Depreciation
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Depreciation

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Depreciation Depreciation Presentation Transcript

  • Fixed assets and DepreciationFixed assets and Depreciation  Fixed assets : assets used in the business forFixed assets : assets used in the business for long – termlong – term  Gross value ( book value ) of the Fixed assets :Gross value ( book value ) of the Fixed assets : Purchase cost of the assets + Import Duty+ Octroi+ Loading and unloading expenses +installation charges + Technical consultancy fees ( -) trade discount
  •  Restatement of value of assets with the help ofRestatement of value of assets with the help of appraisal undertaken by competent approvedappraisal undertaken by competent approved valuersvaluers  When an asset revalued upward :- the ownersWhen an asset revalued upward :- the owners fund will be increasedfund will be increased REVALUATION OF ASSETSREVALUATION OF ASSETS
  • Terms of writing off for fixed assetsTerms of writing off for fixed assets  Tangible assetsTangible assets 1.1. LandLand NoneNone 2.2. Plant, machinery , equipments,Plant, machinery , equipments, DepreciationDepreciation furniture etcfurniture etc 1.1. Natural resourcesNatural resources DepletionDepletion  Intangible assetsIntangible assets  Patent copy right etcPatent copy right etc AmortisationAmortisation
  • DEPLETIONDEPLETION  Allocation of a portion of cost of natural resources to the extraction or production income  Depletion rate : Acquisition and development cost – residual value Estimated recoverable units  Depletion Amount = Depletion rate X No. units extracted
  • AMORTISATIIONAMORTISATIION  Allocation of cost of acquiring intangible longAllocation of cost of acquiring intangible long term assets over the estimated life of the assetsterm assets over the estimated life of the assets to reflect the decline in its service potential .to reflect the decline in its service potential .  Expected life of this Assets :- Legal life orExpected life of this Assets :- Legal life or economic advantage it offerseconomic advantage it offers  Amortization per period =Amortization per period = Cost of the intangible assetsCost of the intangible assets Expected life
  • DEPRECIATIONDEPRECIATION  Allocation of the cost of the assets against theAllocation of the cost of the assets against the income generated by itincome generated by it  It is measure of wearing out , consumption orIt is measure of wearing out , consumption or other loss of value of depreciable assets arisingother loss of value of depreciable assets arising from the use time obsolescence due tofrom the use time obsolescence due to technology and market changestechnology and market changes  Allocate fair amount of cost against the revenueAllocate fair amount of cost against the revenue
  • OBJECTIVESOBJECTIVES  Correct income statementCorrect income statement  True financial positionTrue financial position  Fund for replacementFund for replacement
  • METHODSMETHODS  Straight line MethodStraight line Method  Written Down Value MethodWritten Down Value Method