How to give effect to this transaction?
Asset bought for 10 lakhs in 1-1-2004
5 lakhs due to suppliers of fixed assets as on 1-1-2011 was waived off by them
depreciation is charged at 10% SLM basis. Salvage value - nil
WDV as on 1-1-2011 is 3 lakhs
A/c year: jan to dec
It is covered under what accounting standard ?? whether it is AS - 10 ?
Pls help me to solve this
Assuming value of asset is being charged to P&L account as depreciation every year, the following would be the rectification entries. Assumptions: Usefull life of asset is 3 more years (no change from original 10 years)
Asset A/c dr. 200,000
Party Account dr. 500,000
To Asset A/c 500,000
To P&L A/c 200,000
(first credit the asset account with waiver amount, Rs 500,000, as the asset balance will be in negative, make it positive by crediting it to P&L account Rs 200,000, after above entry asset value is 0)
Asset A/c dr. 150,000
To P&L A/c 150,000
(Total life of asset is 10 years, value is 500,000, depreciation per year is 50,000 SLM, 7years over, so 350,000 depreciation, balance 150,000 should be value of asset as at 1-1-2011, so that for three years ending 2011, 2012, 2013, 50,000 each year can be depreciation)
Depreciation is to be provided on prospective basis in case of change in value of asset- AS-6.
The company will have to do lot of workings as far as taxation is concerned.
Thanks Sunny 
CAclubindia
