Lecture 1 : Depreciation and Concept of Conservatism
Methods of providing depreciation
Straight Line method (SLM).
Reducing Balance Method RBM.
Machine Hour Method.
Production Units Method.
Straight Line method
In this method, an equal amount is written off every year during the working life of the asset to nil or its residual value at the end of its useful life.
SLM: The underlying assumption of this method is that the particular asset generates equal utility during its lifetime.
Depreciation =
Cost of Asset − Scrap Value Useful Life
Example
Cost of machinery: 18000
Installation Charges: 2000
Useful Life of Asset: 5 Years
Calculate Depreciation as per SLM
