7

Depreciation
IITE on Fixed
Assets

Prepared By Vishal Goel

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CHAPTER OBJECTIVES

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 Meaning of Depreciation

• On the basis of GAAP assumption, assets are classified as fixed assets and
current assets.
• Fixed assets are used in the business to drive profits for more than one
accounting period.
 Periodic profit = charging cost against periodic revenue.
• Since fixed assets are used to generate periodic revenue, an appropriate
proportion of the cost of fixed assets, to e used or expired for
generation of periodic revenue, needs to be charged as cost.
• Such an appropriate proportion of the cost of the fixed assets is termed
as Depreciation.

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 Definition of Depreciation

• ICAI in England and Wales:

• “ Depreciation represents that part of the cost of a fixed asset
to its owner
• which is not recoverable when the asset is finally out of use by
him.
• Provision against this loss of capital is an integral cost of
conducting the business during the effective commercial
life of the asset and
• is not dependent on the amount of profit earned.”

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 Analysis of Definition
• Characteristics of Depreciation:
– It is related to Depreciable Fixed assets only.
– It is a fall in the book value of depreciable fixed asset.
– The fall in the book value of an asset is due to the use of the asset in business
operations, effluxion of time, obsolescence, expiration of legal rights or
any other cause.
– It is a permanent decrease in the book value of an asset.
– It is continuous decrease in the book value of an asset.
v ‘Depreciation covers Depletion, Amortization and Obsolescence.
ü Depletion: Physical deterioration by the exhaustion of natural resources like
ore-deposit in mines, oil wells, quarries, timber stands.
ü
ü Amortization: economic deterioration by the expiration of intangible assets
ü
ü Obsolescence: economic deterioration by invention of improved technique,
market decline due to change in taste and fashion, inadequacy of existing
plant to meet the increased business

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 Causes of Depreciation

üPhysical wear and tear

ü
üWith the passage of time
ü
üChange in economic environment
ü
üExpiration of legal rights

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 Need for Charging Depreciation

1. To ascertain true results of operations

2.
3. To present true and fair view of the financial position
4.
5. To ascertain the true cost of production
6.
7. To comply with legal requirements
8.
9. To accumulate funds for replacement of assets

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 Factors Affecting the Amount of
Depreciation
• Historical Cost: Historical cost of depreciable asset implies the cost
incurred on its acquisition, installation, commissioning and for
additions to or improvements which are of capital nature
•
• Expected Useful Life: It implies either the period over which a
depreciable asset is expected to be used by the business or the number
of production units expected to be obtained.
•
• Estimated Residual Value: It implies the value expected to be
realized on its sale or exchange on the expiry of its useful life.

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 Methods for calculating
depreciation
• The various methods for calculating depreciation are:


• Straight line method

• Written down value (reducing balance) method
• Sum-of-the-Years digit (SYD) method:
• Production unit method
• Production hour method
• Joint factor rate method
• Annuity method
• Sinking fund method
• Endowment policy method
• Revaluation method
• Renewal method


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 Depreciation Accounting
• The ICAI issued the Accounting Standard (AS-6) “
Depreciation Accounting” in November 1982.
• It came into existence on 1st April 1995.
• It defines depreciation and depreciable assets, set
outs the significance of depreciation, scope and
coverage and principles and norms of standard
accounting.

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 Meaning and Significance of
Depreciation
Research in Financial Reporting
1. Depreciation is a measure of the wearing out,
consumption or other loss of value of a
depreciable asset arising from
2. Use, effluxion of time, obsolescence through
technology and market changes.
3. Depreciable amount of a depreciable asset represents
its historical cost, or revalued amount substituted
amount for historical cost in the financial
statements
4.

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 Research in Financial Reporting

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 Scope and Coverage
1. It deals with depreciation accounting and applies to all
depreciable assets as specified in AS-10
2. It also applies to FA acquired on finance lease but not to
wasting assets.
Depreciable Assets:

1. Held by enterprise for use in the production or supply of

goods and services, for rental to others, or for
administrative purposes and not for the purpose of sale .
2. Are expected to be used during more than one accounting
period.
3. Having limited useful life.


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Principles and Norms of Standard Accounting
Treatment
 Determinants of Depreciation:
v Historical Cost- An asset is recorded at the price paid to acquire it at
the time of its acquisition and it becomes the basis for the accounts
during the period of acquisition and subsequent accounting period.
 Revalued Amount-
v Expected useful life of the depreciable asset
 the period over which the asset is expected to be used.
 the no. of production or similar units expected to be obtained from the
used of the asset
v Estimated residual value of the depreciable asset
 amount expected to be realized on disposal of an asset at the end of its
useful life.

