ICAI, AS 6 Depreciation Accounting, help to understand of depreciation in industry. From general and accounting point of view. As per company act 2013

1. FINANCIAL ACCOUNTING - PRESENTATION
Topic : AS 6 – Depreciation Accounting
Prepared and Presented by
Prathmesh

2. AS – 6 DEPRECIATION ACCOUNTING
1. Introduction – AS 6
2. Meaning and Definition
3. Features of Depreciation
a) Decline in value
b) Loss of value of assets
c) Continuing process
d) Expired cost
e) Non-cash expense
f) Writing-off capital expenditure
Contd…

3. AS – 6 DEPRECIATION ACCOUNTING
5. Basis for calculating Depreciation
a) Historical cost
b) Estimated useful life
c) Estimated residual or scrap value
6. Methods of charging Depreciation
a) Straight Line Method / Fixed Instalment method
b) Written Down Value Method / Reducing Value method
c) Sinking Fund method
d) Insurance Policy method
e) Sums of the digit method
f) Revaluation method
g) Depletion method
h) Machine Hour rate method
i) Replacement method
Contd…

4. AS – 6 DEPRECIATION ACCOUNTING
(A) Straight Line method (SLM)
Formula:
Amount of Depreciation = Cost – Estimated Scrap Value
Estimated Life
Depreciation Rate = Amount of Depreciation X 100
Cost
Contd…
F. Year Rate of Dep Opening Balance Dep for the Year Closing WDV
2011-12 10% 125,000 12,500 112,500
2012-13 10% 112,500 12,500 100,000
2013-14 10% 100,000 12,500 87,500
2014-15 10% 87,500 12,500 75,000
2015-16 10% 75,000 12,500 62,500

5. AS – 6 DEPRECIATION ACCOUNTING
(B) Written Down Value Method (WDV)
Formula:
Amount of Depreciation = Cost – Estimated Scrap Value
Estimated Life
Depreciation Rate = 1 – (Residual price) ^ (1/n) X 100
Cost
R = Rate of Depreciation (in %)
n = Remaining useful life of the asset (in years)
Residual Value = Scrap value at the end of useful life of the asset
Cost = Cost of the asset/Written down value of the asset Contd…
Year Rate of Dep Opening Balance Dep for the Year Closing WDV
2011-12 10% 125,000 12,500 112,500
2012-13 10% 112,500 11,250 101,250
2013-14 10% 101,250 10,125 91,125
2014-15 10% 91,125 9,113 82,012
2015-16 10% 82,012 8,201 73,811

6. AS – 6 DEPRECIATION ACCOUNTING
7. Applicability of depreciation to assets as per AS 6
a) Natural resources
b) Wasting assets
c) R&D
d) Goodwill
e) Livestock
9. Factors Affecting the amount Of Depreciation
a) Cost of Asset
b) Estimated Scrap value
c) Estimated Useful life
d) Legal Provisions
Contd…

7. AS – 6 DEPRECIATION ACCOUNTING
9. Major Causes of Depreciation
a) Wear and Tear
b) Effusion of time
c) Exhaustion
d) Obsolescence
e) Other causes
11. Advantages & Disadvantages
a) Ascertainment of true profits
b) Reporting of true and fair view
c) Replacement of assets
d) Savings in taxes
Contd…

8. AS – 6 DEPRECIATION ACCOUNTING
11. Presentation in financial statement as per Companies Act
2013.
12. New Act – Comparison with Old act and Benefits
a) Basis of depreciation
b) Residual value
c) Rates
d) Component accounting
e) Amortization of intangible assets.

9. AS – 6 DEPRECIATION ACCOUNTING
14. Benefits of new provisions
a) Increase in govt. revenue
b) True and fair view in financial statements
c) Less dispute in classifications of assets
d) More Transparency
15. Conclusion