Depreciation
This query is : Resolved
20 November 2008
Please explain
“Which method of depreciation is relevant in financial accounting in current scenario and why”?
“Which method of depreciation is relevant in financial accounting in current scenario and why”?
20 November 2008
Wdv method of Accounting is suitable.The reason is intial period asset is new will be more effective than that of later point of time.
20 November 2008
Dear Raj,
Since you are asking from Accounting Angle, I am answering to this question. Once again remaining to you that i am not discussing from Taxation point of View.
As per accounting standard, nowhere they defined that only WDV is suitable for all assets. In standards they simply told either of SLM or WDV can be used. It all depends upon the nature, type, circumstances etc.. of the asset. The option is left to you.
Take the case of Intangible assets like patents, copyright etc.
In some/most of these cases, income from these assets[intangible like patent etc.] will be equal throughout the life of the asset. Since income is equal, expenditure should also be equal. Then only we can say that there is matching concept. Or else you are violating the basic concept of accounting.
To be precise, for assets which have equal income throughout the life of the asset, we may follow SLM basis. For other assets like building, machinery etc. for which we cannot expect/predict income to be same for every year throughout their life. Therefore, WDV may be adopted.
Straighaway nobody can come to a conclusion that only WDV should be followed since nowhere they stated in Accounting Standards.
Since you are asking from Accounting Angle, I am answering to this question. Once again remaining to you that i am not discussing from Taxation point of View.
As per accounting standard, nowhere they defined that only WDV is suitable for all assets. In standards they simply told either of SLM or WDV can be used. It all depends upon the nature, type, circumstances etc.. of the asset. The option is left to you.
Take the case of Intangible assets like patents, copyright etc.
In some/most of these cases, income from these assets[intangible like patent etc.] will be equal throughout the life of the asset. Since income is equal, expenditure should also be equal. Then only we can say that there is matching concept. Or else you are violating the basic concept of accounting.
To be precise, for assets which have equal income throughout the life of the asset, we may follow SLM basis. For other assets like building, machinery etc. for which we cannot expect/predict income to be same for every year throughout their life. Therefore, WDV may be adopted.
Straighaway nobody can come to a conclusion that only WDV should be followed since nowhere they stated in Accounting Standards.
20 November 2008
I agree with Mani's view.
20 November 2008
Further, In economics, depreciation is the decrease in the economic value of the capital stock of a firm, nation or other entity, either through physical depreciation, obsolescence or changes in the demand for the services of the capital in question. If capital stock is C0 at the beginning of a period, investment is I and depreciation D, the capital stock at the end of the period, C1, is C0 + I - D.
20 November 2008
Is your Query in the context of recession ?
You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now
Click here to login now
Similar Resolved Queries
Unanswered Queries
- Gst registered proprietorship firm
- TDS Challan - change of FY 2025-26 to TY 2026-27
- AUDITOR APPOINTMENT FOR THE YEAR ENDING MARCH 27
- Non filing of I T Returns
- UDIN ISSUE
- SALARY CAN BE CAPITALIZE
- GST Intimation due to Government took possession of Business Premises under PPE Act
- TDS on Fixed Assets purchased
- TDS on purchase of under construction property from a reseller
- How to Handle Active E-Invoices in GST Portal Deleted from Tally?
- IMPORT PURCHASE ENTRY PASSED IN BOOKS OF ACCOUNT
- FAST DS 26 Undisclosed Foreign Asset Disclosure Scheme 2026
- Starting trading business
- Regime change
- Goods sold but invoice not issued
- Tally: Imported bank entries do not show up in manual reconciliation
- Sales of goods of amount Rs97 lakhs to a party
- Confused About My Career After 12th — Cyber Security, AI or Finance? Need Guidance
- FAST-DS 2026 Under Tax Law - No recourse or support for person declaring via this scheme?
Trending Online Classes
-
DT & Audit (Exam Oriented Fastrack Batch) - For May 26 Exams and onwards Full English
CA Bhanwar Borana & CA Shubham Keswani
Subscribe to Pro
Join an elite circle of professionals
CAclubindia
