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Depreciation as per Companies Act

Amit Kothari (Article Assistant/ PCC Student) (177 Points)

30 March 2010

hello guys

i have a doubt is charging of depreciation as per Companies Act as per usage of 6 months or more or as per days? or we can choose any of the two methods

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9 Replies

Kaushik Vankadkar (Service) (350 Points)
Replied 30 March 2010

As per comapnies act depreciation is calculated as per pro rata basis. In income tax there is more and less than 6months. However a company can even chose to provide depreciation for full year but neccessary disclosure to be made in notes forming accounts.

regards

kaushik

CA KHAN AURANGZAIB (ERP FINANCIAL CONSULTANT) (85 Points)
Replied 30 March 2010

As per company act depreciation will be charges on pro-rata basis. hence calculate depreciation for the days actual used, not on less or more than 6 month basis.

Amit Kothari (Article Assistant/ PCC Student) (177 Points)
Replied 30 March 2010

so should i go for the days basis ? complying the Income Tax Act? coz one of my senior has not provided any depreciation coz all assets are purchased on or after January being a new company! so shall i provide Depreciation ?

CA KHAN AURANGZAIB (ERP FINANCIAL CONSULTANT) (85 Points)
Replied 30 March 2010

definitely you calculate on prorata basis.

CA Rahul Jain (CA) (1162 Points)
Replied 30 March 2010

@ Amit.

Depreciation has to be provided on pro-rata basis. but if the assets are not 'put to use', there is no need to provide depreciation.....

Amit Kothari (Article Assistant/ PCC Student) (177 Points)
Replied 31 March 2010

ok guys i got it

for example if the asset is purchased on march 1st
for rs 2000

Furniture

then calculations will be : 2000*30/360*18.10/100 = 30.17

now doubt is should the days be 360 or 365 and the date here is 1 st march so am not counting that day and taking only remaining 30 days for the period upto 31-3

so are my assumptions correct?