# CPT Chapter Depreciation

CA CPT chapter on “Depreciation” explains the concept of depreciation, the various methods of charging depreciation (Straight Line Method, WDV Method etc) and their relative advantages and disadvantages. It also explains the accounting entries in case of a change in the method of depreciation. With Sheela Warrier.Duration:3hrs 14min

 Depreciation Duration (min:sec) What is Depreciation? Introduction 00:57 Index 02:58 What is Depreciation 14:49 Why do we Depreciate 06:31 When do we start depreciation 01:22 Summary 02:48 Quiz 08:06 Measurement of Depreciation Measurement of Depreciation 11:11 Methods of Depreciation 04:09 Straight Line Method 07:06 Accounting Entry -Method 1 08:45 Accounting Entry -Method 2 08:52 WDV Method 08:38 Comparison between St line & WDV Method 07:21 Sum of Years digit method 05:35 Machine Hour Method 03:23 Depletion Method 03:36 Production Unit Method 02:58 Summary Method of Depreciation 07:06 Quiz 06:31 Related Topics Introduction to Related Topics 01:25 Change in Method of Dep 11:49 Revaluation of Asset 07:33 Revision of Estimates 05:23 Prov for Repairs & Renewal 02:57 Summary Related Topics 05:25 Quiz 18:17 Additional Questions 10:32 Conclusion 08:41 Total 3:14:44

## Notes

Few things covered by us

What is Depreciation?
Why Depreciation?
When ?
How is Depreciation Measured?
How is Depreciation Accounted for ?
Change in method
Revision of estimates
Revaluation of depreciable assets
Provision for repairs and renewals

Depreciable Assets

Expected to be used for more than one year
Has a limited useful life
Held for use in the business
Not meant for resale

Depreciation

Reduction in the value and utility of an asset
Internal
External
Matching concept

Objectives

Funds for Replacement
True Profit
True Financial Position
True Cost of Production
Legal Requirement

When

Depreciation is charged from when the depreciable asset is:
In a condition ready to be used
Available for the purpose for which it is assigned

Factors for measuring depreciation

Cost of the asset: actual
Residual value: estimated
Useful life: estimated
Depreciable amount: computed

Methods of depreciation

Straight Line Method
Reducing Balance Method
Sum of Years Digits Method
Annuity Method
Sinking Fund Method
Machine Hour Method
Production Units Method
Depletion Method

Reducing Balance (WDV) Method

Fixed rate on written down value (WDV) of asset
Amount of depreciation reduces each year
Depreciation + Repairs is uniform every year
Applicable for Income Tax purposes also
Impact of obsolescence reduced

Change in method of depreciation

Consistency
Change only if
Retrospective effect
Difference taken to Profit and Loss a/c

Revision of estimates

Estimated life
Estimated scrap value
Book value to be depreciated on the basis of new estimate

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