Depreciarion as per slm method
Querist : Anonymous
can anyone let me know the calculation of depreciation as per SLM method with an example..
plz reply.
Straight line depreciation can be calculated using any of the following formulas:
● Depreciation per annum = ( Cost − Residual Value )
Useful Life
● Depreciation per annum = ( Cost − Residual Value ) x Rate of depreciation
Example
On 1 Jan 2011, Company A purchased a vehicle costing $20,000. The company expects the vehicle to be operational for 4 years at the end of which it can be sold for $5,000. Calculate depreciation expense for the year ended 31 Dec 2011, 2012, 2013 and 2014.
Solution:
Depreciable amount of the vehicle is $15,000 ($20,000 cost minus $5,000 salvage value). Useful life is 4 years.
Depreciation expense for year ended 31 Dec 2011 = $15,000 ÷ 4 = $3,750 per year.
Depreciation expense shall remain the same over the useful life. Hence, an amount of $3,750 shall be the depreciation expense for year ended 31 Dec 2012, 2013 and 2014.
Querist : Anonymous
1. Depreciation A/c Dr.
To Fixed Asset A/c
2. P&L A/c Dr
to Depreciation A/c
Querist : Anonymous
Accounting entry is same only the amount of depreciation changes.
Querist : Anonymous
Deprecation is always an indirect expense.
Let me make you clear one thing this is the only entry that you can do.
Do not make fuss of it.
Querist : Anonymous
Residual value in case of slm means the salvage value / expected sale value on expiry of life of asset.(may be the scrap value in some case)
Querist : Anonymous
Pls tell me what the figures are there in your case. and also
the residual value is expected at starting of year1 and if asset not sold then the residual value will also be added in depreciation amount at 4th year and if you stlll using asset then show the asset at Re. 1 in the books.
As in SLM depreciation is not charged beyond the expected life of the asset
Querist : Anonymous
Also you can take depreciation of Rs.3750/- and carry asset at 5000/- in books of account with no depreciation after that.
Querist : Anonymous
In case of a company you need to follow the % given in company act
Income tax do not prescribe the rate for the SLM method it only talks of WDV method.
Querist : Anonymous
Querist : Anonymous
Depreciation = Original Cost * Rate
Depreciation will be same for every year.
In case where the rate is specified the salvage value is not considered. SV is considered only when then rate is not specified.
Querist : Anonymous
Querist : Anonymous
Read the above reply carefully.
Querist : Anonymous
Yes you are correct.
Querist : Anonymous
It is the correct entry.
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