This document discusses depreciation accounting and various depreciation methods. It begins by defining depreciation as the reduction in value of an asset due to factors like usage, passage of time, wear and tear, etc. Depreciation is allocated over the useful life of an asset using methods like straight line, reducing balance, etc. The document then discusses various depreciation methods in detail like sinking fund method, insurance policy method, annuity method, and machine hour rate method. It also discusses accounting standard 6 related to depreciation accounting.
This document provides an overview of depreciation accounting. It defines depreciation as the permanent decrease in the value of an asset due to factors like wear and tear, obsolescence, or the passage of time. The document outlines various causes of depreciation including wear and tear, exhaustion, effluxion of time, weather effects, and permanent declines in asset value. It also discusses objectives of recording depreciation such as correctly calculating profits, complying with legal requirements, and maintaining the integrity of capital. Finally, the document introduces different depreciation methods used in accounting like the straight-line method, declining balance method, and annuity method.
This document discusses depreciation accounting. It defines depreciation accounting as allocating the cost of a tangible capital asset over its estimated useful life. Depreciation represents the gradual conversion of the asset's capitalized cost into an expense that is allocated to different periods. The document discusses different terms used for allocating costs of different asset types, such as depreciation for physical assets, depletion for natural resources, and amortization for intangible assets. It also discusses factors that influence the amount of depreciation charged each year, such as original cost, estimated useful life, additions made to the asset, and estimated residual value.
Depreciation is the allocation of the cost of tangible and intangible assets over their useful lives. There are different methods for calculating depreciation under accounting standards in India (AS-6), US GAAP, and IFRS. Key differences include how revaluations are treated and whether changes in estimates are considered changes in accounting policies. Uniformity in depreciation accounting standards worldwide could improve comparability between companies.
This document summarizes the key aspects of Accounting Standard AS-6 on depreciation accounting in India. It defines depreciation and explains how it is allocated over the useful life of a depreciable asset. It covers the applicability of AS-6, methods of calculating depreciation, factors affecting depreciation, and disclosure requirements regarding depreciation policies and amounts in financial statements. The document also discusses accounting treatments for changes in depreciation methods or estimates of useful life.
1) The document discusses depreciation accounting, including definitions, objectives, factors affecting depreciation amounts, and methods of calculating depreciation.
2) The two most common depreciation methods are the straight-line method, which allocates equal amounts of depreciation each period, and the reducing balance method, which allocates higher amounts initially that decrease over time.
3) Other topics covered include accounting entries for depreciation, illustrations of depreciation calculations using different methods, and the sum-of-years digits method.
This document provides an overview of depreciation accounting. It defines depreciation and related terms like depletion, amortization, and obsolescence. It discusses the causes and objectives of charging depreciation. The document also explains factors affecting depreciation amounts and relevant accounting principles. Finally, it describes the straight line and written down value methods for allocating depreciation over the useful life of an asset.
The document discusses reserves, provisions, and the auditor's responsibilities regarding them. It defines reserves as amounts set aside out of profits that are not intended to meet existing liabilities or diminish asset values. Provisions are liabilities of uncertain timing or amount that are recognized when an outflow of resources is probable to settle a present obligation from a past event. The document provides guidance on measuring, using, and disclosing provisions according to accounting standards. It also distinguishes between reserves and provisions and discusses the various types of reserves like revenue, capital, sinking funds, and secret reserves. Finally, it outlines the auditor's responsibilities to evaluate the adequacy of provisions and ensure reserves are properly accounted for.
This document provides an overview of depreciation accounting. It defines depreciation as the permanent decrease in the value of an asset due to factors like wear and tear, obsolescence, or the passage of time. The document outlines various causes of depreciation including wear and tear, exhaustion, effluxion of time, weather effects, and permanent declines in asset value. It also discusses objectives of recording depreciation such as correctly calculating profits, complying with legal requirements, and maintaining the integrity of capital. Finally, the document introduces different depreciation methods used in accounting like the straight-line method, declining balance method, and annuity method.
This document discusses depreciation accounting. It defines depreciation accounting as allocating the cost of a tangible capital asset over its estimated useful life. Depreciation represents the gradual conversion of the asset's capitalized cost into an expense that is allocated to different periods. The document discusses different terms used for allocating costs of different asset types, such as depreciation for physical assets, depletion for natural resources, and amortization for intangible assets. It also discusses factors that influence the amount of depreciation charged each year, such as original cost, estimated useful life, additions made to the asset, and estimated residual value.
Depreciation is the allocation of the cost of tangible and intangible assets over their useful lives. There are different methods for calculating depreciation under accounting standards in India (AS-6), US GAAP, and IFRS. Key differences include how revaluations are treated and whether changes in estimates are considered changes in accounting policies. Uniformity in depreciation accounting standards worldwide could improve comparability between companies.
This document summarizes the key aspects of Accounting Standard AS-6 on depreciation accounting in India. It defines depreciation and explains how it is allocated over the useful life of a depreciable asset. It covers the applicability of AS-6, methods of calculating depreciation, factors affecting depreciation, and disclosure requirements regarding depreciation policies and amounts in financial statements. The document also discusses accounting treatments for changes in depreciation methods or estimates of useful life.
1) The document discusses depreciation accounting, including definitions, objectives, factors affecting depreciation amounts, and methods of calculating depreciation.
2) The two most common depreciation methods are the straight-line method, which allocates equal amounts of depreciation each period, and the reducing balance method, which allocates higher amounts initially that decrease over time.
3) Other topics covered include accounting entries for depreciation, illustrations of depreciation calculations using different methods, and the sum-of-years digits method.
This document provides an overview of depreciation accounting. It defines depreciation and related terms like depletion, amortization, and obsolescence. It discusses the causes and objectives of charging depreciation. The document also explains factors affecting depreciation amounts and relevant accounting principles. Finally, it describes the straight line and written down value methods for allocating depreciation over the useful life of an asset.
The document discusses reserves, provisions, and the auditor's responsibilities regarding them. It defines reserves as amounts set aside out of profits that are not intended to meet existing liabilities or diminish asset values. Provisions are liabilities of uncertain timing or amount that are recognized when an outflow of resources is probable to settle a present obligation from a past event. The document provides guidance on measuring, using, and disclosing provisions according to accounting standards. It also distinguishes between reserves and provisions and discusses the various types of reserves like revenue, capital, sinking funds, and secret reserves. Finally, it outlines the auditor's responsibilities to evaluate the adequacy of provisions and ensure reserves are properly accounted for.
1) Depreciation is the systematic allocation of the cost of a fixed asset over its useful life to match the cost with the economic benefits generated by the asset.
2) Without depreciation accounting, the entire cost of a fixed asset would be recognized in the year of purchase, providing a misleading view of an entity's profitability.
3) The straight-line method is the simplest way to calculate depreciation by subtracting salvage value from original cost and dividing by estimated useful life in years.
