Depreciation

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

05 June 2012 Our client is charging depreciation on fixed assets based on useful life of assets(S.L.Method) under books.

I read that depreciation will be limited to 95% of the cost of assets?...pls tell...what will be done of 5% in books

Further there are some assets whose net block reduced to NIL although assets lies physically. Should we keep some value in that block

pls advise for the above two issues

Sanjay Chauhan (IFRS)

Sanjay Chauhan (IFRS) (Expert)
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06 June 2012 Query 1:

Excerpt from section 205 of Companies Act

(2) For the purpose of sub-section (1), depreciation shall be provided either -
(a) to the extent specified in section 350; or
(b) in respect of each item of depreciable asset, for such an amount as is arrived at by dividing ninety-five per cent of the original cost thereof to the company by the specified period in respect
of such asset; or
(c) on any other basis approved by the Central Government which has the effect of writing off by way of depreciation ninety-five per cent of the original cost to the company of each such depreciable asset on the expiry of the specified period

5% represents Scrap value.

Query 2:
Ideally it should have scrap value atleast. if not, then you may consider bringing the scrap value of tose assets.

if not, then carry the at Re 1.

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