Depreciation Adjustment - Management Duniya

Depreciation Adjustment

Depreciation Adjustment:

 Under CCA method assets are shown in the Balance sheet on current replacement cost after allowing for depreciation. This will require an adjustment in depreciation also. Current year depreciation under CCA can be calculated with the help of following formula.

Depreciation:

Opening Current value Assets + Closing Current value of Asset

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                                 2 x life of Assets

A machine was purchased on 1-1-1994 at a cost of Rs. 1000000 & its useful life was estimated to be 10years. Its replacement cost was Rs. 1800000 on 1-1-1999 & Rs. 2000000 on 31-12-1999. Calculate the amount of depreciation adjustment.

Cost of Assets = Rs.1000000

Life of the assets = 10years

Historical Depreciation:  Cost of assets/ Life of assets =

1000000/10 = 100000

Current year depreciation in CCA = 1800000 + 2000000 / 2 x 10

Depreciation Adjustment:  Current year Under CCA – Historical Depreciation

                                                                190000 – 100000 = 90000

Tags: Account, accountant, Adjustment, Capital, Cost, Cost Accounting, Depreciation, Expenditure, expenses, finance, income, Loss, Management, Management Accounting, Profit, Profit and Loss a/c, revenue, sales, valume
By: Management Duniya