### Depreciation.pptx

1. Prestation Title Depreciation
2. Agenda Introduction Internal External Method I Method II Applications
3. Introduction Defination: •Reduction •Wear and Tear Causes: Two types.... Internal: °Wear and Tear °Depletion External: °Obsolescence °Efflux of Time °Accident
4. Internal Inherent Normal Causes Wear and Tear: °Account of Continued use e.g. •Building •Plant Depletion: °Proportionate to the Quantum of Production e.g. •Mine •Quarry
5. External External Reasons Obsolescence: °Proper working °Become Obsolete e.g. •Old Machines Efflux of Time: °Account of sheer passage of Time e.g. •Leasehold House Accident: °Destroyed by Abnormal Reasons e.g. •Fire
6. Method I • Straight Line Method • Equal Each Year • Formula (Cost – Scrap Value) / Estimated Value
7. Method I Example: Cost of an Asset=2500 Scrap Value=500 Life=5 Years Appling formula... (2500- 500)/5=400
8. Method I Depreciation for 3 years: •1st Year = 2500 – 400 = 2100 •2nd Year = 2100 – 400 = 1700 •3rd year = 1700 – 400 = 1300
9. Method II • Diminishing Balance Method • Fixed Percentage • Formula Depreciation = (Cost – Scrap Value) * Depreciation Rate
10. Method II Example: Cost of an Asset=\$5000 Scrap Value=\$1000 Rate=40% Appling formula... ((5000- 1000)*40)/100=1600
11. Method II Depreciation for 3 years: 1st year = ((5000-1000)*40)/100 = 1600 2nd year = ((4000 – 1600)*40)/100 = 960 3rd year = ((2400 – 960)*40)/100 = 576
12. Applications Matching Expense Asset Valuation Cost Recovery Tax Deduction