Depreciation is just decrease the value of any fixed asset.When you will use it ,then the value of fixed asset will be decreased .
So calculating of net profit and correct financial position , it is the duty of accountant to show it in profit and loss account .
Rates of depreciation may differ according to the nature of fixed asset some assets’ depreciation rate is low and other is high because high decreasing value due to expiry.
In balance sheet ,we deduct depreciation from fixed asset .
After deducting we can calculate net value of fixed asset which can be show in balance sheet .
Depreciation account can also be made by accountant but every year it must send to profit and loss account because this is nominal account .
So calculating of net profit and correct financial position , it is the duty of accountant to show it in profit and loss account .
Rates of depreciation may differ according to the nature of fixed asset some assets’ depreciation rate is low and other is high because high decreasing value due to expiry.
In balance sheet ,we deduct depreciation from fixed asset .
After deducting we can calculate net value of fixed asset which can be show in balance sheet .
Depreciation account can also be made by accountant but every year it must send to profit and loss account because this is nominal account .
There are two of calculating depreciation
1 - STRAIGHT LINE METHOD (SLM) FIXED INSTALLMENT METHOD
Total cost - Scrape Value
____________________
No. of Year of Useful Life
2 - WRITTEN DOWN VALUE METHOD (WDV) REDUCING BALANCE METHOD OR DIMINISHING BALANCE METHOD.
Asset purchased 50000 (1-1-2011)
Installations 10000
Depreciation 10% yearly
2011
Total cost 50000+10000=60000 * 10% = 6000
2012
WDV 60000-6000=54000 * 10% = 5400
No comments:
Post a Comment