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Depreciation

Depreciation. Kunal Gaikwad : Introduction. Sushil Giri : Objects of Depreciation . Kirti Gullapelli : Assessment & allocation of Depreciation. Shital Indani : Fixed installment method. Sneha Jadhav : Reducing balance method. Sachin Jaiswal : Anity & Sinking method.

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Depreciation

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  1. Depreciation

  2. Kunal Gaikwad : Introduction. • Sushil Giri : Objects of Depreciation . • Kirti Gullapelli : Assessment & allocation of Depreciation. • Shital Indani : Fixed installment method. • Sneha Jadhav : Reducing balance method. • Sachin Jaiswal : Anity & Sinking method. • Swapnil Jaiswal : Revaluation & Insurance policy. • Bharti Kale : Depletion & machine hour rate method. • Varunraj Kalse : Group / Composite Depreciation method.

  3. Depreciation Depreciation :- Depreciation is the gradual & permanent decrease in the value of an asset from any causes . Causes of Depreciation : • Physical wear • Physical deterioration • Expiry of legal rights • Fall in value due to demand fluctuation • Obsolescence

  4. Objects • To a certain true profit or loss . • To present a true financial position . • Replacement of asset.

  5. Assessment & Allocation ofDepreciation • Original cost • Salvage • Useful life

  6. Methods ofDepreciation • Fixed installment method. It is also known as straight line method. A fixed percentage of the original cost of the asset is changed an depriciation each year during the asset. • Formula= c – s ; where d= amt of Depreciation c= cost of asset, s= residual value n= estimate value. • Annual Depreciation= cost of asset – residual value • Features : • Advantages: • Disadvantages: n No. of year of life

  7. Insurance Policy method 2. Revaluation method

  8. Reducing balance method or written down value method • Meaning • Features • Advantages • Disadvantages

  9. Anuti method Sinking funal method

  10. Deplition method Machine hour rate method

  11. Group Depreciation Method

  12. Group Depreciation • Definition : Method for depreciating multiple-asset accounts using one rate. It is used to depreciate a collection of assets that are similar in nature and have approximately the same useful lives such as equipment. The method approximates a single unit cost procedure since the dispersion from the average is not significant. The method of computation and journal entries are basically the same as that of the Composite Depreciation method.

  13. Composite Depreciation • Applying one depreciation rate to the entire asset. • For example, in real estate the foundation and framing of a building may last over 50 years, whereas the electrical and plumbing systems have much shorter lives, say 20 years. A composite rate provides a weighted average life, perhaps 331/3 years for real estate

  14. Example : Composite Rate = Depreciation /year Original Cost Composite Life = Depreciable cost Depreciation / year

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