Depreciation

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nimra (Querist)

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)

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)

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)

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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