end).

---

Step 1: Calculate Depreciation for Each Machinery

Depreciation per year = Cost × (Depreciation Rate / Useful Life)

1. Machinery A (Purchased on 2072 Baishakh 1, Rs. 2,00,000)

   • Depreciation per year = $2,00,000\times \frac{15}{100\times 5}=2,00,000\times 0.03=\text{Rs. 6,000}$
   • Total Depreciation (2072–2074):
     • 2072: Rs. 6,000 (from Baishakh 1 to Chaitra 31)
     • 2073: Rs. 6,000 (full year)
     • 2074: Rs. 6,000 (until Chaitra 31, before sale)

2. Machinery B (Purchased on 2073 Poush 1, Rs. 3,00,000)

   • Depreciation per year = $3,00,000\times \frac{15}{100\times 5}=3,00,000\times 0.03=\text{Rs. 9,000}$
   • Total Depreciation (2073–2074):
     • 2073: Rs. 9,000 (from Poush 1 to Chaitra 31)
     • 2074: Rs. 9,000 (full year)

---

Step 2: Record Machinery Account (2072–2074)

The Machinery Account is a Real Account (Asset Account) and follows the Debit-Credit Rule:

• Debit Side: Purchase of machinery, additions, and any revaluations.
• Credit Side: Depreciation, sales proceeds, and disposals.

We maintain separate sub-accounts for each machinery (A and B) for clarity.

---

Machinery Account (2072–2074)

2072 (Baishakh 1 – Chaitra 31)

Total: 2,00,000 (Debit) – 6,000 (Credit) = 1,94,000 (Balance c/d)

---

2073 (Poush 1 – Chaitra 31)

Calculations:

• Machinery A: 1,94,000 – 6,000 = 1,88,000
• Machinery B: 3,00,000 – 9,000 = 2,91,000
• Total Balance: 1,88,000 + 2,91,000 = 4,79,000

---

2074 (Chaitra 1 – Chaitra 31)

Note: Machinery A is sold on 2074 Chaitra 31 for Rs. 1,55,000. We first record depreciation for the year and then the sale.

Calculations:

1. Depreciation for 2074:
   • Machinery A: 1,88,000 – 6,000 = 1,82,000 (Book Value before sale)
   • Machinery B: 2,91,000 – 9,000 = 2,82,000
2. Sale of Machinery A:
   • Book Value (1,82,000) – Sale Proceeds (1,55,000) = Loss on Sale (27,000)
   • This loss is recorded in the Machinery Disposal Account (not shown here, but typically debited to Profit & Loss A/c).

Final Balance (Machinery B only):

• Rs. 2,82,000

---

Final Machinery Account (Summary of All Years)

---

Key Notes:

1. Depreciation is charged uniformly (Fixed Instalment Method).
2. Machinery A is disposed of in 2074, and its book value (Rs. 1,82,000) exceeds sale proceeds (Rs. 1,55,000), resulting in a loss of Rs. 27,000 (recorded in Machinery Disposal A/c).
3. Machinery B remains in the books with a net book value of Rs. 2,82,000 at the end of 2074.
4. All transactions are recorded chronologically with proper journal entries (not shown here, but implied).

---

Final Answer: The Machinery Account for the years 2072–2074 is prepared as above, showing:

• Purchase of Machinery A (Rs. 2,00,000) and B (Rs. 3,00,000)
• Annual Depreciation (Rs. 6,000 for A, Rs. 9,000 for B)
• Sale of Machinery A in 2074 for Rs. 1,55,000
• Closing Balance (Machinery B) = Rs. 2,82,000