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DEPRECIATION & ITS ACCOUNTING
What is depreciation in the context of accounting?
Depreciation is the systematic allocation of the cost of a tangible fixed asset over its useful life, reflecting the consumption of economic benefits embedded in the asset.
What is the primary purpose of charging depreciation on fixed assets?
To allocate cost of asset over its useful life.
Which accounting standard governs depreciation accounting in India?
AS-6 (Accounting Standard 6) issued by the ICAI governs depreciation accounting in India, though it has been largely superseded by Schedule II of the Companies Act 2013 for companies.
Under the Straight Line Method, how is annual depreciation calculated?
Cost minus residual value divided by useful life in years.
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