Depreciation Calculator As Per Companies Act

Depreciation Methods:

Straight Line Method (SLM):

\[ \text{Depreciation} = \frac{\text{Cost} - \text{Salvage Value}}{\text{Useful Life}} \]

Written Down Value (WDV):

\[ \text{Depreciation} = \text{Cost} \times \text{Depreciation Rate} \]

Depreciation Method:

Cost:

₹

Salvage Value:

₹

Useful Life:

years

Depreciation Rate:

Result:

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1. What is Depreciation?

Depreciation is the systematic allocation of the depreciable amount of an asset over its useful life. It represents how much of an asset's value has been used up according to the Companies Act 2013 provisions.

2. Depreciation Methods

The Companies Act recognizes two main methods:

Straight Line Method (SLM):

\[ \text{Depreciation} = \frac{\text{Cost} - \text{Salvage Value}}{\text{Useful Life}} \]

Written Down Value (WDV):

\[ \text{Depreciation} = \text{Cost} \times \text{Depreciation Rate} \]

Key Differences:

SLM results in equal depreciation charges each year
WDV results in higher depreciation in early years and lower in later years
SLM is simpler but WDV better matches actual asset usage patterns

3. Companies Act 2013 Provisions

Details: Schedule II of the Companies Act 2013 specifies useful lives for various asset classes and requires depreciation calculation based on these norms.

4. Using the Calculator

Instructions: Select method (SLM or WDV), enter cost and salvage value in ₹. For SLM, enter useful life in years. For WDV, enter depreciation rate as percentage.

5. Frequently Asked Questions (FAQ)

Q1: Which method is better - SLM or WDV?
A: It depends on the asset type and business needs. WDV is common for assets that lose more value initially (like vehicles), while SLM is used for assets with steady utility (like buildings).

Q2: What is the typical salvage value?
A: Often 5% of original cost, but can vary based on expected residual value at end of useful life.

Q3: Can I change depreciation methods later?
A: Changes require justification and proper disclosure in financial statements as per accounting standards.

Q4: How does this differ from income tax depreciation?
A: Tax depreciation rates (under Income Tax Act) often differ from Companies Act rates. This calculator follows Companies Act norms.

Q5: What about assets used for less than a full year?
A: Depreciation is typically calculated pro-rata for the period of use during the year.