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The difference between cumulative loan repayment amount and cumilative depreciation is AAD
Power generation companies usually run for 30 years .. if u depreciate it at SLM method it would have around 3.33% anual depreciation but No loan carries such a elongated tenure in general.....
Now the AAD concept come in picture.. The shortfall in LOANrepayment is to depreciation amount is routed thru Sales figure as AAD.. and the same adjusted over the life of teh asset as depreciation..
Got it !
Regards
Malla Reddy
What else can I help you with?
What is provision of depreciation?
Provision of depreciation is allowance account in which every year fixed amount is put to charged against actual depreciation so that planned income statement can be prepared and profit remains smooth.
Why you have depreciation?
Depreciation is used to allocate the fixed cost of asset to specific fiscal years during which that fixed asset is used to earn revenue if depreciation is not used then all cost is charged to one fiscal year which is against the matching concept.
What is The total amount of depreciation recorded against an asset over the entire time the asset has been owned?
The total amount of depreciation recorded against an asset over the entire time the asset has been owned is known as "accumulated depreciation." This figure represents the cumulative depreciation expense that has been charged against the asset since its acquisition. It reflects the wear and tear or usage of the asset over time and is deducted from the asset's original cost on the balance sheet to show its net book value. Accumulated depreciation is important for assessing the asset's current value and for financial reporting purposes.
What is advance against retention money?
no
How are accumulated depreciation and depreciation related?
Accumulated depreciation and depreciation are related with each other as depreciation is annual expense while accumulated depreciation is the sum of all annual depreciation expenses.
Does accumulated depreciation close at the end of the period?
Accumulated depreciation does not close at the end of the accounting period. Instead, it is a permanent account that carries its balance forward to the next period, reflecting the total depreciation expense recognized against an asset since its acquisition. While depreciation expense is closed to the income summary at period-end, accumulated depreciation remains on the balance sheet to reduce the asset's book value over time.
How are accumulated depreciation and depreciation expensese related?
Accumulated depreciation and depreciation are related with each other as depreciation is annual expense while accumulated depreciation is the sum of all annual depreciation expenses.
Why accumulated depreciation exceed depreciation expense?
Depreciation expenses is for one specific fiscal year while accumulated depreciation is the sum of all depreciation expenses that’s why accumulated depreciation exceeds the depreciation if there is depreciation expense in prior year as well.
How are accumulated depreciation and depreciation expenses similar?
Accumulated depreciation is all of the depreciation ever 'accumulated' against the assets currently in service. It is shown on the balance sheet as a 'contra' (negative) asset, directly below the assets it relates to. Depreciation expense is the current period's depreciation of the assets currently in service. It is shown on the income (P&L) statement as an expense. Example: Business purchased a truck for $20,000 which will last 5 years. For simplicity, we'll use 'straight-line' depreciation. End of Year One: Depreciation expense on Income Statement $4,000 (1/5th of $20,000) Accumulated Depreciation on balance sheet: $4,000 End of Year Two: Depreciation expense on Income Statement $4,000 Accumulated Depreciation on balance sheet: $8,000 (both years) End of Year Three: Depreciation expense on Income Statement $4,000 Accumulated Depreciation on balance sheet: $12,000 (all three years)
Distinguish between depreciation policy and the concept of depreciation?
Depreciation policy is management thing that what depreciation method to use and how much depreciation to charge to each asset. Depreciation concepts are concepts which govern the depreciation process which management cannot change they are universal rules to follow depreciation that how straight line depreciation work etc.
Does depreciation appear on the income statement?
Yes, but it also appears on the balance sheet. When depreciation is posted in the accounts, the double entry is Dr Depreciation (IS) and Cr Accumulated Depreciation (BS). The IS account takes the debit side as an expense, while the balance sheet takes the credit side which offsets against purchase cost of the asset, thereby reducing the net book value by the same amount.
What is the entry for accumulated depreciation?
Debit depreciation accountCredit accumulated depreciation
