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Depreciation.pptx

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Depreciation.pptx

the basic to end on depreciation ..
very briefly explain and very useful info ''

the basic to end on depreciation ..
very briefly explain and very useful info ''

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Depreciation.pptx

1. 1. Prestation Title Depreciation
2. 2. Agenda Introduction Internal External Method I Method II Applications
3. 3. Introduction Defination: •Reduction •Wear and Tear Causes: Two types.... Internal: °Wear and Tear °Depletion External: °Obsolescence °Efflux of Time °Accident
4. 4. Internal Inherent Normal Causes Wear and Tear: °Account of Continued use e.g. •Building •Plant Depletion: °Proportionate to the Quantum of Production e.g. •Mine •Quarry
5. 5. External External Reasons Obsolescence: °Proper working °Become Obsolete e.g. •Old Machines Efflux of Time: °Account of sheer passage of Time e.g. •Leasehold House Accident: °Destroyed by Abnormal Reasons e.g. •Fire
6. 6. Method I • Straight Line Method • Equal Each Year • Formula (Cost – Scrap Value) / Estimated Value
7. 7. Method I Example: Cost of an Asset=2500 Scrap Value=500 Life=5 Years Appling formula... (2500- 500)/5=400
8. 8. Method I Depreciation for 3 years: •1st Year = 2500 – 400 = 2100 •2nd Year = 2100 – 400 = 1700 •3rd year = 1700 – 400 = 1300
9. 9. Method II • Diminishing Balance Method • Fixed Percentage • Formula Depreciation = (Cost – Scrap Value) * Depreciation Rate
10. 10. Method II Example: Cost of an Asset=\$5000 Scrap Value=\$1000 Rate=40% Appling formula... ((5000- 1000)*40)/100=1600
11. 11. Method II Depreciation for 3 years: 1st year = ((5000-1000)*40)/100 = 1600 2nd year = ((4000 – 1600)*40)/100 = 960 3rd year = ((2400 – 960)*40)/100 = 576
12. 12. Applications Matching Expense Asset Valuation Cost Recovery Tax Deduction