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 Methods of Depreciation
1.
2. Straight Line Method ( SLM )
3. Written Down Value Method
( WDV)
4. Impact of SLM and WDV on
Profits and Tax

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 Straight Line Method ( SLM )

• Depreciation is charged evenly over the useful life of asset.



• SLM method is more appropriate where the benefit to be

gained from the use of the asset is likely to have an even
spread over its useful life.
 Cost of Asset – Estimated residual value
Depreciation = ……………………………………………
 Expected Useful life

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 900

800
700 Annual
600 Depreciation
500
A 400

mo 300

unt 200

Rs. 100

0 1 2 3 4 5 6 7 8 9 10
Useful life (years)
Straight Line Method – Annual Depreciation Charge.

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 • Illustration 1

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11/22/10 MBA Department, IITE Batch- 10-12 Sem-1 Subect: Accounting ForDate:
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 Shiva Industries Ltd.: SLM

Req. 1. Rate of Depreciation:
 Computation of annual depreciation:
 Rs. 78,00,000 – 3,90,000 = Rs. 7,41,000
 10
• Hence rate of depreciation = Rs. 7,41,000 X 100 = 9.5%
 Rs. 78,00,000



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 • Req.2. Annual Depreciation and
Accumulated Depreciation:
•
Year Annual depreciation (Rs.) Accumulated depreciation
1 7,41,000 (Rs.)
7,41,000
2 7,41,000 14,82,000
3 7,41,000 22,23,000
4 7,41,000 29,64,000
5 7,41,000 37,05,000
6 7,41,000 44,46,000
7 7,41,000 51,87,000
8 7,41,000 59,28,000
9 7,41,000 66,69,000
10 7,41,000 74,10,000
Total… 74,10,000 …

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• Req. 3. Disclosure of Machine in the Balance Sheet:
• Amount (Rs. lacs)
Details
•
Fixed Assets -
Year
1 2 3 4 5 6 7 8 9 10
Machine:
Cost 78.0 78.00 78.00 78.00 78.00 78.00 78.00 78.00 78.00 78.00
0
Accumulated
depreciation: 7.41 7.41 7.41 7.41 7.41 7.41 7.41 7.41 7.41 7.41
Depreciation for … 7.41 14.82 22.23 29.64 37.05 44.46 51.87 59.28 66.69
the year 7.41 14.82 22.23 29.64 37.05 44.46 51.87 59.28 66.69 74.10
Accumulated

depreciation as at
the beginning of
the year
Total

Net book value 70.5 63.18 55.77 48.36 40.95 33.54 26.13 18.72 11.31 3.90
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• Req. 4. Accounting Policy:
•
• The company provides depreciation on
machine as per straight-line method
expecting its useful life to be ten years and
estimating its residual value to be 5% of
cost. Thus effectively the depreciation is
provided @ 9.5% p.a.

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 Declining-Balance Method
• 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.
• This may be a more realistic reflection of an asset's actual expected benefit from the
use of the asset: many assets are most useful when they are new. One popular
accelerated method is the declining-balance method. Under this method the
Book Value is multiplied by a fixed rate.
• Annual Depreciation = Depreciation Rate * Book Value at Beginning of Year
•

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• The most common rate used is double the straight-line rate.
• For this reason, this technique is referred to as the double-declining-
balance method.
• To illustrate,
• suppose a business has an asset with Rs. 1,000
• Original Cost Rs. 100 Salvage Value, and 5 years useful life.
• First, calculate straight-line depreciation rate.
• Since the asset has 5 years useful life,
• the straight-line depreciation rate equals (100% / 5) 20% per year.
With double-declining-balance method, as the name suggests,
double that rate, or 40% depreciation rate is used.
•

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 Written Down Value Method

r = 1– n s
c
Where r = Rate of depreciation or a fixed percentage.
n = Number of years of asset’s useful life.
s = Salvage Value or residual value.
c = Acquisition cost of the asset