1. The document discusses various methods of accounting for depreciation of fixed assets, including straight-line, units-of-production, and declining balance methods.
2. It explains that depreciation involves allocating the cost of tangible assets over the periods they are expected to provide benefits.
3. Key factors that determine depreciation expenses each year include initial asset cost, estimated residual value, useful life, and the depreciation method used.
Fixed assets are long-term assets used by a business over multiple accounting periods. They include property, equipment, furniture, and intangible assets. The cost of a fixed asset includes its purchase price plus any costs to prepare the asset for use. Capital expenditures are added to the asset's value in the accounting records. Acquisition cost is the original historical cost of the asset. Determining cost involves considering various fees, duties, and discounts. Borrowing costs related to asset construction may also be included in the asset's total cost.
This document discusses depreciation, provisions, and reserves. It defines depreciation as the permanent decrease in the value of fixed assets due to use, time, or obsolescence. Common depreciation methods include straight-line and written down value. Provisions are amounts set aside for known liabilities or losses, while reserves are accumulated profits retained for future use. The document contrasts provisions and reserves, explaining their different purposes, accounting treatments, and types such as revenue and capital reserves.
Hi Everyone,
In this Powerpoint Presentation I have discussed about the Accounting Standard-10 on Property, Plant & Equipment issued by ICAI. I have covered all the major topics such as measurement of PPE, Depreciation(Which was previously covered under AS-6 now deleted), Initial Recognition, Subsequent Recognition etc.
This document discusses 9 issues related to the accounting standard AS 6 on depreciation accounting in India. It addresses questions on which assets depreciation does not apply to, factors considered in computing depreciation, circumstances impacting useful life, requirements for changing depreciation methods, implications of asset revaluation, and more. Key points covered include that depreciation must be provided annually regardless of increased market value, schedules may require higher depreciation rates if useful life is shorter than estimated, and revalued assets require depreciation based on remaining useful life, not scheduled rates.
This document discusses depreciation and its key aspects. It defines depreciation as the decline in value of fixed assets like machinery, buildings, vehicles, and furniture due to constant use, time, or obsolescence. Depreciation is a non-cash expense that is allocated over the useful life of the asset to determine accurate profit/loss and financial position. Common depreciation methods include straight line and written down value, which calculate expense differently but both aim to fully write off the asset's value by the end of its life.
Depreciation is the permanent and gradual decline in the value of fixed assets over time due to wear and tear, effluxion of time, or obsolescence. It is a process of allocating the cost of a fixed asset over its useful life and is based on factors like the asset's cost, estimated useful life, and estimated residual value. Depreciation is calculated using methods like the straight-line method, diminishing balance method, or units of production method and is important for determining accurate profits, financial position, and asset values.
Plant & equipment depreciation and intangible assetsRamila Anwar
This document discusses depreciation and plant and equipment assets over multiple pages. It defines depreciation as allocating the cost of tangible assets over their period of use. It also discusses the matching principle of offsetting revenue with the costs of services provided. The document covers categories of plant and equipment assets, determining their costs, capital vs operating expenditures, disposal of assets, and gains/losses. It also defines intangible assets such as goodwill and patents.
This document summarizes Accounting Standard 10 on Property, Plant and Equipment. It describes the objectives, scope, definitions and accounting treatment for PPE. Key points include: the standard establishes principles for recognition, measurement, presentation and disclosure of PPE; assets qualifying as PPE must be held for use in production or supply of goods/services and have a useful life of more than one year; PPE is initially measured at cost and subsequently using either the cost or revaluation model; depreciation is charged over the useful life of an asset using methods like straight line or diminishing balance; and gains or losses on disposal of PPE are included in profit or loss.
This document discusses depreciation, which refers to the decrease in value or usefulness of fixed assets over time. Depreciation spreads the cost of a fixed asset over its estimated useful life. It occurs due to factors like wear and tear, decay, obsolescence, and changes in market value. The straight line and written down value methods are described for calculating depreciation charges each year of an asset's life. The straight line method uses a constant depreciation amount each year, while the written down value method applies a fixed percentage to the asset's reducing balance each year.
This document discusses various methods of depreciation for fixed assets. It defines depreciation as the allocation of the cost of a fixed asset over its useful life. Common causes of depreciation include physical deterioration, obsolescence, depletion, and passage of time. Popular depreciation methods include straight-line, reducing balance, revaluation, units-of-output, double-declining balance, and sum-of-the-years'-digits. Each method calculates depreciation expense differently, with advantages and disadvantages to consider.
This document summarizes Accounting Standard 6 (AS-6) on depreciation accounting. It defines depreciation and outlines the key features and causes of depreciation. It discusses depreciable assets and the applicability of AS-6. The document also explains the different methods for calculating depreciation and conditions for changing the depreciation method. It provides guidance on the disclosure requirements for depreciation as per AS-6 and concludes with important points about the standard.
Depreciation is the gradual decrease in the value of an asset over time due to factors like wear and tear, damage, obsolescence, or age. It is calculated annually and deducted from the value of the asset to reflect its usage and reduced resale value. There are several methods for calculating depreciation, including straight-line, diminishing balance, and sum of years digits, with straight-line being the most common and simplest approach of evenly deducting depreciation over the asset's useful life. Depreciation is an important accounting concept that helps match the cost of long-term assets to the periods that benefit from their use.
The document defines depreciation as allocating an asset's depreciable amount over its estimated life. Depreciation aims to match revenues and expenses to determine profit and spread an asset's cost over the periods it benefits the company. Depreciable assets are used for more than one period, have a finite life, and are held for business use. Non-depreciable assets include land and some investment property. Methods of depreciation include straight-line, units-of-production, and declining balance, with each calculating depreciation expense differently over the asset's estimated useful life.
Depreciation refers to the reduction in value of fixed assets over their useful life. Fixed assets include property, plant, equipment, and machinery used in a business for over one year. Depreciation is calculated through depreciation expense and accumulated depreciation accounts to allocate the cost of the fixed asset over its life. There are two main methods for calculating depreciation - straight-line depreciation which uses equal amounts over the asset's life, and other methods which may use accelerated amounts over time.
The document discusses various methods for calculating depreciation according to Indian accounting standards, including straight-line, declining-balance, half-year convention, and user-defined methods. It also covers calculating depreciation for additional assets, multi-shift operations, and blocks of assets.
This document provides an overview of accounting for depreciation as per AS-6. It defines depreciation as a permanent decrease in the value of a fixed asset due to use, age, or obsolescence. Depreciation is a non-cash expenditure used to allocate the cost of a fixed asset over its useful life. The document outlines the objectives and importance of providing depreciation, the causes and basic factors used to calculate depreciation, and common methods for calculating depreciation including fixed installation, diminishing balance, and annuity methods. It also defines depreciable assets and disclosure requirements regarding depreciation accounting policies under AS-6.
THIS IS ALL ABOUT ACCOUNTING STANDARD - 6 I.E., DEPRECIATION ACCOUNTING.
