What will happen to a fixed asset when we depreciate it by straight line method and its book value becomes zero after a certain period of time, and if that asset is physically present and is in good condition and is still in use in the company?
We can carry that assets as nominal value of says Rs.1 for the purpose of keeping it in our fixed assets register or it can be revaluated by passing the entry thru revaluation reserve.
As per AS-10, the life of assets and realisable value have to be reviewed periodically. if asset has more life the rate of dep will get reduced and some amout will always appear in books. if realisable value still available no nil WDV arise.
there is no concept of carring at nominal value of re. 1.
they are both correct...if the asset has a longer life and still appears in good condition, then it has to be revalued and depreciated according to the unexpired estimated useful life.
In practical situations, where there are small items of fixed assets, they are maintained at nominal value of Re.1 for identification purposes if they are fully depreciated. In these cases revaluation becomes a tedious purposes. Even though maintaing Re1 is not some statutory provision, it is a well accepted norm which any good auditing text book will tell you!
[quote=Akash Rao (Guest)]What will happen to a fixed asset when we depreciate it by straight line method and its book value becomes zero after a certain period of time, and if that asset is physically present and is in good condition and is still in use in the company?[/quote] No depreciation will be charged.it will be shown as assets in the fixedassets regiter having its depreciated value zero.
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