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• WDV
Illustration 2
•

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 Sum-of-Years' Digits Method:
• Sum-of-Years' Digits is a depreciation method that results in a
more accelerated write-off than straight line, but less than
declining-balance method.
• Under this method annual depreciation is determined by
multiplying the Depreciable Cost by a schedule of fractions.
•
• Depreciable Cost = Original Cost - Salvage Value
•
• Book Value = Original Cost - Accumulated Depreciation
•

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• No. of years
• Depreciation = ---------------------------- X original cost – scrap value
• Sum of all digits of the
• life of assets in years
• Example: Cost of the asset is Rs. 10,000, scrap value Rs.1,000, life of the
assets = 3 years
• Depreciable cost = Rs. 10,000 – 1,000 = Rs.9,000
• 3 3
• Depreciation in I Year = --------- = ------- X 9,000 = Rs. 4,500
• 3+2+1 6
• In 2nd Year = 2/6 X 9000 = Rs.3,000
• In 3rd Year = 1/6X 9000 = Rs. 1,500

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 Units-of-Production Depreciation
Method:
• Under the Units-of-Production method, useful life of the asset is expressed
in terms of the total number of units expected to be produced.
• Annual depreciation is computed in three steps.
• First, a Depreciable Cost is computed.
• Depreciable Cost = Original Cost - Salvage Value.
• Second, Depreciation per Unit is computed.
• Depreciation charge per unit is computed by dividing Depreciable Cost by
Total Units, expected to be produced during the useful life of the asset.
• Depreciation per Unit = Depreciable Cost / Total Units of production.
• Third, annual depreciation, or Depreciation Expense, by another name, is
computed.
• from the Original Cost. -- Book Value = Original Cost - Accumulated
Depreciation
•
•
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• Example: Cost of asset Rs. 10,000; residual value Rs. 100, estimated
output 1,00,000 units
• 10,000 - 100
• Rate of Depreciation = ------------------ = 9.9 paise per unit of output
• 1,00,000 units


Depreciation for the period =

Depreciable Amount x Production during the period.

 -------------------------------------------------------------------------------------
 Estimated total Production.


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 Machine Hour Method

• Cost of asset – Residual Value

• Depreciation per hour = --------------------------------------
• Estimated no. of hours asset will
• be used
• Example: cost of asset Rs.11,000; residual value rs. 1,000
• Estimated life in hours = 25,000
• Depreciation = 11000- 1000 / 25000 hrs.
• = Rs..40 per hour

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 Repair Provision Method
• Repairs and maintenance cost over the life of
an asset is to be added to the original cost of
the asset to get a total capital outlay, which
is apportioned over the life of the asset.

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 Revaluation Method
• Assets are revalued periodically and the
decline in their value is considered as
depreciation.

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 DEPRECIATION METHODS
• Annuity Method
• Sinking Fund Method
• Insurance Policy method

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 Machine Hour Method
• Where it is practicable to keep a record of the
actual running hours of each machine,
depreciation may be calculated on the basis
of hours that the concerned machine worked

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 Depreciation for the period =
Depreciable amount x No. of hours machine works
Estimated total machine hours

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 EFFECTS OF NOT PROVIDING FOR
DEPRECIATION
• Periodic expenses will be understated,
• Profits will be overstated;
• Asset valuation will be overstated;
• Capital depletion will take place;
• Cost of production will be understated;
• Price determination will be in appropriate; and
• Net worth will be overstated.

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 Assessment of the impact of
SLM and WDV on profits and
tax

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 Statutory Requirements and Compliance

• 2 section 205 and 350 deals with depreciation.

• Sec-205- no company can declare or pay any dividend out of
its profit without providing depreciation.
•
• Sec-350: depreciation has to be provided at the rates specified
in Schedule XIV of companies Act.

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 •
–Rates of depreciation as per
schedule XIV

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 – Choice of method
– Life of plant and machinery items in co. act life
assume for 20 years

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 • Provisions of the Income Tax Act Sec-32
– Rates of depreciation as per Appendix I – Rules 5

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• Illustration 3

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 MAT & Deferred Tax
1. Companies are required to pay MAT(Minimum Alternative
Tax) of 7.5% of their books profits.
2. Profit as per profit and loss account, even though their taxable
income may be nil or less than 7.5% of their book profit,
after taking into account other deductions as per the
provision of Income Tax Act.
3.
4.

