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Depreciation

28 March 2018

Please tell me , Whether to take depeciation as a Standing Charges or Machine Expenses?
Please give your logics and reasons too..
Chapter Overheads
IPCC (Cost & FM)

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12 Replies

Parminder Singh (744 Points)
Replied 28 March 2018

Standing charges are fixed expenses which do not vary with the use of machine. Examples of standing charges are rent, rates, lighting, insurance, etc.
Machine expenses are variable expenses which vary with running of machines, such as depreciation, repairs, power, maintenance, etc.

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Gautam Chamaria (54 Points)
Replied 28 March 2018

But depreciation is also fixed..

Parminder Singh (744 Points)
Replied 28 March 2018

no. Go through definitons and meaning of depreciation. For taxation it is fixed. For accounts it was earlier fixed. but new company law deepreciarion is as per useful kife which is in line with perception of costing. If you dont use an asset, it wont depreciate. Not at least at the same pace as on using the asset. A memory tip could be an example of pencil. if you dont use it, it does not diminish.

Gautam Chamaria (54 Points)
Replied 28 March 2018

Thanx a lot sir..

Parminder Singh (744 Points)
Replied 28 March 2018

Nost welcome, sir. Hope you are convinced. If, not, research more. If you find any material contrary ro my answer, then please do enlighten me :)

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Gautam Chamaria (54 Points)
Replied 28 March 2018

Sir one more thing..
In IAS 16 Para 55, It is written that Dep. begins when the asset is available for use and continues untill the asset is derecognized, even if it is idle..

Parminder Singh (744 Points)
Replied 28 March 2018

yes. there is also a para where useful life is reviewed at least once a year. so depreciation recorded will be as per judgement and estimate of management on remainung useful life. as against tge example of pencil, if you consider a car, even if you dont use it, it does depreciate. but the quantum of depreciation will be much kesser than when the car is under use. that is how depreciarion is a variable expense. depending on nature of asset, intended use, actual use and remaining useful life the depreciation is determined.

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