THE RULES AND REGULATIONS TO BE FOLLOWED WHILE CALCULATING DEPRECIATION OF A DEPRECIABLE FIXED ASSET.
- Depreciation is an accounting process where a company allocates the cost of an asset over its useful life. It records how the value of an asset declines over time.
- Each year, a company records a depreciation expense to allocate a portion of the asset's cost to that fiscal year. This spreads the initial cost of the asset over its useful life.
- There are different methods for calculating and recording depreciation expenses, but the goal is to allocate an asset's cost over its useful life and reflect its declining value on the company's financial statements. Depreciation is a non-cash expense that impacts metrics like EBITDA that are used to analyze company profitability.
1) Depreciation is the systematic allocation of the cost of a fixed asset over its useful life to match the cost with the economic benefits generated by the asset.
2) Without depreciation accounting, the entire cost of a fixed asset would be recognized in the year of purchase, providing a misleading view of an entity's profitability.
3) The straight-line method is the simplest way to calculate depreciation by subtracting salvage value from original cost and dividing by estimated useful life in years.
1. The document discusses various methods of accounting for depreciation of fixed assets, including straight-line, units-of-production, and declining balance methods.
2. It explains that depreciation involves allocating the cost of tangible assets over the periods they are expected to provide benefits.
3. Key factors that determine depreciation expenses each year include initial asset cost, estimated residual value, useful life, and the depreciation method used.
Fixed assets are long-term assets used by a business over multiple accounting periods. They include property, equipment, furniture, and intangible assets. The cost of a fixed asset includes its purchase price plus any costs to prepare the asset for use. Capital expenditures are added to the asset's value in the accounting records. Acquisition cost is the original historical cost of the asset. Determining cost involves considering various fees, duties, and discounts. Borrowing costs related to asset construction may also be included in the asset's total cost.
This document discusses depreciation, provisions, and reserves. It defines depreciation as the permanent decrease in the value of fixed assets due to use, time, or obsolescence. Common depreciation methods include straight-line and written down value. Provisions are amounts set aside for known liabilities or losses, while reserves are accumulated profits retained for future use. The document contrasts provisions and reserves, explaining their different purposes, accounting treatments, and types such as revenue and capital reserves.
Hi Everyone,
In this Powerpoint Presentation I have discussed about the Accounting Standard-10 on Property, Plant & Equipment issued by ICAI. I have covered all the major topics such as measurement of PPE, Depreciation(Which was previously covered under AS-6 now deleted), Initial Recognition, Subsequent Recognition etc.
This document discusses 9 issues related to the accounting standard AS 6 on depreciation accounting in India. It addresses questions on which assets depreciation does not apply to, factors considered in computing depreciation, circumstances impacting useful life, requirements for changing depreciation methods, implications of asset revaluation, and more. Key points covered include that depreciation must be provided annually regardless of increased market value, schedules may require higher depreciation rates if useful life is shorter than estimated, and revalued assets require depreciation based on remaining useful life, not scheduled rates.
This document discusses depreciation and its key aspects. It defines depreciation as the decline in value of fixed assets like machinery, buildings, vehicles, and furniture due to constant use, time, or obsolescence. Depreciation is a non-cash expense that is allocated over the useful life of the asset to determine accurate profit/loss and financial position. Common depreciation methods include straight line and written down value, which calculate expense differently but both aim to fully write off the asset's value by the end of its life.
Depreciation is the permanent and gradual decline in the value of fixed assets over time due to wear and tear, effluxion of time, or obsolescence. It is a process of allocating the cost of a fixed asset over its useful life and is based on factors like the asset's cost, estimated useful life, and estimated residual value. Depreciation is calculated using methods like the straight-line method, diminishing balance method, or units of production method and is important for determining accurate profits, financial position, and asset values.
Plant & equipment depreciation and intangible assetsRamila Anwar
This document discusses depreciation and plant and equipment assets over multiple pages. It defines depreciation as allocating the cost of tangible assets over their period of use. It also discusses the matching principle of offsetting revenue with the costs of services provided. The document covers categories of plant and equipment assets, determining their costs, capital vs operating expenditures, disposal of assets, and gains/losses. It also defines intangible assets such as goodwill and patents.
This document summarizes Accounting Standard 10 on Property, Plant and Equipment. It describes the objectives, scope, definitions and accounting treatment for PPE. Key points include: the standard establishes principles for recognition, measurement, presentation and disclosure of PPE; assets qualifying as PPE must be held for use in production or supply of goods/services and have a useful life of more than one year; PPE is initially measured at cost and subsequently using either the cost or revaluation model; depreciation is charged over the useful life of an asset using methods like straight line or diminishing balance; and gains or losses on disposal of PPE are included in profit or loss.
This document discusses depreciation, which refers to the decrease in value or usefulness of fixed assets over time. Depreciation spreads the cost of a fixed asset over its estimated useful life. It occurs due to factors like wear and tear, decay, obsolescence, and changes in market value. The straight line and written down value methods are described for calculating depreciation charges each year of an asset's life. The straight line method uses a constant depreciation amount each year, while the written down value method applies a fixed percentage to the asset's reducing balance each year.
This document discusses various methods of depreciation for fixed assets. It defines depreciation as the allocation of the cost of a fixed asset over its useful life. Common causes of depreciation include physical deterioration, obsolescence, depletion, and passage of time. Popular depreciation methods include straight-line, reducing balance, revaluation, units-of-output, double-declining balance, and sum-of-the-years'-digits. Each method calculates depreciation expense differently, with advantages and disadvantages to consider.
This document summarizes Accounting Standard 6 (AS-6) on depreciation accounting. It defines depreciation and outlines the key features and causes of depreciation. It discusses depreciable assets and the applicability of AS-6. The document also explains the different methods for calculating depreciation and conditions for changing the depreciation method. It provides guidance on the disclosure requirements for depreciation as per AS-6 and concludes with important points about the standard.
Depreciation is the gradual decrease in the value of an asset over time due to factors like wear and tear, damage, obsolescence, or age. It is calculated annually and deducted from the value of the asset to reflect its usage and reduced resale value. There are several methods for calculating depreciation, including straight-line, diminishing balance, and sum of years digits, with straight-line being the most common and simplest approach of evenly deducting depreciation over the asset's useful life. Depreciation is an important accounting concept that helps match the cost of long-term assets to the periods that benefit from their use.
The document defines depreciation as allocating an asset's depreciable amount over its estimated life. Depreciation aims to match revenues and expenses to determine profit and spread an asset's cost over the periods it benefits the company. Depreciable assets are used for more than one period, have a finite life, and are held for business use. Non-depreciable assets include land and some investment property. Methods of depreciation include straight-line, units-of-production, and declining balance, with each calculating depreciation expense differently over the asset's estimated useful life.