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 – Consistency Principle: Change in Method
• A change from one method to another can be
done only , when
1.When the statute governing the enterprise
requires the adoption of new method.
2.To comply with the requirements of an
accounting standards
• Consistency Principle not violated
1.Different Kind of assets
2.Similar assets acquired upto a particular date and
thereafter
3.Similar assets located in different geographical
regions
•

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Illustration 4 April Industries Ltd. Change in the Method of Depreciation

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 – Depreciation Charge in Special Cases
• Exchange functions
– AS-11 ‘ The Effects of Changes in Foreign
Exchange Rates’
• Subsequent expenditure
– Of capital nature on an existing assets despite the
integral part of an asset is depreciated like gas
kit in car and aircraft engine
• Revision of useful life
– Based on management’s judgement
– Revaluation of Fixed Assets and Depreciation
• Illustration 5: Arpit Industries Ltd.: Revaluation
of Fixed Assets and depreciation

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•
• Illustration 5

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  Recouping the additional depreciation on revaluation
from the revaluation reserve.
11/22/10 – Profit/LossMBA
onDepartment,
Disposal at10-12
IITE Batch- Fixed Assets
Sem-1 Subect: Accounting ForDate:
Managers
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• Illustration 6

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• Illustration 7

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• Disclosures in Financial Statements

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• Corporate Financial Practices
– Case 1 Whirlpool of India Ltd.

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11/22/10 MBA Department, IITE Batch- 10-12 Sem-1 Subect: Accounting ForDate:
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 Depletion of Wasting, Non-Regenerative, Assets
– Case 2 ONGC Ltd.
–
–
–
–
–
–
–
–
–
–
 Concluding Remarks

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• Ex:1/ (Q.12 PC Tulisan P- 11.56)
• X Ltd. Purchased a second-hand machinery on 1st January 2003 for
Rs.37,000 and immediately spent Rs.2,000 on its repairs and Rs. 1,000
on its erection. On July 2004 it purchased another machine for Rs.
10,000 and on 1st July 2005 sold off the first machine purchased in
2001 for Rs.28,000; on the same date , purchased a machinery for
Rs.25,000. On 1st July 2006 the second machinery purchased for
Rs.10,000 was sold off for Rs. 2,000. Depreciation was provided on the
machinery @ 10% p.a on the original cost annually on 31st December.
• Required:
• Prepare Machinery Account for 4 calendar year commencing from 1st
January 2003.

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• Q-17 PC Tulisan P.11.22:
• On 1st January 2002, ABC Ltd. Purchased a second
hand machinery for Rs.80,000 and spent
Rs.20,000 on its cartage, repairs and
installation. On 30th September 2003, this
machine is sold for Rs. 50,000. Depreciation is
to be provided @ 20%IITEp.a according to WDV
method.
•
• Prepare Machinery account for 3 year assuming
accounts are closed on 31st March each year.

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 Recording of Depreciation by creating
Provision of Depreciation

• For Depreciation
– Depreciation A/c Dr.
 To Provision of Depreciation A/c



IITE


• Closure of Depreciation
– Profit and Loss A/c Dr.
 to Depreciation A/c

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Managers
• On Disposal of an Asset
– For transfer of Original cost of asset disposed off
• Asset Disposal A/c Dr.
 To Asset A/c
– For transfer of accumulated depreciation on asset
disposed off
• Provision for Depreciation A/c Dr.
 IITE
To Asset Disposal A/c
– For recording sale proceeds
• Cash or Bank A/c Dr.
 To Asset Disposal A/c
– Transfer of balance in asset disposal account
• In case of profit
– Asset Disposal A/c Dr.
 To P & L A/c
• In case of Loss
– P & L A/c Dr.
 To Asset Disposal A/c


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Managers
• Q 20 P.11.26 PC Tulsian:
• On 1st January 2001, X Ltd. Purchased a machinery for
Rs.12,00,000. On 1st July 2003, a part of the
machinery purchased on 1st January 2001 for
Rs.80,000 was sold for Rs.45,000 and a new
machinery at a cost of Rs.1,58,000 was purchased
IITE
and installed on the same date. The company has
adopted the method of providing 10% p.a
depreciation on the original cost of the machinery.
•
• Show the necessary ledger accounts assuming that
– Provision for depreciation account is not maintained.
– If it is maintained
•

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 Change in the Method of Depreciation
• Q 25 P.11.35 PC Tulisan:
• On 1st January 2001, X Ltd. Purchased a machine for
Rs.58,000 and spent Rs.2,000 on its erection. On
1st July 2001, an additional machinery costing
Rs.20,000 was purchased. On 1st July 2003 the
machine purchased on 1.1.2001 was sold for
IITE
Rs.28,600 and on the same date a new machine
was purchased at a cost Rs.40,000. Depreciation
was provided for annually on 31st December, @
10% p.a. on WDV of the machinery. In 2004 the
company decided to change the method of
depreciation from WDV to SLM @ 5% p.a w.e.f 1st
January 2001.
•
• Prepare the machinery account for the first 4 years.

