Company depreciation

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Querist : Anonymous

Querist : Anonymous (Querist)

09 January 2016 Dear Experts, we have been charging depreciation in following SLM method (cost-residual value/useful Life) however in existing FY the asset is going to expired and residual value is 30000/- plz let me know in this current FY should i charge depreciation inclusive residual value i.e, (6400 dep, 29999 sv) or should i charge only depreciation 6400 and residual value will be left 30000 forever.. plz guide me what to do... Regard Sumit Saxena

Ankur Singhal

Ankur Singhal (Expert)
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09 January 2016 Dear
as per S-II of companies act 2013, the salvage value can not be more than 5% of the original cost of the asset.
It means you can claim depreciation of Rs.6400+29999 and if the residual value of Rs.30000/- is less than 5% of original cost then claim depreciation of Rs.6400/-

Querist : Anonymous

Querist : Anonymous (Querist)

09 January 2016 sir, plz guide on following query..1) if residual value is 5% then we can charge depreciation 6400 29999, therefore asset value will left Rs. 1, will deptt. be accept Rs. 36399 depreciation in this year....2) if residual value is below 5% then we can charge only 6400 dep. hence Residual value will left Rs. 30000 does this mean No dep. will be charge on this 30000 in subsequent year.. : plzz guide....

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Ankur Singhal

Ankur Singhal (Expert)
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09 January 2016 Dear
Pls clarify which department.
If you are considering for income tax deptt.
Dear the above treatment is as per companies act.
And under income tax there is no life defined of an asset.

Querist : Anonymous

Querist : Anonymous (Querist)

09 January 2016 sir i know No life is defined in income tax, but as per company act, this year Residual value is left 30000 which is below the 5% in case can we claim only 6400 dep. and residual value 30000 will remain in subsequent year also in subsequent year No dep. can be charge on 30000 (sv), plzz guide is this correct.

Ankur Singhal

Ankur Singhal (Expert)
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09 January 2016 Dear
I said the residual value should be less than 5%.
i.e your residual value can be re.1.
hence you can claim depreciation of Rs.6400+29999/-.
You interpreted it wrong.

Querist : Anonymous

Querist : Anonymous (Querist)

09 January 2016 sir this sv 30000/- is fixed 5% of asset. cost 600000/- in this case how much dep. can we claim weather 36399 or only 6400...

Ankur Singhal

Ankur Singhal (Expert)
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09 January 2016 Dear
As it is last year of expected life and you are claiming depreciation on slm method then claim Rs.6400/-
Hence S.V Rs.30000/- would appear in books with no further depreciation.

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Querist : Anonymous

Querist : Anonymous (Querist)

09 January 2016 but sir in above reply you have said charge depreciation Rs. 6400 plus 29999, hence sv will be Rs. 1 plzz clarify why it is...

Ankur Singhal

Ankur Singhal (Expert)
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09 January 2016 Dear
i was giving you the options that we take on year 1 but later you clarify your whole query and i gave you the practical solution on that.

Querist : Anonymous

Querist : Anonymous (Querist)

09 January 2016 sir in my case sv is 30000 i request you to explain in which case we will charge dep. 6400 plus 29999 and in which we will charge only 6400 and the sv is to be shown in books also no dep on sv in further.

Querist : Anonymous

Querist : Anonymous (Querist)

09 January 2016 sir plzz clarify....

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Ankur Singhal

Ankur Singhal (Expert)
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09 January 2016 Dear
that was the theortical view as prescibed in companies act
but the answer i gave you is practically used in practice.

Querist : Anonymous

Querist : Anonymous (Querist)

09 January 2016 sir thanx for corporation in this regard... but i have seen many asset. in company balance shreet i mean thease assets value is Rs. 1, after expiry of useful life, i want to know in which case we can opt this method.... plzzzzz reply soonest....

Ankur Singhal

Ankur Singhal (Expert)
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09 January 2016 Dear
It is as per you if you want to show the asset at Re.1 or at SV
I would prefer you to show asset at SV and when the asset cannot be used in business then writeoff the salvage value.

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Querist : Anonymous

Querist : Anonymous (Querist)

09 January 2016 sir it is optional we can choose any of these method however your preferance is right not to writeoff the sv if asset is in use because if asset. is to be sold in further then we can pass the following entry.. cash DR..... to concern asset... right........