Dear all,
I hope the day is treating you well
i have a normal question
There are two main types of providing dep on fixed assets
1. When provision for depreciation A/c is kept
2. When depreciation is directly charged to respective assets A/c
I need clarification about rules of using both methods i.e. when we use one or another mehtod?
In my view there is not any specific rules of maintaining Dereciation provision accounts. Actualy the mehtod is adopted by the company as per their suitablity and traceablity of records. As per the requirements of the companies Act the FA register has to be maintained by the company showing breakup of each FA items along with accumulated depreication. If the said details is maintained, it is desire of the company whatever method is adopted for accounting it is ok. Howerver the disclosure requirement as per Sch.Vi and AS has to be complied in financial statemenent.
Dear Deepak kmr sharma
Both of the two types of methods of depreciation as mentioned by you are followed by the companies depending on their policies .
Method 1 : When the company is of the view of showing the assets in the balance sheet at the historical cost
Method 2 : When the company is completely following the companies act,1956
Ok .....
Okay thank you, now i understand that
there is no specific rules to apply any of above two depreciation methods. It depends on policy of company.
In exams, if not given otherwise, we can apply any method to provide depreciation.
I also assume that there are no specific rules on below mentioned techniques of providing depreciation. It depends on practice of a business entity.
1. Fixed installment or Straight line method
2. Diminishing Balance Method or Written down value method or Reducing balance method
3.Insurance policy method.
4. Sinking fund amortization fund method.
5. Annuity Method.
Please correct me if i am wrong
You can follow any method as per the policy of the company ..
However, if you are saying exams then WDV method would be most appropriate and logical .....
Ok.....
Companies Act recognises only Straight line method and WDV (please refer scheule XIV) for providing depreciation. As regards exam, I think the quetion paper should clearly mention which method is to be followed.
sir,
what is ration of depri. on fix asset in f.y. 2007-08 as per company act
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