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Managers
 Conceptual Application
 Case No.1 Fixed Assets


• An automobile manufacture brought six heavy

stamping machines at a price of Rs.16,250
each. When they were delivered, the purchaser
IITE
paid freight charges of Rs.4,200 and handling
fees of Rs. 1,200. Four employees earning
Rs.10 an hour, worked 340 hours weeks setting
up and testing the machines. Special wiring
and other materials applicable to the new
machines cost rs.600.
• How much of these costs should be capitalized as
cost of these machines?

11/22/10 MBA Department, IITE Batch- 10-12 Sem-1 Subect: Accounting For 70
Managers
• Ans: Each Machine All Machines
• Asset Cost:
• Purchase price Rs.16,250 Rs.97,500
• Freight 700 4,200
• Handling 200 1,200
• Installation:
• Labour IITE
800 4,800
• Materials 100 600
• Total Rs.18,050 Rs.1,08,300
• If the bookkeeping system is loosely designed, the
installation materials and perhaps even some of the
installation labour might be expensed. In concept,
however, they should be capitalized.

11/22/10 MBA Department, IITE Batch- 10-12 Sem-1 Subect: Accounting For 71
Managers
 Case No.2: Dairy Farm:


• Rahul Mehta owns a small dairy farm in Ahmedabad. He purchased the

farm for Rs.2,40,000 in 1995. Rs.1,00,000 was paid for the land and
Rs.1,40,000 for the farm buildings. In 2000, the farm was revalued.
According to a local firm of estate valuers, the land was worth
Rs.1,60,000 and the building were valued at Rs. 2,22,000. When the
farm was purchased, the SLM method was used to depreciate the
buildings. A residual value of zero was assumed and the useful life
of the building was expected to be 25 years. It was decided that no
IITE
depreciation charge would be made on the land. Rahul also owns a
tractor which he bought for Rs. 30,000 two tears ago. The reducing
balance method is used to calculate depreciation on this asset.
1. Calculate the annual depreciation charge for the farm buildings (1)
between 1995 and 1999 (2) between 2000 and 2004.
2. Draw up a table to show the historical cost/revaluation, annual
depreciation charge, and the asset book value of the buildings
from 1995 to 2004.
3. Why are fixed assets such as land and property sometimes
revalued?
4. Calculate the current net book value of the tractor. Write off the
tractor @ 30% each year.
5. Suggest two other assets that the farm will depreciate in its
11/22/10 accounts. MBA Department, IITE Batch- 10-12 Sem-1 Subect: Accounting For 72
Managers
• Ans: (a) 1) Rs.5,600 ((Rs.1,40,000 – Rs.0) / 25)
– (2) Rs.11,000 ((Rs.2,20,000 – Rs.0) /20)
• (b) Year Historical cost / Annual depreciation Net book value
• revaluation charge
• Rs. Rs.
Rs.
• 1995 1,40,000 5,600 1,34,400
• 1996 1,40,000 5,600 IITE1,28,800
• 1997 1,40,000 5,600 1,23,200
• 1998 1,40,000 5,600 1,17,600
• 1999 1,40,000 5,600 1,12,000
• 2000 2,20,000 11,000 2,09,000
• 2001 2,20,000 11,000 1,98,000
• 2002 2,20,000 11,000 1,87,000
• 2003 2,20,000 11,000 1,76,000
• 2004 2,20,000 11,000 1,65,000

