Machinery Account

Introduction
In this question, we are required to prepare the Machinery Account after charging depreciation at a rate of 10% using the diminishing balance method. We need to consider the purchase, repair, installation, and sale of the machine.

Diminishing Balance Method
The diminishing balance method is a commonly used method to calculate depreciation. In this method, the depreciation expense is calculated as a fixed percentage of the carrying amount of the asset at the beginning of the accounting period. The percentage is usually higher in the earlier years and decreases over time.

Calculation of Depreciation
To calculate the depreciation using the diminishing balance method, we will use the following formula:

Depreciation expense = Carrying amount at the beginning of the period * Depreciation rate

Step 1: Calculation of Depreciation Expenses
The carrying amount of the machine at the beginning of each accounting period is calculated as follows:

- Year 1 (April 2003 - March 2004): Rs 30,000 (purchase cost)
- Year 2 (April 2004 - March 2005): Carrying amount at the beginning of the period - Depreciation expense (Year 1)
- Year 3 (April 2005 - September 2005): Carrying amount at the beginning of the period - Depreciation expense (Year 2)

Using the above formula, we can calculate the depreciation expense for each year.

Step 2: Preparation of Machinery Account
We will prepare the Machinery Account in the following format:

Date | Particulars | Amount | Date | Particulars | Amount
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1-Apr-03 | To Bank/Cash | 30,000 | | |
| | | | |
1-Apr-03 | By Machinery | 30,000 | | |
| | | | |

31-Mar-04 | To Depreciation | xx | 31-Mar-04 | By Balance c/d | xx
| | | | |

| | | | |

| | | | |

31-Mar-05 | To Depreciation | xx | 31-Mar-05 | By Balance c/d | xx
| | | | |

| | | | |

| | | | |

1-Oct-05 | To Bank/Cash | 25,000 | 1-Oct-05 | By Machinery | 25,000
| | | | |

Explanation:
- On April 1, 2003, the company purchased a second-hand machine for Rs 30,000, which is debited to the Machinery Account.
- The repair expenses of Rs 4,000 and installation expenses of Rs 1,000 are also added to the Machinery Account.
- At the end of the accounting period, depreciation is charged based on the carrying amount of the machine at the beginning of the period and the depreciation rate.
- The depreciation expense is debited to the Machinery Account.
- On October 1, 2005, the machine is sold for Rs 25,000, and the amount received is credited to the Machinery Account.

Conclusion
By following the above steps and preparing the Machinery Account, we can accurately record the purchase, repair, installation, and sale of the machine, as well as the depreciation