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DEPRECIATION
§ §
Depreciation is a measure of the wearing out,
consumption or other loss of value of a
depreciable asset arising from use, effluxion of
time or obsolescence through technology and
market changes. Depreciation is allocated so
as to charge a fair proportion of the
depreciable amount in each accounting period
during the expected useful life of the asset.
Depreciation includes amortisation of assets
whose useful life is predetermined.
This Standard deals with depreciation accounting
and applies to all depreciable assets-
À Tangible assets
À Intangible assets
À Exceptions
(i) Forests, plantations and similar regenerative
natural resources;
(ii) Wasting assets
(iii) Expenditure on research and development;
(iv) Live stock
§§
×
×
×
§§
ÀInternal causes
ÀExternal causes
m
m
xObsolescence
x Passage of time
x Passage of time
§§
§
§ §
§
m
Furniture 20000
3) Current value of
Furniture is Rs.17000.
§
Particulars Amount Dr. Particulars Amount Cr.
(IN RS.) (IN RS.)
To Depr. 5000
On Machinery
To Depr. On 4000
Patent Rights
To Depr. On 3000
Furniture
Liabilities Amount(IN RS.) Assets Amount(IN RS.)
Machinery:
50000
Less: Depr. @ 45000
10% -> 5000
Patent Rights :
25000
Less: Depr. 21000
4000
Furniture:
20000
Less: Depr. -> 17000
3000
§
§§
À Straight-line depreciation is the simplest and
most-often-used technique.
À Depreciation methods that provide for a higher
depreciation charge in the first year of an asset's life and
gradually decreasing charges in subsequent years are
called accelerated depreciation methods. Depreciation
methods that provide for a higher depreciation charge in
the first year of an asset's life and gradually decreasing
charges in subsequent years are called accelerated
depreciation methods.
Block Particulars Rate in (%)
½
½
½
Block Particulars Rate in (%)
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$
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& $'
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( $ ½
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Block Particulars Rate in (%)
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