Depreciation accounting ppt @ bec doms 2009

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Depreciation accounting ppt @ bec doms 2009

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Depreciation accounting ppt @ bec doms 2009

  1. 1. Depreciation Accounting
  2. 2. Depreciation AccountingDefinition A measure of the wearing out, consumption orother loss of value of depreciable assets arisingfrom use, efflux of time or obsolescence throughtechnology and market changes.”
  3. 3. Depreciation AccountingDefinition AnalysisAllocation of depreciable amount of a fixed assetover its estimated useful lifeDepreciation is a non-cash expense and ischarged to Profit & Loss a/c each yearDepreciation is based on cost of asset
  4. 4. Depreciation Accounting Causes of DepreciationUse/consumptionEfflux of timeAbnormal factorsObsolescence
  5. 5. Depreciation Accounting Need for charging DepreciationTo ascertain the true & fair profit or loss of theorganisation To reveal the true & fair financial position of theorganisationTo provide funds for replacementTo compute the correct tax liability
  6. 6. Depreciation Accounting Accounting for Depreciation(C)Methods of determining the amounts ofdepreciation.(B) Accounting treatment
  7. 7. Depreciation Accounting(A) Methods of determining the amounts of depreciation 2 methods
  8. 8. Depreciation AccountingFixed Instalment Method/Straight Line Method CALCULATION OF DEPRECIATIONOriginal cost of asset – Estimated scrap value Life of the asset
  9. 9. Depreciation Accounting Original Cost of the Asset
  10. 10. Depreciation AccountingOriginal Cost includes- Payment to vendor- Transportation- Customs duty, in case of import of asset- Transit Insurance- Commission paid on purchase of asset- Installation charges- Initial repairs to second hand assets- Registration cost- Special costs incurred
  11. 11. Depreciation Accounting Estimated Scrap Value
  12. 12. Depreciation Accounting Life of the AssetFactors Responsible- Nature of the product- Quality of machine- Legal requirements- Use of machine- Maintenance of asset- Replacement policy
  13. 13. Depreciation AccountingDiminishing Balance Method/Written Down Value Method
  14. 14. Depreciation Accounting (B) Accounting treatment
  15. 15. Depreciation AccountingAS – 6 Depreciation Accounting
  16. 16. Depreciation Accounting APPLICABILITYForests, plantations and similar regenerative naturalresources.Wasting Assets – Oil wells, Coal mines etc.Expenditure on research and development, whethersuccessful or unsuccessful.GoodwillLivestockLand, unless it has a limited useful life for theorganisation
  17. 17. Depreciation Accounting Change in the method of DepreciationStatutory requirement arisesCompliance with the Accounting StandardIf the change would result in a moreappropriate preparation or presentation of thefinancial statements
  18. 18. Depreciation Accounting Disclosure in Financial statementsHistorical cost of each assetTotal depreciation for the periodThe method of depreciation being usedRate of depreciationUseful life of the asset
  19. 19. Depreciation Accounting THANK YOU

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