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what is depreciation and methods mostly used
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Answer / sanmilan
All Assets have a Life Span. The capacity or productivity of
any particular asset need not be same as initial years after
using the same for 5 years. So cost of acquiring an asset is
spread over the estimated life of the assets. This is called
Depreciation.
Straight Line Method, Written Down method, Declining method
Sum-of the Years’ digit Method are the Deprecation Methods.
Most commonly used are Straight Line & WDV Methods.
| Is This Answer Correct ? | 8 Yes | 0 No |
Answer / anithajayanna
The term depreciation represents loss or diminution in the value of an asset consequent upon wear and tear ,obsolescence, effluxion of time or fall in market value.
Methods of Depreciation
1.Fixed installment Method
2.Diminishing Balance Method
3.Annuity Method
4.Depreciation Fund Method
5.Straight Line Method
6.Replacement Cost Method
7.Statutory Method
| Is This Answer Correct ? | 2 Yes | 0 No |
Answer / gangadhar das
More than 14 dep. methods are there but mostly common
method used by a company is (SLM & WDM)
SLM:- STRAIGHT LINE METHOD
WDM:- WRITTEN DOWN METHOD
| Is This Answer Correct ? | 2 Yes | 0 No |
Answer / barodianbuddy(acca)
According to IAS 16, their are two key methods of depreciation. They are Straight line method & Reducing balance method. The other methods used are Machine hour rate method & Sum of the digits method.
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Manoj & Mahavir joined a firm drawing salary of Rs 25000 per month.After serving 3 yrs ,they started business of their own in partnership,contributing Rs200000(expected life 10 yrs,bought spare parts worth Rs 33000 from Kundu on credit.Office supplies were purchased for cash.Initially they were very busy in conducting their business operations but by the end of the 1st year,31/12/2005 they were disappointed when they found their bank balances.Following is the summary of their bank statement. Receipts: Share Capital Rs 250000 Collections from Customers 412000 Payments: Equipment 200000 Salaries of Assistants 88000 Rent advance for 2 yrs 96000 On-year ins. Policy on equipment 12000 Office stationery 27000 Payment to Kundu 29000 Withdrawals of Manoj 90000 Withdrawals of Mahavir 90000 Closing balance c/d 30000 ----------- Total : 6,62,000 Still amount receivable from customers for services to them amounted to Rs 30,000 & closing balance of office stationery is Rs2000,spare parts Rs2600 were utilised by the end of the year .Prepare trial balance with the available information and show total. Also what is the net profit.
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