DEPRECIATION
Chapter notes, video classes, MCQ practice tests and quick-revision one-liners for Accounting and Financial Management for Bankers — JAIIB.
One-liners from this chapter
Free sample — 8 of 66 rapid-fire Q&A cards.
What is depreciation in accounting?
Depreciation is the systematic allocation of the cost of a tangible fixed asset over its useful life, reflecting the consumption of economic benefits embodied in the asset.
What is the formula for depreciation under the Straight Line Method?
(Cost minus Residual Value) divided by Useful Life in years.
Which accounting standard governs depreciation for Indian companies?
AS 10 (Property, Plant and Equipment) issued by the ICAI governs depreciation accounting for Indian companies, replacing the earlier AS 6.
Which method of depreciation charges a fixed amount every year on the original cost?
Straight Line Method (SLM) charges fixed annual depreciation.
What is the Straight Line Method (SLM) of depreciation?
Under SLM, a fixed and equal amount of depreciation is charged every year over the asset's useful life, calculated as (Cost - Residual Value) / Useful Life.
Which method charges depreciation on the book value remaining at the start of each year?
Written Down Value (WDV) method charges on remaining book value.
What is the Written Down Value (WDV) method of depreciation?
Under WDV, depreciation is charged at a fixed percentage on the reducing book value each year, resulting in higher charges in early years and lower charges in later years.
Under which accounting standard is depreciation accounted for as per Ind AS framework?
Ind AS 16 (Property, Plant and Equipment) governs depreciation.
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