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Depreciation as per co act, 2013

Om Prakash (CA Final Student) (46 Points)

16 June 2015

VEHICLE-BIKE
Purchase price - 44,171
Depreciation upto 31.3.14 - 40,912
WDV as on 1.4.14 - 3,259
Lfe as per Cos Act, 2013 - 10 years
Used life - 9.57 years
remaining Life - 0.43 years
Salvage value - 2,209 (44,171 * 5%)

Ques - What will be the rate of depreciation & how much will be the depreciation as per cos act, 2013 & what will be the treatment of Salvage value ?

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21 Replies

vineet kumar (Student CA IPC / IPCC) (85 Points)
Replied 16 June 2015

Dear Om Parkash ,

Rate of depreciation of BIKE as per schedule-II of of the companies act.2013 is 25.89% rate (WDV) & 9.5% on SLM basis.

In the given case we are following Straight line method(SLM) So rate of depreciation will be 9.5%. And amount of Depreciation For the F.Y.2015-16 will be

Cost of Assets - Residual Value/total useful life*remaning life

i.e(44171-2209/10*.43)Rs.1804

Treatment Of salvage value

WDV of assets after charging dep. will be (3259-1804) 1455. and salvage value is rs.2209 at the end of FY2015-16. Assests should be writeoff in this year, & balance amount of Rs.754 credited to Statment of P/L A/C.

Thanks & Regard

Vineet Kumar

E-mail :- vineet.singh @ kppmca.in

1 Like

Gajendra T.S. (G) (54 Points)
Replied 16 June 2015

Dear Vineet sir, Pls suggest how it would be under WDV method? Formula [1-(2209/3258)^(1/0.43)] would be correct or not?

Mohamed Malik.M (Accountant) (25 Points)
Replied 16 June 2015

Dear gajendra sir, can u tell me, why salvage should be 5% of purchase prise.

vineet kumar (Student CA IPC / IPCC) (85 Points)
Replied 16 June 2015

Dear, gajendra sir, Since, life of assets is given, so we presumed that SLM.

Gajendra T.S. (G) (54 Points)
Replied 16 June 2015

Dear Mohamed, 5% is given by Companies Act,2013. U can take any other salvage value, but should disclose it in Notes with reasons for the same.

Gajendra T.S. (G) (54 Points)
Replied 16 June 2015

Dear Vineet sir, thank u. If we have been following WDV since past many years, I think switch over to SLM will require seperate disclosures & retrospective effect need to be calculated.

dhawalguitar (student) (98 Points)
Replied 17 June 2015

Sir, how to calculate Building improvements of capital nature that materially extend the useful life of a building or increase the value of a building, or both as per the Schedule II of Companies Act 2013.

Please provide an illustration if possible.

Om Prakash (CA Final Student) (46 Points)
Replied 17 June 2015

Dear Mr. Vineet Kumar thanks for the reply but I did not say that I was following SLM, I am following WDV in the given case so please reply in the same context.

Om Prakash (CA Final Student) (46 Points)
Replied 17 June 2015

Originally posted by : vineet kumar
	Dear, gajendra sir, Since, life of assets is given, so we presumed that SLM.

Mr. Vineet, Life is prescribed by the new Companies Act i.e 2013 & accordindly it cannot be assumed as SLM.

CA Club Member (student) (210 Points)
Replied 17 June 2015

If we change the method of depreciation from WDV to straight line in the current year.. is retrospective effect is to be done from the date of purchase of asset..?

Om Prakash (CA Final Student) (46 Points)
Replied 17 June 2015

Originally posted by : CA Club Member
	If we change the method of depreciation from WDV to straight line in the current year.. is retrospective effect is to be done from the date of purchase of asset..?

Yes Dear, whenever we change the method of depreciation from WDV to straight line in the current year retrospective effect is to be done from the date of purchase of asset according to AS-6. The deficiency or surplus arising from retrospective recomputation of depreciation should be debited or credited to Profit and Loss account in the year in which the method of depreciation is changed.

Also as per AS-5 "Net profit or loss for the period, prior period items, change in accounting policy", such a change should be disclosed with a suitable note along with quantification of the amount of change.

Gajendra T.S. (G) (54 Points)
Replied 17 June 2015

Dear Omprakash Sir, Kindly clarify the below doubts w.r.t. depn.under new companies act, 2013 - WDV method; Case: Date of acquisition of asset: 01.01.2012 Original Cost: Rs.100000 Carrying amount as on 01.04.14: Rs.71545 Scrap Value: Rs.5000 Method of Depn: WDV Life of the asset as per New Act: 15 Years Doubts: 1.As per new provisions of Companies Act,2013, remaining useful life of the asset (n) would be 12 years or 12.75 years? 2. In formula (1-((S/C)^(1/n))*100; C = ?Original cost? or ?Carrying cost as on 01.04.14? for the above mentioned case. Thanks in advance.

Om Prakash (CA Final Student) (46 Points)
Replied 18 June 2015

Originally posted by : Gajendra T.S.
	Dear Omprakash Sir, Kindly clarify the below doubts w.r.t. depn.under new companies act, 2013 - WDV method; Case: Date of acquisition of asset: 01.01.2012 Original Cost: Rs.100000 Carrying amount as on 01.04.14: Rs.71545 Scrap Value: Rs.5000 Method of Depn: WDV Life of the asset as per New Act: 15 Years Doubts: 1.As per new provisions of Companies Act,2013, remaining useful life of the asset (n) would be 12 years or 12.75 years? 2. In formula (1-((S/C)^(1/n))*100; C = ?Original cost? or ?Carrying cost as on 01.04.14? for the above mentioned case. Thanks in advance.

Dear Gajendra,

1. Remaining useful life would be 12.75 years.

2. "C" would be the carrying cost. Relaxation has been given to consider varrying cost for assets purchased before 01.04.2014 so accordingly C would be carrying cost in your case.

Chirag Gupta (Student CA Final ) (30 Points)
Replied 18 June 2015

Originally posted by : om prakash choudhury
	VEHICLE-BIKE Purchase price - 44,171 Depreciation upto 31.3.14 - 40,912 WDV as on 1.4.14 - 3,259 Lfe as per Cos Act, 2013 - 10 years Used life - 9.57 years remaining Life - 0.43 years Salvage value - 2,209 (44,171 * 5%) Ques - What will be the rate of depreciation & how much will be the depreciation as per cos act, 2013 & what will be the treatment of Salvage value ?