Depreciation refers to the reduction in value of fixed assets over their useful life. Fixed assets include property, plant, equipment, and machinery used in a business for over one year. Depreciation is calculated through depreciation expense and accumulated depreciation accounts to allocate the cost of the fixed asset over its life. There are two main methods for calculating depreciation - straight-line depreciation which uses equal amounts over the asset's life, and other methods which may use accelerated amounts over time.
The document discusses various methods for calculating depreciation according to Indian accounting standards, including straight-line, declining-balance, half-year convention, and user-defined methods. It also covers calculating depreciation for additional assets, multi-shift operations, and blocks of assets.
This document provides an overview of accounting for depreciation as per AS-6. It defines depreciation as a permanent decrease in the value of a fixed asset due to use, age, or obsolescence. Depreciation is a non-cash expenditure used to allocate the cost of a fixed asset over its useful life. The document outlines the objectives and importance of providing depreciation, the causes and basic factors used to calculate depreciation, and common methods for calculating depreciation including fixed installation, diminishing balance, and annuity methods. It also defines depreciable assets and disclosure requirements regarding depreciation accounting policies under AS-6.
THIS IS ALL ABOUT ACCOUNTING STANDARD - 6 I.E., DEPRECIATION ACCOUNTING.
THE RULES AND REGULATIONS TO BE FOLLOWED WHILE CALCULATING DEPRECIATION OF A DEPRECIABLE FIXED ASSET.
- Depreciation is an accounting process where a company allocates the cost of an asset over its useful life. It records how the value of an asset declines over time.
- Each year, a company records a depreciation expense to allocate a portion of the asset's cost to that fiscal year. This spreads the initial cost of the asset over its useful life.
- There are different methods for calculating and recording depreciation expenses, but the goal is to allocate an asset's cost over its useful life and reflect its declining value on the company's financial statements. Depreciation is a non-cash expense that impacts metrics like EBITDA that are used to analyze company profitability.
1. Depreciation is the allocation of the cost of a fixed asset over its useful life. It represents the permanent decline in value of the asset due to usage and age.
2. There are several methods for calculating depreciation, including the straight-line method, diminishing balance method, and annuity method. Reserves are funds set aside from profits to strengthen the financial position and meet unknown future liabilities, while provisions are for known liabilities whose exact amount is uncertain.
3. The key differences between reserves and provisions are that reserves are created from profits to meet unknown liabilities and can be used flexibly, while provisions are for meeting specific known liabilities whose amounts are uncertain.
This document provides information about accounting for fixed assets and depreciation. It defines depreciation as a measure of the wearing out of an asset's value from use over time. Depreciable assets must be used for more than one period and have a limited useful life. Depreciation is calculated based on the historical cost, useful life, and estimated residual value of an asset. Common depreciation methods include straight-line and declining balance. The document also compares depreciation standards between AS-6, GAAP, and IAS-16.
This document discusses depreciation, provisions, and reserves. It begins by defining depreciation as a fall in the value of an asset due to usage, the passage of time, obsolescence, or accidents. It then discusses the causes, need, and factors affecting depreciation. Finally, it explains the straight-line and written down value methods of charging depreciation, as well as related terms like depletion and amortization.
Depreciation reduces the value of assets over time. It is calculated based on the estimated useful life of the asset which can be determined by factors like usage, time, or lease period. There are various causes of depreciation including wear and tear, exhaustion, depletion, deterioration, obsolescence, and weather damage. Depreciation must be accounted for to determine true profit, asset value, and financial position of a company. Straight line and double declining balance are common depreciation methods that allocate an asset's cost over its useful life.
This document discusses depreciation, which refers to the decline in value of fixed assets over time due to usage, age, or obsolescence. Depreciation is a non-cash expense that is allocated over the useful life of an asset to match the cost of the asset with the periods in which it provides benefits. It is necessary to account for depreciation to arrive at accurate profit figures and reflects the expired cost associated with the usage of a fixed asset. The document also discusses the meaning and methods of calculating depreciation according to accounting standards.
The document discusses depreciation, which is the decline in the value of fixed assets over time due to use, age, or obsolescence. Depreciation is accounted for for tax and profit purposes by allocating the cost of the asset over its useful life. It ensures that the costs are matched to the periods that benefit from use of the asset. Common methods to calculate depreciation include straight-line and written down value. The document also discusses the need to create provisions and reserves to cover uncertain costs and retain profits for future needs.
The document discusses depreciation, which is the decline in the value of fixed assets over time due to factors like usage, age, and obsolescence. It notes that depreciation is needed to match expenses to the periods that benefits are derived from assets. Depreciation is calculated based on the cost of the asset, its expected useful life, and estimated salvage value. Common methods to calculate depreciation include straight-line and written down value. The document also distinguishes depreciation from similar concepts like depletion and amortization.
This document discusses capital budgeting and various techniques used to evaluate capital expenditure projects. It defines capital budgeting as evaluating long-term investments to maximize shareholder wealth. Various criteria used to evaluate projects are discussed, including traditional non-discounted methods like average rate of return and payback period, as well as discounted cash flow methods like net present value, internal rate of return, and profitability index. The advantages and disadvantages of each method are also summarized.
Fixed Asset Process activities, end to end activities of fixed asset in the company, capitalisation, journal entries, fixed asset cycle, procurement cycle, types of depreciation, depreciation methods, Cost and management course study material
The document discusses various aspects of depreciation. It defines depreciation as the permanent and continuing diminution in the quality, quantity or value of a fixed asset over time due to factors like usage, obsolescence and changes in technology. It then explains the need to charge depreciation to accurately calculate profits, show asset values reasonably and maintain the original investment in the asset. The document also discusses the factors affecting the computation of depreciation and various methods of calculating depreciation like the straight line method, written down value method, and sum of years' digit method.
This document discusses depreciation accounting standards in India. It defines depreciation as the wearing out, consumption or loss of value of an asset due to use, time, or obsolescence. Depreciable assets have a limited useful life. The document outlines the causes and needs for depreciating assets, and factors to consider such as cost, useful life, and residual value. It describes common depreciation methods like straight-line and written down value, and notes disclosure requirements for depreciation policies in financial statements.
The accountant advised the trader not to consider an expected loss from a legal damages payment in finalizing the accounts for the year because the amount owed is uncertain. The summary agrees, stating contingent liabilities from uncertain amounts should not be recorded as expected losses but instead disclosed in notes. Actual losses will adjust book profit once amounts are certain from the court judgment.
Depreciation accounting involves allocating the cost of a fixed asset over its useful life. Common methods for calculating depreciation include straight line, reducing balance, units of production and annuity. The cost basis for depreciation includes expenses for acquisition, installation and commissioning of the asset. Revaluation of assets, upward or downward, affects the depreciation calculation and associated accounting entries.
This document discusses depreciation accounting concepts, objectives, causes, and methods. It defines depreciation as the allocation of an asset's cost over its useful life. Objectives of depreciation include matching revenues and expenses to determine profit, and recovering an asset's cost over the periods it benefits the company. Causes of depreciation include wear and tear, aging, and obsolescence. Common depreciation methods include straight-line, written down value, and sum of years digits. The document also covers depreciation calculations, accounting entries, and policies for different asset types.
