Unabsorbed depreciation
This query is : Resolved
12 August 2011
I am totally confused with concept of Unabsorbed Depreciation. Can anyone explain it clearly ?
12 August 2011
Due to insufficient profits , sometimes loss is appearing in the P&L A/c.
CONSIDER the situation -
(Depreciation debited to P&L A/c 20000.)
.
Net Loss as per P&L A/c 45000
.
So in this situation to the extent of Rs 20000, the loss is due to depreciation. The balance loss of 25000/- is business loss.
.
In case, 15000 is income from other sources, against which business loss can be set off. No other income is available Now. We have to c/fd 10000 business loss
and 20000/ depreciation loss.
.
We can say that the above losses could not be absorbed by other income of the same year and that's why 10000+20000 are unabsorbed losses. Out of which 20000 is unabsorbed Depreciation and 10000 is unabsorbed business losses.
.
ADVANTAGE:
Unabsorbed depreciation can be c/fd as many years as profits of the subsequent years will not absorb it, hoWever business loss can be c/fd up to 8 AYs.
.
CONSIDER the situation -
(Depreciation debited to P&L A/c 20000.)
.
Net Loss as per P&L A/c 45000
.
So in this situation to the extent of Rs 20000, the loss is due to depreciation. The balance loss of 25000/- is business loss.
.
In case, 15000 is income from other sources, against which business loss can be set off. No other income is available Now. We have to c/fd 10000 business loss
and 20000/ depreciation loss.
.
We can say that the above losses could not be absorbed by other income of the same year and that's why 10000+20000 are unabsorbed losses. Out of which 20000 is unabsorbed Depreciation and 10000 is unabsorbed business losses.
.
ADVANTAGE:
Unabsorbed depreciation can be c/fd as many years as profits of the subsequent years will not absorb it, hoWever business loss can be c/fd up to 8 AYs.
.
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