Depreciation in accounting ppt

depreciation accounting ppt and accumulated depreciation formula accounting
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Published Date:25-07-2017
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Depreciation Accounting CPT Section A: Fundamentals of Accounting Chapter-5 Part 5: Miscellaneous Concepts of Depreciation CA. Poonam Patni THE TOPICS ALREADY COVERED IN PART : 4 INSURANCE POLICY METHOD DEPLETION METHOD DOUBLE DECLINING METHOD SALE OF DEPRECIABLE ASSET LEARNING OBJECTIVES Revision of the Revaluation Change in Provision estimated of Practice method of for repairs useful life depreciable Questions Depreciation & renewals of the asset asset CHANGE IN THE METHOD OF DEPRECIATION CHANGE- Ex: From SLM to WDV method or vice versa. Statutory requirement Compliance with the accounting standard WHEN Appropriate preparation & presentation of the financial statements In case of change in method of depreciation. Recalculation of depreciation is done in according to the new method of depreciation. Deficiency or surplus arising from such retrospective recomputation should be Dr. or Cr. to the P&L a/c of the year of change of method. Such change is treated as change in accounting policy. Its effect needs to be quantified & disclosed. Treatment is required to be given as per AS-1,5 & 6. EXAMPLE: XYZ Ltd. purchased a machinery on 01/01/2011 for Rs. 52,380 & spent Rs. 1,620 on its erection. On same day another machinery was acquired for Rs.19,000. On 01/07/2012 the Co. changes the machinery purchased on method of 01/01/2011 becomes Depreciation was depreciation from obsolete was auctioned provided 10% pa WDV to SLM 5% for Rs.28,600 & on the on WDV basis on pa for the year 2013 st same day new machine 31 December. with retrospective was purchased for Rs. effect. 40,000. Solution: 1. Book Value of machines: I. Machine II. Machine III. Machine Particulars Rs. Rs. Rs. Cost 54,000 19,000 40,000 Less:- Depreciation for 2011 5,400 1,900 WDV 48,600 17,100 Less:-Depreciation for 2012 2,430 1,710 2000 WDV 46,170 15,390 38,000 Less:- Sale Proceeds in 2012 28,600 Loss on Sale 17,570 2. WDV on the basis of 5% depreciation on SLM basis as at st 31 December. II. Machine III. Machine Particulars Rs. Rs. Cost 19,000 40,000 Less: Depreciation 1, 900 (190005%2years) Less: Depreciation 1,000 (400005%0.5year) Total 17,100 39,000 56,100 3. The book value appearing in the books is Rs. 53,390; Rs. 2,710 being excess depreciation will be written, back to make the figure Rs. 56,100. Note: The rate 10% is assumed to be pa. MACHINERY ACCOUNT 2011 2011 Particulars Rs. Particulars Rs. Jan. 1 To Bank 52,380 Dec 31 By Depreciation a/c 7,300 Jan. 1 To Bank-erection 1,620 Dec 31 By Balance c/d 65,700 charges Jan. 1 To Bank 19,000 73,000 73,000 2012 Particulars Rs. 2012 Particulars Rs. Jan. 1 To Balance b/d 65,700 July 1 By Depreciation a/c 2,430 July 1 To Bank a/c 40,000 July 1 By Bank 28,600 Dec 31 By Loss on sale of FA 17,570 a/c Dec 31 By Depreciation a/c 3,710 Dec 31 By Balance c/d 53,390 1,05,700 1,05,700 2013 Particulars Rs. 2013 Particulars Rs. Jan. 1 To Balance b/d 53,390 Dec. 31 By Depreciation a/c 2,950 Jan. 1 To P&L a/c 2,710 Dec 31 By Balance c/d 53,150 (excess dep. written back) 56,100 56,100 REVISION OF THE ESTIMATED USEFUL LIFE OF THE ASSET PREIODICAL REVIEW OF THE USEFUL LIFE OF THE ASSET When estimated useful life of the asset is revised Unamortized depreciation amount is charged to the asset Over the revised estimated useful life of the asset Example: XYZ Ltd. Purchased a machine worth Rs. 20,00,000 on 01.01.2007. Estimated useful life was 10 years & scrap value was Rs. 2,00,000. On 01.01.2012 the WDV was revalued to be up by 20%, useful life was re-estimated as 13 years & scrap value as Rs. 2,80,000. XYZ Ltd. Follows WDV method for charging depreciation. Show Machinery a/c & Provision for Depreciation a/c for the year ended 31.12.2012. Solution: 1. In the year 2007 Calculation of rate of depreciation as per WDV method. = 1 - 10 2,00,000 100 20,00,000 = 1- (1/10 log 20 - 1/10 log 200) X 100 = 1- (1/10 X 1.3010 – 1/10 X 2.3010) X 100 = 1- ( 0.1301 – 0.2301) X 100 = 1- ( 0.10) X 100 = 1 - ( Antilog - 0.10 + 1 - 1 ) X 100 = 1 - ( Antilog bar 1.90 ) X 100 = 1 – 0.7943 X 100 = 0.2057 X 100 = 20.57 % Rate of Depreciation. 2. Statement of Depreciation . Date Particulars Rs. 01.01.2007 Cost of the machine 20,00,000 31.12.2007 Less: Depreciation ( 20.57%) 4,11,340 01.01.2008 WDV 15,88,660 31.12.2008 Less: Depreciation ( 20.57%) 3,26,740 01.01.2009 WDV 12,61,920 31.12.2009 Less: Depreciation ( 20.57%) 2,59,539 01.01.2010 WDV 10,02,381 31.12.2010 Less: Depreciation ( 20.57%) 2,06,160 01.01.2011 WDV 7,96,221 31.12.2011 Less: Depreciation ( 20.57%) 1,63,759 01.01.2012 WDV 6,32,462 Date Particulars Rs. 01.01.2012 WDV 6,32,462 Add: Upward Revaluation 20 % 1,26,492 Revalued Value 7,58,954 31.12.2012 Less: Depreciation 88,942 ( 11.719% on Rs. 7,58,,954 ) 01.01.2013 WDV 6,70,012 = 1 - 8 2,80,000 X 100 7,58,954 = 11.719 % MACHINE ACCOUNT Date Particulars Rs. Date Particulars Rs. Jan. 1 To Balance b/d 20,00,000 Dec. 31 By Balance c/d 21,26,492 Jan. 1 To Revaluation 1,26,492 Reserve a/c 21,26,492 21,26,492 Provision for Depreciation Account Date Particulars Rs. Date Particulars Rs. Dec. 31 To Balance c/d 14,56,480 Jan. 1 By Balance b/d 13,67,538 Dec. 31 By Dep. a/c 88,942 14,56,480 14,56,480 REVALUATION OF DEPRECIABLE ASSET Revaluation means revising the value. On the basis of Depreciation is remaining charged on estimated revalued value useful life of the asset Treated in accordance with AS-10. Revaluation of Depreciable Asset can be Downward revision Upward revision

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