Ratio analysis involves evaluating a company's performance and financial health by comparing financial data over time and against industry benchmarks. There are several types of ratios that provide different insights. Liquidity ratios like the current ratio measure a company's ability to pay short-term debts, with a higher ratio indicating better coverage of current liabilities. Profitability ratios like return on assets indicate how efficiently a company generates profits relative to its assets, with a higher ratio generally being preferable. Ratio analysis is a key tool for fundamental analysis of a company's financial strength and operating efficiency.
This document discusses various concepts and methods of accounting for depreciation. It begins by defining depreciation as the systematic allocation of the cost of a fixed asset over its useful life. It then explains reasons for depreciation such as wear and tear, effluxion of time, obsolescence, and depletion. The document goes on to distinguish between different types of depreciation such as depreciation, depletion, and amortization. It also distinguishes between the straight-line and written down value depreciation methods. The document concludes by providing examples of calculating depreciation under various methods including straight-line, written down value, annuity, machine hour, production units, and depletion.
This chapter discusses depreciation of fixed assets, capital expenditures, and revenue expenditures. It defines depreciation and explains the need for and causes of depreciation. It also covers how to calculate and account for depreciation using different methods. The chapter distinguishes between capital expenditures, which increase asset value, and revenue expenditures, which are daily operating expenses. It explains how incorrectly treating expenditures can affect financial statements.
DEFINITIONS: Business, Dealer, Goods, Declared Goods, Input Tax, Manufacture, Out Put Tax, Person, Sale, Sale Price, Turnover, Works-Contract, Taxable Turnover.
Tax refund includes refund of tax on goods and/or services exported out of India or on inputs or input services used in the goods and/or services which are exported outside India, or refund of tax on the supply of goods regarded as deemed exports, or refund of unutilized input tax credit as provided under section 38(2).
1 highlights of income tax provisions in budget 2018Subramanya Bhat
The document summarizes key changes to India's income tax provisions in the 2018 budget. Some key points:
- Long-term capital gains (LTCG) over Rs. 1 lakh from listed equity shares will now be taxed at 10%. All LTCG until January 31, 2018 will be exempt.
- Standard deduction of Rs. 40,000 introduced for salaried employees in lieu of transport/medical exemptions.
- Deduction limits for senior citizens increased for interest income, health insurance premiums, and medical expenditure.
- Corporate tax rate reduced to 25% for domestic companies with turnover up to Rs. 250 crores.
- Income Tax Return (ITR) is a document filed with the Indian Income Tax Department by taxpayers annually detailing their earnings and taxes paid for the year. It must be filed by all Indian citizens earning a taxable income.
- The due date for individual ITR filing for financial year 2018-2019 was July 31, 2018. The date is extended for individuals requiring tax audit. Late filers may face penalties.
- The Indian income tax system levies tax on both earned and unearned incomes based on multiple tax slabs ranging from 0-30% depending on the amount of total annual income. Tax rates are lower for senior citizens.
VARIOUS FORMS OF INCOME TAX ,BASIC KNOWLEDGE OF GST PPT WHICH REQUIRED FOR A STUDENT TO UNDERSTAND DIRECT AND INDIRECT TAXATION. STUDENTS STUDYING B.COM AND M.COM WILL BE BENEFITED . FOR PRACTITIONERS ALSO WILL BENEFIT.
VARIOUS FORMS OF INCOME TAX ,BASIC KNOWLEDGE OF GST PPT WHICH REQUIRED FOR A STUDENT TO UNDERSTAND DIRECT AND INDIRECT TAXATION. STUDENTS STUDYING B.COM AND M.COM WILL BE BENEFITED . FOR PRACTITIONERS ALSO WILL BENEFIT.
VARIOUS FORMS OF INCOME TAX ,BASIC KNOWLEDGE OF GST PPT WHICH REQUIRED FOR A STUDENT TO UNDERSTAND DIRECT AND INDIRECT TAXATION. STUDENTS STUDYING B.COM AND M.COM WILL BE BENEFITED . FOR PRACTITIONERS ALSO WILL BENEFIT.
VARIOUS FORMS OF INCOME TAX ,BASIC KNOWLEDGE OF GST PPT WHICH REQUIRED FOR A STUDENT TO UNDERSTAND DIRECT AND INDIRECT TAXATION. STUDENTS STUDYING B.COM AND M.COM WILL BE BENEFITED . FOR PRACTITIONERS ALSO WILL BENEFIT.
VARIOUS FORMS OF INCOME TAX ,BASIC KNOWLEDGE OF GST PPT WHICH REQUIRED FOR A STUDENT TO UNDERSTAND DIRECT AND INDIRECT TAXATION. STUDENTS STUDYING B.COM AND M.COM WILL BE BENEFITED . FOR PRACTITIONERS ALSO WILL BENEFIT.
VARIOUS FORMS OF INCOME TAX ,BASIC KNOWLEDGE OF GST PPT WHICH REQUIRED FOR A STUDENT TO UNDERSTAND DIRECT AND INDIRECT TAXATION. STUDENTS STUDYING B.COM AND M.COM WILL BE BENEFITED . FOR PRACTITIONERS ALSO WILL BENEFIT
VARIOUS FORMS OF INCOME TAX ,BASIC KNOWLEDGE OF GST PPT WHICH REQUIRED FOR A STUDENT TO UNDERSTAND DIRECT AND INDIRECT TAXATION. STUDENTS STUDYING B.COM AND M.COM WILL BE BENEFITED . FOR PRACTITIONERS ALSO WILL BENEFIT.
VARIOUS FORMS OF INCOME TAX ,BASIC KNOWLEDGE OF GST PPT WHICH REQUIRED FOR A STUDENT TO UNDERSTAND DIRECT AND INDIRECT TAXATION.
STUDENTS STUDYING B.COM AND M.COM WILL BE BENEFITED . FOR PRACTITIONERS ALSO WILL BENIFIT
VARIOUS FORMS OF INCOME TAX ,BASIC KNOWLEDGE OF GST PPT WHICH REQUIRED FOR A STUDENT TO UNDERSTAND DIRECT AND INDIRECT TAXATION.
STUDENTS STUDYING B.COM AND M.COM WILL BE BENEFITED .
VARIOUS FORMS OF INCOME TAX ,BASIC KNOWLEDGE OF GST PPT WHICH REQUIRED FOR A STUDENT TO UNDERSTAND DIRECT AND INDIRECT TAXATION.
STUDENTS STUDYING B.COM AND M.COM WILL BE BENEFITED .
How to Build a Module in Odoo 17 Using the Scaffold MethodCeline George
Odoo provides an option for creating a module by using a single line command. By using this command the user can make a whole structure of a module. It is very easy for a beginner to make a module. There is no need to make each file manually. This slide will show how to create a module using the scaffold method.
