Depreciation

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Ashutosh (Querist)
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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)
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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)
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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)
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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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