Saturday, December 10, 2016
Friday, December 9, 2016
DEPRECIATION
UNDERSTANDING DEPRECIATION ON ACCOUNTING PRINCIPLE
EVERY EQUIPMENT OR ITEM HAS ITS OWN USEFUL LIFE AFTER THAT IT CEASES TO BE USEFUL ONE.
IN THIS LOGIC , WHEN WE USE ANY EQUIPMENT , ITS ORIGINAL PURCHASE PRICE ALSO REDUCES THROUGHOUT ITS USEFUL LIFE TILL ITS PRICE REDUCES TO ZERO.
THAT IS THE EQUIPMENT DEPRECIATES ITS PRICE. IT DEPENDS ON ITS USEFUL LIFE OF THAT PARTICULAR ITEM. THE PRICE OF THE EQUIPMENT IS DIVIDED BY THE USEFUL LIFE AND THAT AMOUNT IS REDUCED FROM ITS PREVIOUS PRICE.
THERE ARE SEVERAL METHODS OF CALCULATING DEPRECIATION.
A EXAMPLE IS GIVEN LIKE
ISHAAN BOUGHT A CAR FOR RUPEES 300000. ITS PRICE DEPRECIATES AT THE RATE OF 10 % PER YEAR.
AFTER 1 YEAR 10 % OF RUPEES 300000 WILL BE REDUCED FROM RS 300000
SO AMOUNT WILL BE 300000* 10/100= RUPEES 30000
SO, DEPRECIATED PRICE OF THE CAR AFTER 1 YEAR WILL BE 300000 - 30000 = RS.270000
NOW AFTER 2 YEAR AGAIN 10% WILL BE DEPRECIATED FROM RS. 270000
SO, 10 % OF RUPEES 270000 IS 270000*10/100= RS. 27000
RUPEES 27000 WILL BE DEDUCTED FROM RS.270000
ONE METHOD CALCULATION OF DEPRECIATION IS LIKE THIS.
EVERY EQUIPMENT OR ITEM HAS ITS OWN USEFUL LIFE AFTER THAT IT CEASES TO BE USEFUL ONE.
IN THIS LOGIC , WHEN WE USE ANY EQUIPMENT , ITS ORIGINAL PURCHASE PRICE ALSO REDUCES THROUGHOUT ITS USEFUL LIFE TILL ITS PRICE REDUCES TO ZERO.
THAT IS THE EQUIPMENT DEPRECIATES ITS PRICE. IT DEPENDS ON ITS USEFUL LIFE OF THAT PARTICULAR ITEM. THE PRICE OF THE EQUIPMENT IS DIVIDED BY THE USEFUL LIFE AND THAT AMOUNT IS REDUCED FROM ITS PREVIOUS PRICE.
THERE ARE SEVERAL METHODS OF CALCULATING DEPRECIATION.
A EXAMPLE IS GIVEN LIKE
ISHAAN BOUGHT A CAR FOR RUPEES 300000. ITS PRICE DEPRECIATES AT THE RATE OF 10 % PER YEAR.
AFTER 1 YEAR 10 % OF RUPEES 300000 WILL BE REDUCED FROM RS 300000
SO AMOUNT WILL BE 300000* 10/100= RUPEES 30000
SO, DEPRECIATED PRICE OF THE CAR AFTER 1 YEAR WILL BE 300000 - 30000 = RS.270000
NOW AFTER 2 YEAR AGAIN 10% WILL BE DEPRECIATED FROM RS. 270000
SO, 10 % OF RUPEES 270000 IS 270000*10/100= RS. 27000
RUPEES 27000 WILL BE DEDUCTED FROM RS.270000
ONE METHOD CALCULATION OF DEPRECIATION IS LIKE THIS.
Thursday, December 8, 2016
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