Replacement proposal accounting

ask the management regarding treatment of old machine, 

the practice is wrong, if they have transfered old machine, then they have to issue invoice to vendor for 50 and vendor has to issue invoice for 500, result is 4,50 net, but in absence of proper system the physical existance of old machine is questioned.

now the management has to show in accounts as scrap for old machine and sell out the same by paying taxes.

First of all book the asset at its cost to the company i.e 500 by debit the fixed asset account and crediting the party account.

Secondly, transfer the agreed exchange value i.e 50 in your case to the party (creditor) account

Hence, in the accounts it will showing that you will have to pay for 450.