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Excess depreciation provided in previous year

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Ashok Asku

11 Points Posted on 21 February 2019

Dear Friends,

what is the accouting treatment of excess depreciation provide in previous years due to wrong calculation of depreciation.

what is the situation is happened actually, while we calculating the depreciation on sale of fixed assets we worgly calculated bouble effect of depreciation (Exmaple. actual depreciation of Rs.1,00,000/- but we calculated is as double i.e Rs.2,00,000/-) unfortunately financials are got audited.

hence we require the rectification process and accounting treatment for the same what we have accounted excess depreciation Rs.1,00,000/- in previous year.

Kindly Help friends..thanks in advance...!

Regards,

Ashok B

Replies (4)

Madamshetty Kavya

32 Points Posted on 21 February 2019

As per AS 5, The nature and amount of prior period items should be separately
disclosed in the statement of profit and loss in a manner that their impact
on the current profit or loss can be perceived.

Priya Kashyap

Student

7053 Points Posted on 24 February 2019

excess depreciation is the additional depreciation that entity would have not charged had the asset being measured on historical cost basis.

Excess depreciation = Depreciation on revalued amount – Depreciation on original cost

Journal entry to record the transfer of reserve from revaluation surplus to retained earnings account using the amount calculated as excess depreciation is following:

BY Revaluation surplus a/c TO Retained earnings a/c