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    This document provides information about depreciation accounting. It begins with an introduction that defines depreciation as the process of allocating the cost of a fixed asset over its useful life based on the matching principle. It then discusses the determinants of depreciation such as cost, useful life, and residual value. Several depreciation methods are described, including the straight-line method, written down value method, and unit of production method. Specific details are provided about calculating depreciation under the straight-line and written down value methods. The document also references Schedule XIV of the Indian Companies Act for standard depreciation rates and provides assessment and reference information.

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    2.Depreciation

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    This document provides information about depreciation accounting. It begins with an introduction that defines depreciation as the process of allocating the cost of a fixed asset over its useful life based on the matching principle. It then discusses the determinants of depreciation such as cost, useful life, and residual value. Several depreciation methods are described, including the straight-line method, written down value method, and unit of production method. Specific details are provided about calculating depreciation under the straight-line and written down value methods. The document also references Schedule XIV of the Indian Companies Act for standard depreciation rates and provides assessment and reference information.

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    11 views13 pages

    Institute-University School of Business Department-Mba

    Uploaded by

    Abhishek kumar
    This document provides information about depreciation accounting. It begins with an introduction that defines depreciation as the process of allocating the cost of a fixed asset over its useful life based on the matching principle. It then discusses the determinants of depreciation such as cost, useful life, and residual value. Several depreciation methods are described, including the straight-line method, written down value method, and unit of production method. Specific details are provided about calculating depreciation under the straight-line and written down value methods. The document also references Schedule XIV of the Indian Companies Act for standard depreciation rates and provides assessment and reference information.

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    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
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    of 13

    INSTITUTE-UNIVERSITY SCHOOL OF

    BUSINESS
    DEPARTMENT-MBA
    Master of Business Administration
    Financial Reporting and Analysis
    BAT-601

    DEPRECIATION
    DISCOVER . LEARN . EMPOWER
    DEPRECIATION

    Course Outcome
    CO Title Level
    Number
    CO1 To impart understanding of the Basic Principles of Remember
    Accounting, Accounting Standards, Reading and Analyzing   Will be covered in this
    Balance sheets and its application in modern day business
    lecture
    CO2 To prepare various financial statements i.e. trading Understand
    account, Profit and loss account and balance sheet, P/L  
    Appropriation account, cash flow statement etc.
    CO3 To provide knowledge of concepts those are helpful in Understand
    financial decision making

    2
    Depreciation

    3
    Introduction
    • Most of the Fixed Assets have limited useful life
    • The cost of a Fixed Assets needs to appropriated on a systematic basis over its useful life
    • This process of appropriation is called depreciation
    • Based upon the `Matching Principle’
    • Different Terms
    • Depreciation
    • Real Assets with limited useful life
    • Depletion
    • Natural resources
    • Amortization
    • Intangible assets

    4
    Determinants of Depreciation
    • Amount of depreciation depends upon
    • Cost of Acquisition
    • Expected Useful Life
    • Estimated Residual Value
    • Expected Useful Life
    • Period / Production Units
    • Physical Life
    • Extent of use
    • Legal / Contractual Requirements
    • Technological Changes – Obsolescence
    • Past experience
    Determinants of Depreciation
    • Estimated Residual Value
    • Amount expected to be realized on disposal
    • If considered insignificant – taken as Nil
    • Otherwise based upon the past experience
    • Depreciable Value
    • Cost of Acquisition – Estimated Residual Vale
    • Depreciation
    Cost of Acquisition – Residual Value
    Useful Life
    Depreciation Methods
    • Method of allocating the cost of assets over its useful life
    • Straight Line Method (SLM)
    • Written Down Value Method (WDV)
    • Unit of Production Method
    • Sum of Digits Method
    • The Management is free to use any method
    • The method chosen must be applied consistently from period to period
    Straight Line Method

    • Depreciable amount is amortized equally over the useful life of the asset
    • Depreciation = Cost – RV
    Useful Life
    • Depreciation charge in each period remains same over the useful life of the asset
    • Simple to operate / understand
    Accelerated Methods
    • Written Down Value (WDV) Method
    • Higher depreciation in the earlier years
    • Depreciation is calculated by applying a rate to the net book value in the beginning of the year
    • Sum of years’ digit Method
    • Depreciation for 1st year = n/SYD
    • SYD = n(n+1)/2
    Depreciation Rates - Schedule XIV of the
    Companies Act

    10
    Assessment Pattern

    11
    References

    • Reference book- Maheshwari S.N, Accounting for Management, Vikas Publishing House, New Delhi,2010
    • Reference Website: https://corporatefinanceinstitute.com/resources/knowledge/accounting/types-
    • Reference Journal for advance study: Journal of Accountancy (JOA)

    12
    THANK YOU

    For queries
    Email: reepu.usb@cumail.in

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