This slide is special for master students (MIBS & MIFB) in UUM. Also useful for readers who are interested in the topic of contemporary Islamic banking.
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বাংলাদেশের অর্থনৈতিক সমীক্ষা ২০২৪ [Bangladesh Economic Review 2024 Bangla.pdf] কম্পিউটার , ট্যাব ও স্মার্ট ফোন ভার্সন সহ সম্পূর্ণ বাংলা ই-বুক বা pdf বই " সুচিপত্র ...বুকমার্ক মেনু 🔖 ও হাইপার লিংক মেনু 📝👆 যুক্ত ..
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Walmart Business+ and Spark Good for Nonprofits.pdf
Depreciation accounting
1. DEPRECIATION ACCOUNTING
Meaning of Depreciation: Every business acquires some non-trading fixed assets. These fixed
assets are used in the business for facilitating its trading activities and enhancing its revenue
earning capacity. These assets are basically purchased for the business with the intention of
permanent use and not for resale.
All fixed assets except the value of land decreases with the passage of time. The value of these
assets decrease each year. Such gradual reduction or decrease in the value of fixed assets for the
purpose of earning revenue is called depreciation.
In general words, depreciation is the reduction in the value of an asset due to usage, passage of
time, wear and tear, technological out dating or obsolescence, depletion, inadequacy, decay or
other such factors.
In accounting, depreciation is a term used to describe any method of attributing the historical or
purchase cost of an asset across its useful life. Depreciation is calculated on all depreciable assets
which can be defined as those which have a useful life for more than one accounting period but
is limited and are held by an enterprise for use in the production or supply of goods and services.
Examples of depreciable assets are machines, plants, furniture, buildings, computers, trucks,
vans, equipment, etc. Moreover, depreciation is the allocation of 'depreciable amount' which is
the 'historical cost' or other amount substituted for historical cost less estimated salvage value.
Depreciation has significant effect in determining and presenting the financial position and
results of operations of an enterprise. Depreciation is charged in each accounting period by
reference to the extent of the depreciable amount.
A systematic procedure for allocating the cost over the periods of its useful life in a rational
manner is called depreciation accounting.
Causes of Depreciation: Following are the main causes of depreciation:
1.Physical deterioration: It is caused mainly from wear and tear when the asset is in use and
from erosion, rust and decay from being exposed to wind, rain, sun and other elements of nature.
2.Economic factors: These may be said to be those that cause the asset to be put out of the use
even though it is in good physical condition. These arise due to obsolescence and inadequacy.
Obsolescence means the process of becoming obsolete or out of date. Old machinery in good
physical conditions may be rendered obsolete by the introduction of new model which produce
2. more than the old machinery. Inadequacy refers to the termination of the use of an asset because
of growth and changes in the size of the firm. But obsolescence and inadequacy do not
necessarily mean that the asset is scrapped. It is merely put out of use by firm.
3.Time factor: There are certain assets with a fixed period of legal life such as lease, patents and
copyrights. For instance, a lease can be entered into for any period while a patent’s legal life is
for some years but on certain grounds this can be extended. Provision for the consumption of
these assets is called amortization rather than depreciation.
4.Depletion: Some assets are of wasting characters perhaps due to extraction of raw materials
from them. These materials are then either used by the firm to make something else or are sold in
their raw state to other firms. Natural resources such as mines, quarries and oil wells come under
this heading. To provide for the consumption of an asset of a wasting character is called
provision for depletion.
Need for providing Depreciation:
1. To know the correct profits.
2. Show correct financial position.
3. Make provision for replacement of assets.
Methods of Depreciation
Different methods of calculating provision for depreciation are mainly accounting customs
which may be used by different concerns taking into consideration the individual peculiarities.
The following are the main methods of providing depreciation.
1. Straight Line Method.
2. Reducing Balance Method.
3. Change in Method of Depreciation
4. Sinking Fund Method
5. Insurance Policy Method.
6. Annuity Method.
3. 7. Machine Hour Rate Method.
8. Service Hour Method.
9. Depletion Method
10. Revaluation Method
11. Sum of Digits Method
Change in Method of Depreciation: According to Accounting Standard 6 issued by ICAI, the
depreciation method selected should be applied consistently. A change in the method of
providing depreciation can be made only in the following cases:
1. Adoption of new method is required by law or accounting standard.
2. The change is necessary for a better presentation of financial statements.
When the method of providing depreciation is changed, the depreciation should be recalculated
in accordance with the new method from the date of the asset coming to use. The deficiency or
surplus arising from retrospective re-computation should be adjusted in the books of accounts by
passing an adjusting entry.
Sinking Fund Method : This method is also known as Depreciation Fund Method. Under this
method sinking fund is created to provide a definite amount at a certain future date for a specific
purpose of replacement of the asset at the end of its useful life. An amount equal to the annual
depreciation of the asset is charged against the profits every year and accumulated in the form of
Depreciation Fund. At the time of replacement of the asset, the investment made are realised and
the available money is used in replacing the asset concerned.
Advantages of this method:
1.It is considered as scientific method from the point of accounting.
2. This method not only provides for the depreciation but also makes provision for replacement
of old asset, when it becomes useless.
Disadvantages: Under this system, the burden on the Profit and Loss Account in respect of
depreciation and repairs of an asset is not uniform year after year. This is because, though the
4. amount of depreciation debited to the profit and loss account every year is constant, the amount
of repairs debited to Profit and Loss Account goes increasing as the asset becomes older.
This method is adopted when it is desired not only to provide for depreciation but also to make
provision for replacement of old asset by new one.
Steps involved in the working of Sinking Fund Method:
Step 1 Calculate the amount of depreciation to be provided for with the help of sinking fund
table.
Step 2 Set aside the amount of depreciation at the end of each year.
Step 3 Purchase the Investments at the end of each year except last year.
Step 4 Receive the interest on investments at the due dates.
Step 5 Repeat Step 2,3,and 4 each year except last year.
Step 6 Realise the investments in the year of replacement of asset.
Step 7 Transfer profit/loss on sale of investments to Depreciation Fund Account.
Step 8 Transfer the balance left in Depreciation Fund Account to Respective Asset Account.
