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What is accumulated depreciation..??

Neelesh Choudhary (business) (57 Points)

26 October 2013

what's the meaning..??

Buildings accum deprn 8000 cr.

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CA Pallav Singhania (IT System Auditor) (33678 Points)
Replied 26 October 2013

Accumulated depreciation is the total amount of depreciation for a fixed asset that has been charged to expense since that asset was acquired and made available for use.

For Example:

A company buys an asset for ₹5,000 that has a five-year lifespan and zero salvage value. The company uses straight-line depreciation, and the asset depreciates at a rate of ₹1,000 per year.

In year one, depreciation will be ₹1,000, as will accumulated depreciation, and carrying value of the asset will be ₹4,000.

In year two, depreciation will be ₹1,000, accumulated depreciation will be ₹2,000 (₹1,000 from the current year + ₹1,000 accumulated from previous years) and carrying value will be ₹3,000.

Each subsequent year will follow the same process.

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Sreeniketh Angara (B. Com CA PCC CS Executive) (699 Points)
Replied 26 October 2013

Small Addition to what Mr. Pallav has said in accounting Terminology.

The Net Block of the Asset Values will be shown in the Revised Sch Vi Balance Sheet. However coming to the Entry part, since Depreciation A/c is being Debited and Accumulated Depreciation A/c is being Credited, the Asset Value will continue to show Rs. 5000/- in the Accounting Package/Software. It wont change. In effect, instead of deducting the depreciation from the value of the asset, a new head is opened for transferring Depreciation of each year to this account. This is known as Accumulated Depreciation. It is maintained for more clarity and better control.

Thanks and God Bless

Sreeniketh

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