Depreciation Procedure

We know that there are 2 methods of Depreciation

  • Depreciation as per Income Tax
  • Depreciation as per Companies Act

 

Depreciation method to be used depends upon type of business i.e. whether business is a Company or a  Non Company

Difference

Depreciation for Non Companies

Depreciation for Companies

They follow only

Depreciation as per Income tax

both for entries and tax payment

 

 

 

 

They follow

Depreciation as per Income tax  

For paying taxes

And

Depreciation as per Companies Act

for passing entries

They  normally follow WDV method and present depreciation as follows

 

Particulars

Year 1

Year 2

Year 3

Opening value

1000

900

810

Dep 10%

100

90

81

Closing value

900

810

729

 

 

 

 

 

 

 

 

 

They also normally follow WDV Method.

Presentation is diffetent

 

Particulars

Year 1

Year 2

Year 3

Gross block

1000

1000

1000

less Accumulated dep

100

190

271

Net Block

900

810

729

 

Some Companies also follow SLM Method

(Straight Line Method as mentioned below)

 

Particulars

Year 1

Year 2

Year 3

Gross block

1000

1000

1000

less Accumulated dep

100

200

300

Net Block

900

800

700

 

They pass the entry

Depreciation

         To Asset

 

 

 

They pass the entry

Depreciation

         To Accumulated Depreciation

 

 

 

 

  1. Accounts and Finance
  2. Step 4 Balance Sheet Finalization Procedure
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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 .
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