Calculation of Depreciation under SYD Method:

Step 1: Calculate the total number of units of production or hours of usage over the useful life of the machinery. Let us assume that the machinery will produce 50,000 units over its useful life.

Step 2: Calculate the sum of the years of useful life of the machinery. In this case, it will be 5+4+3+2+1=15.

Step 3: Calculate the depreciation rate per unit of production or hour of usage. It can be calculated as follows:

Depreciation rate per unit of production = 1/15 * 100% = 6.67%

Step 4: Calculate the depreciation expense for each year using the following formula:

Depreciation expense = Depreciation rate per unit of production * Number of units produced or hours of usage during the year

Preparation of Machinery Account:

Year 1:

- Opening balance of machinery account: Rs 0
- Machinery purchased: Rs 50,000
- Depreciation expense for the year: 6.67% * 10,000 = Rs 6670
- Closing balance of machinery account: Rs 43,330 (Rs 50,000 - Rs 6,670)

Year 2:

- Opening balance of machinery account: Rs 43,330
- Depreciation expense for the year: 6.67% * 10,000 = Rs 6670
- Closing balance of machinery account: Rs 36,660 (Rs 43,330 - Rs 6,670)

Year 3:

- Opening balance of machinery account: Rs 36,660
- Depreciation expense for the year: 6.67% * 10,000 = Rs 6670
- Closing balance of machinery account: Rs 29,990 (Rs 36,660 - Rs 6,670)

Year 4:

- Opening balance of machinery account: Rs 29,990
- Depreciation expense for the year: 6.67% * 10,000 = Rs 6670
- Closing balance of machinery account: Rs 23,320 (Rs 29,990 - Rs 6,670)

Year 5:

- Opening balance of machinery account: Rs 23,320
- Depreciation expense for the year: 6.67% * 10,000 = Rs 6670
- Salvage value of machinery: Rs 5,000
- Closing balance of machinery account: Rs 0 (Rs 23,320 - Rs 6,670 - Rs 5,000)

Conclusion:

Under SYD method, the depreciation expense decreases every year. This method is useful for assets that have a higher depreciation rate in the initial years of their useful life.