11/22/10 MBA Department, IITE Batch- 10-12 Sem-1 Subect: Accounting For 73
Managers
• (c) Because they sometimes rise in value and the balance
sheet should show a ‘true and fair’ view of the business’s
assets.
•
• (d) The annual depreciation charge and the net book value
of the tractor for two years is shown in the table below.
• Year Cost of Annual depreciation Accumulated
Net book value IITE
• tractor charge depreciation
• Rs. Rs.
Rs. Rs.
• 1 30,000 9,000 (30,000 * 30%) 9,000
21,000
• 2 6,300 (21,000 * 30%) 15,300
14,700
•
• (e) Milking equipment, plough, and other vehicles.
11/22/10 MBA Department, IITE Batch- 10-12 Sem-1 Subect: Accounting For 74
Managers
• P. Shah Q 1: On 1st January 2006, K.K Ltd.
Purchased machinery for Rs. 58,000 and
spent Rs.2,000 on its installation. On 1 July
2006, an additional machinery costing
Rs.20,000 was purchased. On 1st July 2008,
IITE
the machine purchased on 1st January 2006

was sold for Rs. 28,600 and on the same date

new machinery was purchased at a cost of Rs.
40,000. Show the machinery account for the
first four calendar year according to WDV
method taking the rate of depreciation at
10% p.a.
•
11/22/10 MBA Department, IITE Batch- 10-12 Sem-1 Subect: Accounting For 75
Managers
 IITE

11/22/10 MBA Department, IITE Batch- 10-12 Sem-1 Subect: Accounting For 76
Managers
• Que: Samsung India Ltd. Which depreciates its machinery @
10% on diminishing balance method, had on 1st January, 2008,
Rs. 9,72,000 to the Dr. of Machinery account. During the year
2008, part of the machinery purchased on 1st January 2006 for
Rs. 80,000 was sold for Rs. 45,000 on 1st July 2008 and a new
machinery at a cost of Rs. 1,50,000 was purchased and installed
IITE
on the same date, installation charges being Rs.8,000.
• The company decided to change its method of depreciation from
WDV to SLM with effect from 1st January 2006 and adjust the
difference on 31st December 2008. The rate of depreciation
remains the same as before.
• Show the Machinery account and ascertain the amount
chargeable to profit and loss account.

11/22/10 MBA Department, IITE Batch- 10-12 Sem-1 Subect: Accounting For 77
Managers
 • Ans:
Machinery Account
Date Particulars Rs. Date Particulars Rs.
1.1.08To Balance b/ d 972000 1.7.08 By Bank (Sale) 45000
1.7.08To Bank ( 150000 + 8000) 3240
158000 1.7.08 By Depreciation ( on machine sold)
IITE
1.7.08 By P&L A/ c ( Loss) 16560
31.12.08By P& L A/ c ( Difference) 11200
119900
31.12.08By Depreciation ( on machine sold)
31.12.08By Balance c/ d 934100

1130000 1130000

11/22/10 MBA Department, IITE Batch- 10-12 Sem-1 Subect: Accounting For 78
Managers
• Working Notes:
• (1) Original cost of the old assets unsold:
• Book value as on 1 /1/2008 Rs.9,72,000
• Book value as on 1/1/2007 = 972000 X 10/9 10,80,000
• Book Value as on 1/1/2006 = 10,80,000 X 10/9 12,00,000
• ( This is also the original cost)
• IITE
Original cost of machinery on 1/1/2006 Rs. 12,00,000
• Less: Cost of Machinery sold 80,000
• Cost of unsold machinery Rs.11,20,000


• (2) 10% depreciation on SLM for 2008 i.e. 11,20,000 X 10%

= 1,12,000
• Add: Depreciation for 6 months ( on new machinery) =
7,900
 Total Depreciation
for 2008 = 1,19,900

11/22/10 MBA Department, IITE Batch- 10-12 Sem-1 Subect: Accounting For 79
Managers
• (3) Cost of machine on 1.1.2006 Rs.80,000
• Less: Depreciation for 2006 @ 10% 8,000
• Value on 1.1.2007
72,000
• Less: Depreciation for 2007 7,200
• Book Value on 1.1.2008
64,800
IITE
• Less: Depreciation for 2008 for 6 months
3,240
• Book value on 1.7.2008
61,560
• Less: Sale value on 1.7.2008
45,000
• Loss on Sale 16,560
•

11/22/10 MBA Department, IITE Batch- 10-12 Sem-1 Subect: Accounting For 80
Managers
• (4) WDV method SLM Method
• BV on 1.1.2006 11,20,000 11,20,000
• Depreciation for 2006 1,12,000 1,12,000
• Depreciation for 2007 1,00,800 1,12,000
• Total 2,12,800 2,24,000
•
• IITE
•
•
• Additional depreciation due to change in method =
• Rs.2,24,000 – 2,12,800 = Rs. 11,200

11/22/10 MBA Department, IITE Batch- 10-12 Sem-1 Subect: Accounting For 81
Managers