Calculation of depreciation according to companies act 2013

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How to calculate depreciation under companies act 2013

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U have to calculate the depreciation on useful life of the assets.

please use the attached chart.

Depreciation is the systematic allocation of the depreciable amount of an asset over its useful life. The depreciable amount of an asset is the cost of an asset or other amount substituted for cost, less its residual value. The useful life of an asset is the period over which an asset is expected to be available for use by an entity, or the number of production or similar units expected to be obtained from the asset by the entity.

Firstly let us understand the concepts related to depreciation:

i. Useful Life: life over which asset can be used subject to maximum as specified in the act.

ii. Depreciable Amount: Cost of Asset – Residual Value

iii. Residual Value: Generally not more than 5% of original cost (Note 5 of Schedule II)

Thank u sir for giving me such a detailed descripttion regarding depreciation .

 Depreciation is the systematic allocation of the depreciable amount of an asset over its useful life. The depreciable amount of an asset is the cost of an asset or other amount substituted for cost, less its residual value. The useful life of an asset is the period over which an asset is expected to be available for use by an entity, or the number of production or similar units expected to be obtained from the asset by the entity. For the purpose of this Schedule, the term depreciation includes amortisation.

Firstly let us understand the concepts related to depreciation:

i. Useful Life: life over which asset can be used subject to maximum as specified in the act.

ii. Depreciable Amount: Cost of Asset – Residual Value

iii. Residual Value: Generally not more than 5% of original cost (Note 5 of Schedule II)

iv. Carrying Amount: Not defined in the act. AS-28 defines carrying amount as the amount at which an asset is recognised in the Balance Sheet after deducting any accumulated Depreciation (amortization) and accumulated impairment losses thereon”.

Dear Sir

 

The Companies Act, 2013 requires companies to compute the depreciation in accordance with the Schedule II to the Companies Act which provides useful lives to compute the depreciation.

 

When we follow the method of computation of depreciation pronounced in Sch II of Companies Act under WDV method, the residual value is not matching with Scrap value fixed initially. 

 

Small illustration has been provided below:

 

Cost of the asset   100000  
Life of the asset   5 years  
Date put to use   1st July 2015  
Method of Depreciation    Written Down Value method
Scrap value   500  
Rate of Depreciation   65.34%

 
 
Year Depreciation WDV
1                       49,096            50,904
2                       33,262            17,642
3                       11,528              6,114
4                         3,995              2,119
5                         1,385                  734
6                             120                  615
       

Kindly explain how to deal with the difference amount of Rs.115 i.e. 615-500

With regards
     

 

 


CCI Pro

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