Depreciation

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nimra (Querist)
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21 May 2010 how to calculate rate of depreciation under reducing balance method? Plz explain the procedure with clear steps.Thank you.

CMA Ramesh Krishnan

CMA Ramesh Krishnan (Expert)
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21 May 2010 Under reducing Balance method the Depreciation need to calcualte on the value = Gross asset value less Depreciation up to the previous period

Suppose a asset purchase Rs.10000 and Depreciation Rate 10 % Reducing balance method

1st year Depreciation is 10000X 10% = 1000

2nd year Depreciation is 10000-1000=9000x10%= 900

nimra

nimra (Querist)
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21 May 2010 Thank You sir! but I wanted to know how to calculate rate of depreciation.Suppose Cost of an assest=105000,residual value=5000 useful life=10 years.How to know the rate of depreciation to be calculated under reducing balance method.
Thank You!

CMA Ramesh Krishnan

CMA Ramesh Krishnan (Expert)
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22 May 2010 Use the below formula

rate = 1 - (n * by the square root of R /C) * 100%

Where:

n = the number of years of useful life of the asset -

R= the estimated residual value of the asset

C= the cost of the asset

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