Here also there are 2 methods of depreciation

1.WDV Method (Written down Value Method)

2.SLM Method (Straight Line Method)

 

WDV Method

Suppose Asset Value is 5000 and Depreciation Rate is 10% WDV.

Depreciation will be computed as follows

 Particulars

Year 1

Year 2

Year 3

Opening Value

5000

4500

4050

Less Dep 10%

500

450

405

Closing Value

4500

4050

3645

 

However,it is shown as follows in Balance Sheet as follows

 Particulars

Year 1

Year 2

Year 3

Gross block

5000

5000

5000

Less Accumulated Dep

500

950

1355

Net Block

4500

4050

3645

 

Hence Depreciation is not charged to Fixed Assets,It is booked in Accumlated Depreciation A/c

 

Entry Passed

Year 1

Depreciation A/c  Dr 500

                   To Accumulated Dep           500

 

Year 2

Depreciation A/c  Dr 450

                    To Accumulated Dep          450

 

Year 3

Depreciation A/c  Dr 405

                     To Accumulated Dep          405

 

SLM Method

EXAMPLE

Suppose Asset Value is 5000 and Depreciation Rate is 10% WDV.

Depreciation will be computed as follows

Particulars Year 1 Year 2 Year 3
Opening Value 5000 4500 4000
Less Dep 10% 500 500 500
Closing Value 4500 4000 3500

However,it is shown as follows in Balance Sheet as follows

 

 Particulars

Year 1

Year 2

Year 3

Gross block

5000

5000

5000

Less Accumulated Dep

500

1000

1500

Net Block

4500

4000

3500

 

Entry Passed here also is

Depreciation A/c  Dr 500

                   To Accumulated Dep          500

 

Depreciation A/c  Dr 500

                  To Accumulated Dep          500

 

Depreciation A/c  Dr 500

                 To Accumulated Dep          500

 

  1. Accounts and Finance
  2. Step 3 Passing Book Closure Entries
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CA Maninder Singh
CA Maninder Singh is a Chartered Accountant for the past 6 years. He provides courses for Practical Accounts, Taxation and Efiling at teachoo.com .
  • sudiptab009's image
    Hi...

    I have a query regarding Depreciation...
    As per my knowledge depreciation is a one time entry which is passed at the year end..

    Eg;- 31/3/17.  Dep for P&M A/c....Dr.    50,000
                                 To prov for dep for P&M A/c.   50,000
                           (Say, 5,00,000@10%)
    and so on....

    Now tell me...is it ever possible to pass the above mentioned entries every month (i.e on monthly basis) on any kind of provisional basis..!!??

    Eg;- 30/4/16.       Dep for P&M a/c....Dr.    2,000
                                          To PFD for P&M A/c.  2,000

              31/5/16.     Dep for P&M a/c....Dr. 2,000
                                          To PFD for P&M a/c.  2,000
                   (this amount of 2,000 is on provisional basis)

    And so on....

    Then at year end a reverse entry is passed to adjust the excess or short of dep, as the case may be.. and a final entry is passed with actual amount of Dep.

    Would like to confirm whether such type of practice is even acceptable in practical world...??

    Hope i got my query understandable..

    Thanks in advance..
    View answer
  • Kirana Prakash Nandi's image
    Kirana Prakash Nandi
    March 29, 2017, 11:32 a.m.
    In company at the time of assets disposal what wiil be the treatment?
    View answer
  • hem1717's image

    Hi Team There! Under WDV method for companies , how come "Net block" 4050 n 3645 is calculated for 2nd year n 3rd year respectively? Pls refer image.WDV method for companiies in BSheet.jpg

    View answer
  • Yashu Sharma's image
    What is differences between SLM and wdm

    View answer
  • Sudhir Kumar's image

     Under which head this accumulated depreciation will be created

    View answer
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