Profit and Loss A/c Dec To Machinery A/c , Dec By Profit and Loss A/c , , , Illustration Anand bought a machinery for ` , , on - - . On - - , he bought another machine for ` , . On - - , he purchased another machine for ` , . Provide depreciation at % p.a.
on straight line method. Prepare machinery account for the years to by using accounts by assuming accounts are closed on st December every year. Solution Machinery Account Cr. Jan To Bank A/c , , Dec Dec By Depreciation A/c By Balance c/d , , , , , , Jan June To Balance b/d To Bank A/c , , Dec Dec By Depreciation A/c By Balance c/d , , , , , , , Jan Oct To Balance b/d To Bank A/c , , , Dec Dec By Depreciation A/c By Balance c/d , , , , , , , Jan1 To Balance b/d , , Accountancy Note: Depreciation for : , , × % = , : , , × % = , (+) , x % x / = , , : , , x % = , (+) , x % = , (+) , x % x / = , .
Calculation of profit or loss on sale of asset Sometimes, a business may sell an asset. In that case, the profit or loss on sale is to be calculated and accounted in the books. To find the profit or loss on sale of asset, the book value of the asset on the date of sale and the sale price are to be compared. Book value of the asset on the date of sale is calculated by subtracting the total depreciation provided on the asset from the date of its purchase or construction to the date of sale from the original cost of the asset.
If the sale price is more than the book value of the asset, the difference is profit. On the other hand, if the