Brian Tate purchased machinery costing £25,000 in March 20-5. It is the firm’s policy to depreciate machinery by direct depreciation on the machinery account, using the reducing balance method at a rate of 20 per cent per annum. A full year’s depreciation is charged in the year of purchase and the financial year ends on 30 September.

You are required to:

(a) Show the entries for three years, 20-5, 20-6 and 20-7, on the machinery account and the depreciation account.

(b) Show the entries for three years, 20-5, 20-6 and 20-7, in the profit and loss account and the balance sheet.