A machine purchased for ₹8,00,000 on April 01, 2000. Depreciation wa

A machine purchased for ₹8,00,000 on April 01, 2000. Depreciation was provided on straight-line basis at the rate of 20% on original cost. On April 01, 2002, a substantial modification was made in the machine to make it more efficient at a cost of ₹80,000. This amount is to be depreciated @ 20% on straight line basis. Routine maintenance expenses during the year 2003-04 were ₹2000. Draw up the Machinery account, Provision for depreciation account and charge to Profit and Loss account in respect of the accounting year ended on 31.3.2003.

Answer»

Provision for Depreciation a/c

Note

1. Cost of modification is capitalised but routine repair expenses are treated as revenue expenditure.
2. Calculation of balance of provision for depreciation account on 1.4.2002 :- Original cost on 1.4.2000 Depreciation for the year 2000-01 & 2001-02 (8,00,000 x 20% x 2)	800000 320000
3. Depreciation for the year 2002 - 03 is as under: - 20% of 800000 20% of 80000 Total Depreciation (2002-03)	160000 16000 176000
4. Amount to be charged to P/L a/c Depreciation Repair & Maintenance	176000 2000