Depriciation method

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

23 June 2013 SIR

PLEASE EXPLAIN ME THE METHOD OF DEPRICIATION , WHAT IS THE DEFFERENCE IN DEP. AS PER INCOME TAX / COMPANY LAW.

ALSO EXPLAIN THE STAIGHT LINE METHOD AND WDV METHOD

THANKS

MUKESH KUMAR

Sanket

Sanket (Expert)
Follow

23 June 2013 the very basic differwnce is that by giving
higher benefit in income tax the GOvt
want you to invest more in capital
infrastructure to save tax and by this
way they want to build a chain of capital
investment.

Sanket

Sanket (Expert)
Follow

23 June 2013 In Written Down Value (WDV) method
depreciation is charged on the reuced
price. Example: Asset purchased for Rs.
100.00: Depreciation rate 10%. First year
its value will be reduced to 90.00
(100-10% of 100) and in second year
depreciation will be Rs. 9.00 i e 10% of
90. Similarly third year it will be Rs.
8.10. This way the value of asset never
comes at Zero.
In Straight Line Method (SLN) life of a
asset is known then for the duration of
life ever year an equal sum is taken as
depreciation. Example Asset purchased
for Rs. 100.00 Life ascertained 8 years
and then every year a sum of Rs. 12.50
is charged to Depreciation and after 8th
year its book value will be zero.
WDV method is strongly recommended.

Upgrade to CAclubindia Pro. Subscribe Now!