What is depreciation? throw light on the principal methods of charging depreciation. what are the duties of an auditor in this regard?
Answers
Answered by
1
we can directly call depriciation as an expense and not loss. since its a reduction in the value of the asset due to its use or by time. there are mainly two methods of charging depriciation-
1- straight line method :- In this method a fix amount of value is being deducted every year for the value of the asset and its always calculated on the original cost of the asset like a trucks original price is 100 and depriciation rate is 10% then 10% of 100= rupees 10 will be deducted every year.
2 - Written Down Value Method - according to this method the depriciation is charged on the written down value of the asset every year suppose the value of the asset is 100 then 10% of 100= 10 for forst year but for the next year its value will be 90 so 10% of 90= 9 so 90-9= 81 now the depriciation will be charged on 81 it means the value of depriciation is not same every year but the percentage of depriciation is same always.
1- straight line method :- In this method a fix amount of value is being deducted every year for the value of the asset and its always calculated on the original cost of the asset like a trucks original price is 100 and depriciation rate is 10% then 10% of 100= rupees 10 will be deducted every year.
2 - Written Down Value Method - according to this method the depriciation is charged on the written down value of the asset every year suppose the value of the asset is 100 then 10% of 100= 10 for forst year but for the next year its value will be 90 so 10% of 90= 9 so 90-9= 81 now the depriciation will be charged on 81 it means the value of depriciation is not same every year but the percentage of depriciation is same always.
Similar questions