6 A AFME 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 terms?
Depreciation is the systematic allocation of the cost of a tangible fixed asset over its useful life, reflecting the reduction in value due to wear, tear, and obsolescence.
What is the formula for calculating depreciation under the Straight Line Method?
(Cost minus Residual Value) divided by Useful Life
Why do banks charge depreciation on fixed assets?
Banks charge depreciation to match the cost of an asset against the revenue it helps generate, following the matching principle, and to show a true and fair view of the asset's carrying value.
Which Indian Accounting Standard specifically deals with property, plant and equipment depreciation?
Ind AS 16 governs PPE and related depreciation
Which accounting standard governs depreciation for Indian companies?
AS 10 (Property, Plant and Equipment) governs depreciation for Indian companies, replacing the earlier AS 6 (Depreciation Accounting) which was withdrawn by ICAI.
What is the difference between depreciation and amortisation?
Depreciation is for tangible assets; amortisation for intangible assets
What is the Straight Line Method (SLM) of depreciation?
Under SLM, an equal amount of depreciation is charged every year throughout the asset's useful life, calculated as (Cost − Residual Value) ÷ Useful Life.
Under Schedule II of Companies Act 2013, what determines the useful life of assets?
The Act prescribes indicative useful lives for different asset categories
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