Sum of Years Digits places a higher depreciation value at the ront end of an asset letting you deduct that from your taxes early on. For a new company this is extremely useful because you save more on taxes during the first, most critical years. During the latter part of this process the depreciation amounts will be less which means you will pay more taxes. In the end the same amount is paid, so it all depends when you need the most money.
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.
When a separate provision for depreciation account is in use, the bookkeeping entries for the year's depreciation involve debiting the depreciation expense account and crediting the provision for depreciation account. This reflects the expense incurred for the period while simultaneously increasing the accumulated depreciation on the asset. This method allows for clearer tracking of depreciation over time without directly reducing the asset's book value until it is disposed of.
which method of depreciation to use when bonus is received that is based on net profit
Advantages: Easy to use Matches Cost to revenues (Matching Concept) Disadvantages: Depreciation can not be charged when the Asset is not in use.
Tax department has developed theire own depreciation schedules for different assets class and use their own depreciations rather than using accounting depreciation and due to this accounting depreciation difference there is also difference in tax we pay and tax we calculate and called "Deffered Taxation"
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.
When a separate provision for depreciation account is in use, the bookkeeping entries for the year's depreciation involve debiting the depreciation expense account and crediting the provision for depreciation account. This reflects the expense incurred for the period while simultaneously increasing the accumulated depreciation on the asset. This method allows for clearer tracking of depreciation over time without directly reducing the asset's book value until it is disposed of.
which method of depreciation to use when bonus is received that is based on net profit
Advantages: Easy to use Matches Cost to revenues (Matching Concept) Disadvantages: Depreciation can not be charged when the Asset is not in use.
Declining-Balance
Tax department has developed theire own depreciation schedules for different assets class and use their own depreciations rather than using accounting depreciation and due to this accounting depreciation difference there is also difference in tax we pay and tax we calculate and called "Deffered Taxation"
There are two entries to record Depreciation Expense. Say we are depreciating a TruckDebit Depreciation Expense - Equipment TruckCredit Accumulated Depreciation - Equipment TruckAt the end of the Accounting Cycle when the books are closed Depreciation Expense will be closed out, Accumulated Depreciation will not be. It remains on the books as long as the item being depreciated is in use and still listed as an Asset.
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.
Straight line
the straight line method
According to their annual report, Target generally uses the accelerated depreciation method.
No, depreciation cannot be charged on capital work in progress (CWIP) because depreciation is applied to assets that are completed and ready for use. CWIP represents costs incurred for assets that are not yet finished, meaning they have not been placed into service. Once the construction or development is completed and the asset is put into use, depreciation can then be applied.