Depreciation - wip

Hi all, need help

We have capital project which won't finish up until 2018 . I understand from reading the forum that until the project is not completed and operation depreciation is not charged i.e. revenue starts getting generated

question is , the machinery which will be installed at the project will be initiated  as of 2014 during the course of time, the machinery will deplete coz of wear n tear even without using the machinery.

so should we charged depreciation on the machinery as of when it gets installed

or wait till the project gets initiated?

thanks in advance for help n guidance

Replies (2)

From accounting point of view, the depreciation should be charged, as definition of depreciation as per AS-6 includes also wear & tear, passage of time.

However from tax point of view depreciation shud be charged only when the machinery is being put to use, so depreciation can't be claimed under the I-T act.

thanks for your reply

there is not tax - so I’ll ignore that bit

from an accounting entry perspective - what you saying is charge depreciation on EQUIPMENT from the date the machinery gets installed. but then as per AS-6, should we only start depreciating till they become operational or generate revenue

I am completely confused

thanks

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