Accounting Entries
At the end of the 1st
year
1. For providing Depreciation
Depreciation A/c .............................Dr. (with the amount of depreciation)
To Depreciation Fund A/c
2. For closure of depreciation A/c
Profit and loss A/c ..........................Dr. (with the amount of depreciation)
To Depreciation A/c
3. For making Investments
Depreciation Fund Investments A/c................Dr. (with the amount of investments made)
To Bank A/c
5. At the end of 2nd
year and subsequent years
4. For receiving the interest on Depreciation Fund Investments
Bank A/c .................................Dr. (with the amount of interest received)
To Interest on Depreciation Fund Investments A/c
5. For transfer of interest on Depreciation Fund Investments
Interest on Depreciation Fund Investments A/c..........Dr. (with the amount of interest)
To Depreciation Fund A/c
6. For Providing Depreciation
Depreciation A/c .....................................Dr. (with the amount of depreciation)
To Depreciation Fund A/c
7. For closure of Depreciation A/c
Profit and loss A/c ..........................Dr. (with the amount of depreciation)
To Depreciation A/c
8. For making Investments
Depreciation Fund Investments A/c................Dr. (with the amount of investments made)
To Bank A/c
At the end of last year
9. For receiving the interest on Depreciation Fund Investments
Bank A/c .................................Dr. ( with the amount of interest received)
To Interest on Depreciation Fund Investments A/c
10. For transfer of interest on Depreciation Fund Investments
Interest on Depreciation Fund Investments A/c..........Dr. (with the amount of interest)
To Depreciation Fund A/c
11. For Providing Depreciation
Depreciation A/c .....................................Dr. (with the amount of depreciation)
6. To Depreciation Fund A/c
12. For closure of Depreciation A/c
Profit and loss A/c ..........................Dr. (with the amount of depreciation)
To Depreciation A/c
13. For realising the Depreciation Fund Investments
Bank A/c ........................................Dr.(with the sale proceeds of investments sold)
To Depreciation Fund Investments A/c
14. For transfer of profit or loss on realisation of Depreciation Fund Investments
a) In case of profit
Depreciation Fund Investments A/c..........Dr. (with the amount of profit)
To Depreciation Fund A/c
b) In case of loss
Depreciation Fund A/c ......................Dr. (with the amount of loss)
To Depreciation Fund Investments A/c
15. For transfer of the balance in Depreciation Fund A/c
Depreciation Fund A/c ......................Dr. (with the balance in depreciation fund account)
To Respective Asset A/c
16. For sale of Asset as scrap
Bank A/c .............................Dr. (with the scrap realised)
To Respective Asset A/c
17. For closure of Asset A/c
a) In case of Debit Balance
Profit and Loss A/c...................Dr. (with the balance in asset Account)
To Respective Asset A/c
b) In the case of Credit Balance
7. Respective Asset A/c ...............Dr. (with the balance in asset Account)
To Profit and Loss A/c
Insurance Policy Method: Under this method in order to provide for replacement of the asset at
the end of its useful life an amount equal to annual depreciation charged is used to pay premium
on insurance policy. At the end of the period the insurance company agrees to pay policy value,
which is used in purchasing a new asset.
Accounting Entries
A) For first and subsequent years:
1. In the beginning of the year for paying insurance premium.
Depreciation Insurance Policy A/c ....................Dr.
To Bank A/c
2. At the end of the year
Profit & Loss A/c ..............................Dr.
To Depreciation Reserve A/c
B) At the end of last year:
3. When money is received from insurance Co.
Bank A/c ..........................Dr.
To Depreciation Insurance Policy A/c
4. For transfer of accumulated depreciation to the asset A/c
Depreciation Reserve A/c ..........................Dr.
To Asset A/c
5. When new asset is purchased
New Asset A/c ................................Dr.
To Bank A/c
8. Annuity Method: This method is based on the presumption that when an asset is used in a
business the total loss to the business during the life of the asset is not only the original cost of
the asset but also the interest which could have been otherwise earned had the money spent in the
acquisition of the asset was invested in interest bearing securities. Under this method not only the
original cost of the asset but also the interest on the money invested on the asset is written off as
depreciation over the life of the asset. The amount of depreciation is uniform and is determined
on the basis of annuity table.
Journal Entries-
1. When the asset is purchased
Asset A/c .....................Dr.
To Bank
2. When interest is charged to the asset
Asset A/c ......................Dr.
To Interest A/c
3. When depreciation is charged
Depreciation A/c ...............Dr.
To Asset A/c
4. When interest is transferred to P & L A/c
Interest A/c ...................Dr.
To P & L A/c
5. When depreciation a/c transferred to P& L A/c
P & L A/c ........................Dr.
to Depreciation A/c
9. Machine Hour Rate Method: Under this method depreciation is calculated on the basis of time
during which the asset is used. Examples of assets which are depreciated under this method are
machinery, vehicles etc. the following formula is used to calculate depreciation.
Depreciation = Original cost of Asset—Scrap Value
Life of Asset in Hours
Service Hour Method: Service hour method is mostly useful for depreciating transport vehicles.
It takes into consideration the 'running time' of the asset for calculating the depreciation. Under
this method the depreciation is calculated by dividing the net total cost of the asset by its
estimated service life.
Depletion Method: Depletion means the exhaustion of natural resources. This method is
adopted in cases where it is possible to estimate the probable quantity of output available, for
example, oil well, mines quarries etc. Here the purchase price is paid for the acquisition of a
natural resource. Depreciation is calculated on one unit of the output by dividing the total value
of the acquisition of asset by the number of units expected to be produced.
Revaluation Method: Under revaluation method of depreciation, the assets are revalued each
year. The method is normally adapted to charge depreciation on numerous inexpensive fixed
assets like small tools, live stock, patents, copy rights and other assets of such nature which are
constantly changing and their period of life is most uncertain.
Illustration: (Revaluation Method)
On 1st July 2013, a firm has loose tools worth Rs 10,000. During the year they purchased tools
of Rs 6, 000 On December 2013, the loose tools valued at Rs 13,500.
On 1st June 2014, loose tools of Rs 8,000 were purchased. During the year, tools worth Rs 1,000
were stolen by the workers. The remaining tools valued at Rs 20,000.
During the year 2015, tools worth Rs 800 were broken and sold as scrap for Rs 150. In the same
year tools for Rs 800 purchased. Dec. 2015, tools were valued at Rs 18,500. Prepare Loose Tools
Account and Depreciation Account for three years.
10. Dr. Loose Tools A/c Cr.
Date Particulars Amount(Rs.) Date Particulars Amount(Rs.)
2013
July 1 To Balance b/d
To Bank A/c
10,000
6,000
2013
Dec. 31 By Depreciation A/c
By Balance c/d
2,500
13,500
16,000 16,000
Sum of Digits Method: Under this method, amount of the depreciation to be written off each
year is calculated by using the formula:
Remaining life of the asset(including the current year) * Cost of the asset
Sum of all the digits of the life of the assets in years
Suppose the life of an asset costing Rs. 2,00,000 is 10 years. The sum of all the digits 1 to 10 is
55. The depreciation to be provided in the first year will be:
10/55 *2, 00,000 = Rs. 36364
In the second year it will be
9/55 *2,00,000= Rs. 32727
in the third year it will be
8/55*2,00,000= Rs.29090
11. Accounting Standard 6- Depreciation Accounting
1. Depreciation is a measure of the wearing out, consumption or other loss of value of a
depreciable asset arising from use, passage of time or obsolescence through technology
and market changes. Depreciation is allocated so as to charge a fair proportion of the
depreciable amount in each accounting period during the expected useful life of the asset.
Depreciation includes amortization of assets whose useful life is predetermined.
