Response to the following problem:
A company was incorporated on 1st January, 1960, and on that date purchased two machines, each costing £1,000. Depreciation is provided at the rate of 20 per cent per annum by the straight line method. Each year the amount so provided is credited to an account called "Provision for Depreciation" and the balance on this account is deducted in the Balance Sheet from the original cost of the asset On 31st December, 1962, one machine was sold for £420 and on the same day was replaced by a new machine which cost £1,200.
You are asked to give all the accounts necessary to record these matters, including transfers to Profit & Loss Account, for each of the years 1960, 1961 and 1962 and to show the balance carried down on 1st January, 1963.