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ASSETS PURCHASE ENTRY:
ASSETS (MACHINERY) A/C - Dr -100.000
PAYABLES A/C - Cr -100,000
DEPRECIATION ENTRY (EVERY MONTH) TILL7 YEARS:
DEPRECIATION AMOUNT PER MONTH -100,000 /120 MONTHS
DEPRECIATION A/C - DR -833.33
ACCUMULATED DEPRECIATION A/C - CR -833.00
SALE OF ASSETS:
BOOK VALUE: ORIGINAL COST - ACCUMULATED DEPRECIATION
100,000 -70,000
30,000 = BOOK VALUE
GAIN/LOSS ON SALE OF ASSETS: BOOK VALUE - SALE VALUE OF ASSETS
30,000 -50,000
(20,000) = GAIN ON SALE OF ASSETS
SALE OF ASSETS ENTRY:
ACCUMULATED DEPRECIATION A/C - DR -70,000
CASH OR BANK A/C - DR -50,000
ASSETS (MACHINERY) A/C - CR -100,000
GAIN ON SALE OF ASSET A/C - CR - 20,000
At the time of purchase of Machine (It will purchase at the1st date of the financial year)
a) Assets (Machine) 100,000 Dr
Bank / Cash 100,000 Cr
the Company follow depreciation method to depreciated the asset than at the end of every year following entry will be recorded
b) Depreciation expense 10,000 Dr
Allowance for depreciation 10,000 Cr
let suppose the machine will sold at the1st date of the8th financial year from the date of purchase
the WDV of the assets at that time is = Cost - Allowance for deprecation =100,000 -70,000 =30,000. The machine will be sold for50% of the cost prices i.e.50,000 than following entry will be recorded
c) Allowance for deprecation 70,000 Dr
Bank / AR 50,000 Dr
Assets (Machine) 100,000 Cr
Gain on Sale of Assets (Machine) 20,000 Cr.
1. At cost
Dr Machine Disposal Account $100,000
Cr Machine Account $100,000
2.
At disposal period
Dr Accumulated Depreciation account $70,000 (100,000/10 =10,000 x7yrs)
Cr Machine Disposal Account $70,000
3.
Cash received for the sale
Dr Cash or Bank $50,000 (0.5x100,000 =50,000)
Cr Machine Disposal Account $50,000
4.
Profit on Disposal
Dr Machine Disposal Account $20,000
Cr Profit and Loss Account $20,000