2. The depreciable amount of a depreciable asset should be allocated on a systematic basis
to each accounting period during the useful life of the asset.
Depreciable assets are assets which
a) are expected to be used during more than one accounting period; and
b) have a limited useful life; and
[3] are held by an enterprise for use in the production or supply or for administrative
purposes.
3. --> Depreciable amount of a depreciable asset is its historical cost, or other amount
substituted for historical cost less the estimated residual value.
Useful life is the period over which a depreciable asset is expected to be used by the
enterprise.
The useful life of a depreciable asset is shorter than its physical life.
ϖ There are two method of depreciation:
1] Straight Line Method (SLM)
2] Written Down Value Method (WDVM)
Note: A combination of more than one method may be used.
ϖ The depreciation method selected should be applied consistently from period to period.
The change in method of depreciation should be made only if;
12. ♣ The adoption of the new method is required by statute; or
♣ For compliance with an accounting standard; or
♣ If it is considered that change would result in a more appropriate preparation of
financial statement; or
ϖ When there is change in method of depreciation, depreciation should be recalculated in
accordance with the new method from the date of the assets coming into use. (i.e
RETROSPECTIVELY)
The deficiency or surplus arising from such recomputation should be adjusted in the year
of change through profit and loss account.
Such change should be treated as a change in accounting policy and its effect should be
quantified and disclosed.
ϖ The useful lives of major depreciable assets may be reviewed periodically. Where there
is a revision of the estimated useful life, the unamortised depreciable amount should be
charged over the revised remaining useful life. (i.e. PROSPECTIVELY)
ϖ Any addition or extension which becomes an integral part of the existing asset should
be depreciated over the remaining useful life of that asset.
The depreciation on such addition may also be applied at the rate applied to the existing
asset.
Where an addition or extension retains a separate identity and is capable of being used
after the existing asset is disposed of, depreciation should be provided independently on
the basis of estimate of its own useful life.
ϖ Where the historical cost of a depreciable asset has undergone a change due to increase
or decrease in the long term liability on account of exchange fluctuations, price
adjustments, changes in duties or similar factors, the depreciation on the revised
unamortised depreciable amount should be provided prospectively over the residual
useful life of the asset.
ϖ This accounting standard is not applied on the following items.
• Forests and plantations
13. • Wasting assets
• Research and development expenditure
• Goodwill
• Live stock
ϖ Disclosure requirements
1] the historical cost
2] total depreciation for each class charged during the period
3] the related accumulated depreciation
4] depreciation method used ( Accounting policy)
5] depreciation rates if they are different from those prescribed by the statute governing
the enterprise.
1. A machine is purchased for Rs. 100,000 on 1st
January 2013. It was decided to
replace the machine at the end of the 4th
year. For this purpose an insurance policy
was taken out, the annual premium being Rs. 22,000.
Prepare a) Machinery A/c b) Depreciation fund A/c c) Depreciation Policy A/c
2. Abhay Tyres company Ltd. purchased a machinery on 1st
January 2013 for Rs. 50,000
and decided to make a provision for replacement by means of depreciation fund. The
investment yield 4% per annum. According to the sinking fund table Rs. 11,774.50
are to be invested annually. At the end of forth year the investments realised Rs.
36,700.
Prepare 1) Machinery A/c 2) Depreciation Fund A/c 3) Depreciation Fund Investment
A/c.
Objective Questions:
14. Choose the correct alternative from the following:
1. The main object of providing depreciation is:
a. To calculate true profit.
b. To show true financial position.
c. To reduce tax.
d. To provide funds for replacement.
2. Depreciation arises because of:
a. Fall in the market value of an asset.
b. Physical wear and tear.
c. Fall in the value of money.
d. None of them.
3. Depreciation is a process of:
a. Valuation
b. Allocation
c. Both valuation and allocation
d. None of them
4. Under the straight line method of providing depreciation it:
a. Increase every year.
b. Remain constant every year.
c. Decreases every year
d. None of them.
(3)
(a
.
(4)
(a)
15. (5) Under the diminishing balance
method depreciation it:
(a) Increases every
year.(b) Decreases
every year. (T)
(c) Remain constant
every year.
(d) None of them.
(6) Under the fixed installment
method of providing
depreciation it is calculated on:
(a) Original cost (T)
(b) on balance
amount(c) On scrap value
(d) None of
them
(7) Under the diminishing balance
method, depreciation is
calculated on:
(a) Scrap value
(b) On
original value(c) On book
value (T)
(d) None of them
(8) The amount of depreciation
charged on a machinery will be
debited to:
(a) Machinery
account (b)
Depreciation account (T)
(c) Cash account
d) Repair account
(9) Loss on sale of plant and
machinery should be written off
against:
(a) Share
premium(b)
Depreciation fund account (T)
(c) Sale account
(d) Profit & loss
account
(10) Loss on sale of machinery will
be:
(a) Debited on
machinery A/c(b)
Credited to machinery A/c (T)
16. (c) Credited to profit
and loss A/c
(d) None of them
(11) Asset which have a limited
useful life are termed as:
(a) Limited assets
(b)
Depreciation assets (T)
(c) Unlimited asset
(d) None of
these
(12) Process of becoming out of date
or obsolete is termed as:
(a) Physical
deterioration (b)
Depletion(c) Obsolescence
(T)
(d) Amortization
(13) Which of the term is used to
write off in reference to
tangible fixed assets.
(a) Depreciation(T) (b)
Depletion(c) Amortization
(d) Both (b)
and (c)
(14) The economic factors causing
depreciation:
(a) Time
factor(b) Obsolescence
and inadequacy (T)
(c) Wear and tear
(d) Money valuation
(15) Profit prior to incorporation is
an example of:
(a) Capital reserve (T)
(b) Revenue reserve(c)
Secret reserve
(d) None of these
(16) Total depreciation cannot
exceeds its:
(a) Scrap value
(b) Cost
value(c) Market value
(d)
Depreciable value (T)
17. (17) Depreciation value of an asset
is equal to:
(a) Cost + Scrap value
(b) Cost + Market
price(c) Cost – Scrap value
(T)
(d) None of these
(18) Depreciation does not depend
on fluctuations as:
(a) Market value of asset
(T)
(b) Cost of price of
asset(c) Scrap value of asset
(d) None of these
(19) Depreciation is:
(a) An income
(b) An
asset(c) A loss (T)
(d) A liability
(20) The books value of an asset is
obtained by deducting
depreciation from its:
(a) Market value
(b) Scrap
value(c) Market + Cost
price (d) Cost (T)
(21) Depreciation fund method is
also known as:
(a) Sinking fund
method (T)
(b) Annuity method
(c) Sum of years digits
method
(d) None of these
(22) The method is specially suited
to natural resources (mines,
quarries, sand, pits etc.) is said
to be:
(a) Annuity method
(b) Depletion
method (T)
(c) Revaluation method
(d) Sum of digits
method