Electricity companies

1)The moon electricity co. had to discard a machine on 1st oct, 2005. On 1st april, the depreciation provision in this respect stood at Rs.150000 against the cost of RS. 250000 as on april 1, 1997. Show the affected accounts for  2005 assuming the machine realised Rs.30000 immediately on being discarded and in the normal course it would have been depreciated fully by 31st march, 2006

Concept:

Under the case of electricity comapnies the asset discarded will be transfered to contingency reserve account at WDV. No depreciation will b e charged on such asset so discarded. Moreover any amount realised from the sale of this asset will be credited to contingency reserve account. If in case the contingency reserve falls short of WDV then the unabsorbed amount will be reduced from capital base.

Under the given situation

Contingency Reserve A/c Dr.  Rs.100000  (250000-150000)

To Plant A/c                              

Bank A/c Dr.   30000 ( Amount Realised)

To Contingency Reserve A/c

2) The D electricty com has to replace 1/4 of a main at a cost of Rs. 180000 and lay an auxillary main for the remaining length at a cost of Rs.260000. The original main had a cost Rs.240000 twenty years ago when cost were one half of what they are now.Old material realised Rs.5000.

1)

 Auxillary Main A/c Dr   Rs.260000

To Bank A/c     

2)Replacement A/c Dr.       Rs.60000

Main A/c Dr.                         Rs.120000

To    Bank A/c                       Rs.180000

3) Bank A/c Dr.                Rs.5000

To Replacement A/c   

4) Revenue A/c Dr. 55000

To Replacement A/c       

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