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    Unit: 2: Prepared By: Togadiya Jignesh

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    Jignesh Togadiya
    This document provides an overview of Accounting Standard 6 on depreciation accounting. It defines depreciation as the decrease in value of assets due to factors like wear and tear, passage of time, and obsolescence. Causes of depreciation include wear and tear from use, accidents, obsolescence from new inventions, exhaustion from extraction, and efflux of time. The standard does not apply to certain assets like forests, research expenditures, goodwill, and livestock. Objectives of depreciation include ascertaining true profit, showing true financial position, replacing assets, and keeping capital intact. Depreciable assets are those with limited useful lives that are used for more than one period. Depreciation is

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    Unit: 2: Prepared By: Togadiya Jignesh

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    Jignesh Togadiya
    22 views9 pages
    This document provides an overview of Accounting Standard 6 on depreciation accounting. It defines depreciation as the decrease in value of assets due to factors like wear and tear, passage of time, and obsolescence. Causes of depreciation include wear and tear from use, accidents, obsolescence from new inventions, exhaustion from extraction, and efflux of time. The standard does not apply to certain assets like forests, research expenditures, goodwill, and livestock. Objectives of depreciation include ascertaining true profit, showing true financial position, replacing assets, and keeping capital intact. Depreciable assets are those with limited useful lives that are used for more than one period. Depreciation is

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    This document provides an overview of Accounting Standard 6 on depreciation accounting. It defines depreciation as the decrease in value of assets due to factors like wear and tear, passage of time, and obsolescence. Causes of depreciation include wear and tear from use, accidents, obsolescence from new inventions, exhaustion from extraction, and efflux of time. The standard does not apply to certain assets like forests, research expenditures, goodwill, and livestock. Objectives of depreciation include ascertaining true profit, showing true financial position, replacing assets, and keeping capital intact. Depreciable assets are those with limited useful lives that are used for more than one period. Depreciation is

    Copyright:

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    Download as PDF, TXT or read online from Scribd
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    Download as pdf or txt
    22 views9 pages

    Unit: 2: Prepared By: Togadiya Jignesh

    Uploaded by

    Jignesh Togadiya
    This document provides an overview of Accounting Standard 6 on depreciation accounting. It defines depreciation as the decrease in value of assets due to factors like wear and tear, passage of time, and obsolescence. Causes of depreciation include wear and tear from use, accidents, obsolescence from new inventions, exhaustion from extraction, and efflux of time. The standard does not apply to certain assets like forests, research expenditures, goodwill, and livestock. Objectives of depreciation include ascertaining true profit, showing true financial position, replacing assets, and keeping capital intact. Depreciable assets are those with limited useful lives that are used for more than one period. Depreciation is

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    of 9

    UNIT: 2

    Prepared by: Togadiya Jignesh

    Accounting Standard - 6

    Depreciation Accounting

    Definition of Depreciation:
    A measure of the wearing out, consumption or other loss of value of depreciable assets arising from use, efflux (Passage) of time or obsolescence through technology and market changes. In short, "Depreciation is the decrease in the value of assets, Due to wear and tear, efflux (Passage) of time, obsolescence or similar causes."

    Causes of Depreciation
    1.
    2.

    3.

    4. 5.

    Wear & tear: Due to constant use. Obsolescence: Some assets are discarded due to new invention. Efflux (Passage) of time: Due to passage of time, some assets value decrease even if they are not used. Accidents: Due to an accidents, an value may be decrease. Exhaustion: it is applicable for mineral mines, oil wells etc. due to continuous extraction of minerals, it may be out of use.

    Scope of AS - 6
    This standard not applicable to. forests, plantations and similar regenerative natural resources; wasting assets including expenditure on the exploration for and extraction of minerals, oils, natural gas and similar non regenerative resources; expenditure on research and development; goodwill and other intangible assets; live stock.

    Objectives of Providing Depreciation

    To ascertain true profit of the business. To show the true financial position For replacement of assets To follow company act Keeping Capital Intact:

    Depreciable assets are assets which

    are expected to be used during more than one accounting period; and have a limited useful life; and are held by an enterprise for use in the production.

    Assessment of Depreciation

    1)

    2)
    3)

    Assessment of Depreciation are usually based on the following three factors: Historical cost of the assets Expected useful life of the assets Estimated residual Value (Scrap value) of the assets.

    Methods of Depreciation

    Straight Line Method (SLM) Written Down Value Method (WDV) Machine Hours Rate Method Sum of Years Digits Method

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