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Fixed Assets

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This query is : Resolved

Yajuvendra Rawat (Querist)
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28 November 2009 Dear Friends,
In our company three cars were purchased & fitted with a CNG kit. Expenses for conversion into CNG were debited to the Fixed Asset itself. I have heard that a car engine running on petrol has a longer life as compared to engine running on a CNG. Since we are following W.D.V. method with a fixed rate every year, is it possible for us & our management to shift the current rates to higher rates for the above given cars. Can these have a higher rate of depreciation than the normal ones. Please help me on this

CA SURENDRA KUMAR RAKHECHA

CA SURENDRA KUMAR RAKHECHA (Expert)
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06 December 2009 When there is a change in estimated useful life (useful life is shorter than the physical life); the balance in the asset account (wdv) should be divided by the useful life and calculate the rate of depreciation accordingly applicable for wdv method.

For example; cost of car was Rs.10 lac having a useful life of 8 years. At the end of 5 year; estimated life is now 7 years. Then the balance at the end of 5 year in the car account is to be absorbed in 2 years remaining.

If management is not providing the correct picture despite knowing the fact; it means book results are not true.

CA Rakhecha
Surat

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