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Depreciation adjusted after finalization of accounts..?

Vikram (Proprietor) (100 Points)

24 July 2009

Hello Friends,

During the F.Y. 2007-08 one of my assets was depreciated as follows

Asset Value: Rs.1,00,000
Depreciation @ 60% for 8 months : Rs.40,000

Asset C/D: Rs.60,000

But in July 2008, during tax returns, deprciation was adjusted as it is allowed for the full year as per IT Act. So in iTR V, depreciation was adjusted to Rs.60000.

My query is now this adjusted 20,000, how should i pass an entry in current F.Y. 2008-09 (so that my asset get reduced by 20,000 and also capital get reduced for that amount...?

Please advise.

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5 Replies

CA Hardik (Profession) (92 Points)
Replied 25 July 2009

Friend,

Pass the following JV

Capital A/c Dr 20,000

To Asset A/c 20,000

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Anubhav Bansal (CA) (223 Points)
Replied 27 July 2009

hold on hattrick. how can you give such a suggestion. Vinod can you please inform me in detail about the nature of your business and further while filing the return if you have increased the depreciation amount you must have reduced your profit. So prima facie you can directly adjust the last year profit, but still i wont recommend you the same till you clearly put in your problem.

K B K (CA final, CWA Final) (53 Points)
Replied 30 July 2009

What HATTRICK said is correct. Since it is an Propreitor concern, the balance in P & L account will be carried forward to Capital account. Hence the entry will be

Capital account Dr. 20000

to Asset a/c 20000

Vikram (Proprietor) (100 Points)
Replied 30 July 2009

Well this is what my CA told me to do:

1. I do not pass any entry in my books of account. And continue with the same asset value that I have before the depreciation was adjusted.

2. Current year in ITR-4, he changed the depreciation allowed by recalculating the depreciation after adjustments.

He told me to continue with my books of account without any adjustements.

CA Anshu Agarwal (B€ @LW@¥$ ]-[@Pp¥) (1832 Points)
Replied 30 July 2009

there may be difference in the profit for income tax purpose and the profit as per the P&L a/c. the difference in the depreciation in the books and the income tax may become. there is no need for passing any journal entry for the difference in the depreciation in the books and the income tax.