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Straight Line Method Depreciation

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Mohanraj J

781 Points Posted on 08 March 2020

Dear Friends
How do we calculate SLM?
Asset Value 10000, Salvage 500, Net 9500, Life 3 years.
9500/3 : 3167 Depn cost per year
3167/12 : 264 Depn cost per month

This montly depn cost is same for all 12 months? Bcoz, Jan month is 30Days, 28 and 31 days for Feb & March month respectively. In this cases how do we account same depn cost for all 12 months?

Definitely it will be inaccurate for costing in Manufacturing Industry.

Replies (4)

Quick Summary

This discussion explains the Straight Line Method (SLM) of depreciation, calculating annual and monthly depreciation costs. It addresses concerns about monthly variations due to differing days in months and how to handle additional costs like customs duty on assets. The advice given is to add the extra cost to the Net Book Value (NBV) and depreciate it over the asset's remaining life.

CA Naveen Chand

Chartered Accountant

8022 Points Posted on 15 March 2020

Rs. 3,167 p.a depreciation

Mohanraj J

781 Points Posted on 16 March 2020

Thank u so much Mr. Navern.
One more clarifications; Plant & Machinery purchased on June 2018 and started amortization for the same month onwards. After 15 months (Aug 2019) we received a notice from Customs regarding short duty valuation of particular Plant & Machinery now customs is asking to pay 75K against that FA.
Machinery Cost 1000000
Salvage Cost 50000
Net Value 950000
15 months Depreciation Cost 148,450
NBV after 15 months 851,550.
How so we add this customs Duty in the FA?
NBV after 15 months or From the date of Acquisition? From the date of Acquisition means we already closed Financial Statement, if AuG 2019 how do we calculate?