AS-10

If the new machine enhances the capacity beyond performance of old machine it is capitalised along with carrying amaount if it falls in the same class

If the machine has seperate identity it will be classified as a seperate ITEM AND DEPRECIATION WILL BE PROVIDED ACCORDINGLY

But please note items costing less than Rs 5000 as per schedule VI can be written off without capitalising it

Dear Sivaram, thank u for your reply.

Can you pls tell me the "journal entry" for this transaction

and the way in which it will appear in the financial statement

Gross Block

Opening Balance                  26000

Additions                                 5000

Gross Block                           31000

Less Depreciation                 11000

Net Block                                 20000

When Rs. 5000 is capitalised and shown along  with same class of assets

Note Depreciation is not provided on Additions as date of additions not known

If addition is a seperate class of asset  show Rs. 5000 as addition in gross block and provide depreciation acordingly

If written off Rs. 5000 will not be shown as addition and  Gross Block will be Rs. 26000 and Net Block will be Rs. 15000 and depreciation will be Rs. 11000

Hi sivaram. I'm sorry if i sounds very stupid. I really cant able to understand why the opening balance is Rs 26000 and the additions is rs. 5000.

Because in my case a asset worth Rs. 15000 is sold and a new asset worth Rs. 26000 is purchased by paying Rs. 5000. There fore the total amt spent by X ltd is Rs 20000 (15k+5k) for puchasing an asset worth of Rs. 26000

Can you also tell me the logic behind Gross block Rs. 31000 (26k+5k)

sorry dinesh u are right   machine account appears as follows

Cost Price     Rs. 26000

Less Deletions 15000(Presuming it is at cost)

Less Accumulated Depreciation ********

Net Block            9000

Depreciation to be provided at the rates for additions of Rs. 26000 and Depreciation on Sale of Asset for Rs. 15000 is to be reversed till date of sale and profit and loss is to be ascertained and taken to profit and loss .

Here sale value of the asset is not given and I presumed that Rs. 15000 is the cost of Asset Sold

Thanks Dinesh for correcting me