Depreciation

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Ashutosh (Querist)

08 June 2009 Dear Friends,

I have this query regarding Depreciation Accounting. If an asset is purchased on say, 01st Apr 2000 with estimated life of 10 years and its depreciation rate is given 25% p.a. on Straight Line Method. What will its treatment in books of accounts after 4 years..?

It is an ICWA exam problem.

CA RAMESH KUMAR AHUJA

CA RAMESH KUMAR AHUJA (Expert)

08 June 2009 There is a self contained contradiction in your query. The estimated life is said to be 10 years while the rate of depreciation under SLM is said to be 25%. In my opinion it can not be more than 10%.

Ashutosh

Ashutosh (Querist)

08 June 2009 Dear Ramesh,

I know there is contradiction in the question. I just asked this query as I wanted to know if it is possible any way round because it was asked in ICWA exam.

krishnan

krishnan (Expert)

08 June 2009 Depreciation has to be provided in accordance with Schedule XIV .If the rate of depreciation in the instant case is 25 % , depreciation is to be provided at that rate in accordance with sections 205 & 350 . Therefore the book value of the asset will be zero as at the end of year 4. The management can take a decision to revalue the asset at that time by creation of an equivalent revaluation reserve .

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