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DEPRICIATION IN ACCOUNTING METHOD:

MEANING OF DEPRICIATION : Depreciation is the reduction in the value of assets arising from the passage of time due to use or abuse, wear and tear. A depreciation expense is not a method of valuation but of cost allocation for a particular period. It is the amount of cost allocation within an accounting period. Business concern must be calculated depreciate value of assets for both accounting and tax purposes.

As described above, depreciation value should be deducted from present value of assets which will be posted in asset side of Balance sheet and also depreciation amount must be posted at debit side of profit & loss account as an expense. As per the Income tax act, in order to calculate appropriate income tax, depreciation value must be shown P&L account with proper depreciation accounting methodology otherwise income tax valuation must be rise.

SPECIMEN OF DEPRICIATION ACCOUNTING:

PROFIT & LOSS A/C

PROFIT & LOSS A/C AS ON DTD : ______________

PARTICULARS AMOUNT PARTICULARS AMOUNT
To. Depreciation XXX

Here one thing must be remember that opening cash & bank must be come from previous year closing which has been shown in last year Balance Sheet.

BALANCE SHEET

BALANCE SHEET AS ON DTD : __________________

LIABILITY AMOUNT ASSETS AMOUNT
LAND & BUILDING XXX
LESS: DEP. XXX XXX
FURNITURE & FIXTURE XXX
LESS: DEP. XXX XXX
PLANT & MACHINERY XXX
LESS: DEP. XXX XXX
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