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Depreciation

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Hiral Shah

21 Points Posted on 13 May 2020

Companies act Depreciation : if one asset is taken in between of the year lets say in july, 2015 & useful life is 10 years and purchase amount is 1,00,000 then how to allocate useful life of 9 years & 3 months.? (Confusion is that in FY 15-16, only 9 months is considered)

Replies (3)

Quick Summary

This discussion addresses the calculation of depreciation for assets purchased part-way through a financial year. It clarifies how to prorate the useful life of an asset when it's acquired mid-year, ensuring accurate depreciation charges for the initial and subsequent years. The example demonstrates calculating depreciation for the first year and how the remaining useful life is accounted for in subsequent years, including the final year when the asset's residual value is considered.

yasaswi gomes

My grammar is 💯 good I

7306 Points Posted on 13 May 2020

Depreciation is 12,000 per say, then monthly depreciation for three months= 12000*3/12= 3000₹. It is possible that such a scenario occurs that a firm depreciates its asset at full or partial amount. Here, if depreciation is SLM, then

1 year= 10000*9/12= 7500

2 year= 10000*12/12=10000

10 year= 10000*12/12=10000

Accumulated Depreciation= 97500₹

Hiral Shah

21 Points Posted on 13 May 2020

My concern is for 10th year.
its partition falling under 11th years?

yasaswi gomes

My grammar is 💯 good I

7306 Points Posted on 13 May 2020

No.

Year 1 closing balance of PPE= 100000-7500 depreciation

In year 2, the first year closing balance becomes second year’s opening balance. Similarly, ninth year’s closing balance of PPE becomes opening balance of tenth year. By the tenth year, the residual value of the asset is 100000-97500=2500₹. This is also known as scrap value. There is no 11th year because the useful life of asset is ten years only.