Part Disposal under SLM
Example
1:
A machine cost ₹1,00,000, 5-year life. After 2 years, a major part of the
machine (worth carrying value ₹10,000) is sold for ₹12,000. Show how disposal
is recorded & new carrying for the rest.
Solution
- Suppose
2-year depreciation done. Let’s assume each year ₹20k (no salvage). So
after 2 yrs total depreciation = 40k, carrying 60k.
- If
a portion (cost-proportion) had a carrying of ₹10k, sold @12k => 2k
profit.
- Remaining
machine CV = 60k – 10k = 50k.
(Exact approach depends on how we track partial disposal cost, but
conceptually: 10k out, 12k realized, 2k gain.)
Table (simplistic):
|
Particulars
|
Amount
(₹)
|
|
Original CV after 2 yrs
|
60,000
|
|
Part disposed CV
|
10,000
|
|
Sale proceeds of part
|
12,000
|
|
Profit on disposal
|
2,000
|
|
Balance machine CV
|
50,000
|
Hinglish
Explanation:
- Total
machine ke 2 saal ke baad 60k value bachi. Usme se 10k wala part bech diya
12k me, 2k profit. Bachi hui machine ab 50k value par continue hogi.
Disposal Under Written Down Value
Example
2:
A car cost ₹5,00,000. Dep. rate 25% WDV. After 2 years, it is sold for
₹2,40,000. Find the profit or loss on sale.
Solution
1.
Year 1 dep
= 5,00,000 × 25% = 1,25,000 → closing 3,75,000.
2.
Year 2 dep
= 3,75,000 × 25% = 93,750 → closing 2,81,250.
3.
Sold @2,40,000 =>
compare with 2,81,250.
Loss = 2,81,250 –
2,40,000 = ₹41,250.
Table:
|
Year
|
Opening
(₹)
|
Dep @25%
(₹)
|
Closing
(₹)
|
|
1
|
5,00,000
|
1,25,000
|
3,75,000
|
|
2
|
3,75,000
|
93,750
|
2,81,250
|
|
Sale
|
–
|
–
|
Sold @2,40,000 => Loss 41,250
|
Hinglish Explanation:
- 2
saal ke baad WDV 2,81,250 aata hai. Par hum sale 2,40,000 pe kar rahe hai,
toh humari loss 41,250.
Depreciation + Revaluation
Example
3:
Building cost ₹10,00,000, SLM 10% (life 10 years?). After 2 years, it’s
revalued to ₹9,00,000. Show new depreciation if the remaining life is still 8
years.
Solution
1.
2 years done, old
annual dep = 10,00,000 ÷ 10 = 1,00,000. So 2,00,000 total used. CV = 8,00,000.
2.
Revalued to 9,00,000
=> +1,00,000 adjustment.
3.
Now new base =
9,00,000, life 8 years left. New annual dep = 9,00,000 ÷ 8 = ₹1,12,500.
Table:
|
Period
|
Calculation
|
Value
|
|
1–2 yrs
|
Dep = 1L each year, total
2L →
CV = 8L
|
8,00,000
|
|
Revalue
|
Increase to 9L →
+1L revaluation
|
9,00,000
|
|
Next 8 yrs
|
9,00,000 ÷ 8 =
1,12,500/year
|
–
|
Hinglish Explanation:
- Revaluation
badha di building ki CV from 8L to 9L. Ab hum 9L ko 8 saalon me write off
karenge, ₹1,12,500 har saal.
IFRS Approach to Partial
Year (Month-Wise)
Example
4:
A machine is bought on 1st Aug for
₹6,00,000, salvage 60,000, 5-year life (SLM). Assume monthly basis. Year ends
31st Dec. Calculate depreciation for the first year.
Solution
1.
Full-year dep =
(6,00,000 – 60,000) / 5 = 5,40,000 / 5 = 1,08,000.
2.
Monthly = 1,08,000 ÷
12 = ₹9,000 per month.
3.
From 1st Aug to 31st
Dec = 5 months (Aug, Sep, Oct, Nov, Dec).
4.
5 months × 9,000 =
₹45,000.
Table:
|
Details
|
Calculation
|
Amount
|
|
Annual Depreciable Amount
|
6,00,000 - 60,000
|
5,40,000
|
|
Annual Dep. (5,40,000 ÷ 5)
|
|
1,08,000
|
|
Monthly Dep. (1,08,000 ÷
12)
|
|
9,000
|
|
First Year (Aug–Dec = 5
months)
|
9,000 × 5
|
45,000
|
Hinglish Explanation:
- Humne
monthly approach liya, har mahine 9k. 5 mahine hue, total 45k.
Mid-year Addition +
Full-year Use
Example
5:
Policy: if purchased on or before 15th
of any month, full month’s depreciation is charged. A machine is bought on 10th Sept for ₹1,20,000, SLM 20% p.a. The
year ends on 31st Dec. Compute
depreciation for that year.
Solution :
1.
Annual depreciation
@20% of 1,20,000 = ₹24,000.
2.
Period from 10th Sept
→
31st Dec is 3.7 months, but policy says if purchased before 15th, we count
full month for Sept. So effectively 4 months.
3.
4/12 of annual =
24,000 × (4/12) = ₹8,000.
Table:
|
Particulars
|
Calculation
|
Amount
(₹)
|
|
Annual Dep @20% on
1,20,000
|
24,000
|
24,000
|
|
Months counted (Sep, Oct,
Nov, Dec)
|
4 months (policy)
|
–
|
|
Dep for current year
|
24,000 × 4/12
|
8,000
|
Hinglish
Explanation:
- Because
firm’s policy says “purchase date before 15th →
full month count,” humne 4 months liye. So 8k depreciation
for that period.
High Rate for First Year,
then Normal SLM
Example
6:
A machine is purchased for ₹2,00,000. The company charges 30% depreciation in the first year (to
account for installation), then normal SLM for the remaining 4 years. No
salvage. Show the schedule.
Solution:
1.
1st year: 2,00,000 ×
30% = 60,000 →
carrying 1,40,000.
2.
Remaining 4 years:
total cost left = 1,40,000. SLM over 4 yrs = 1,40,000/4 = 35,000 each.
Table:
|
Year
|
Opening
|
Depreciation
|
Closing
|
|
1
|
2,00,000
|
60,000 (30% special)
|
1,40,000
|
|
2
|
1,40,000
|
35,000
|
1,05,000
|
|
3
|
1,05,000
|
35,000
|
70,000
|
|
4
|
70,000
|
35,000
|
35,000
|
|
5
|
35,000
|
35,000
|
0
|
Hinglish
Explanation:
- Pehle
saal ek hi baari main 30% charge kiya, baad me 4 saalo me leftover cost
spread kar diya.
Depreciation for Intangible
Asset
Example
7:
Purchased a patent for ₹1,00,000,
no salvage, life 5 years. Compute annual depreciation (amortisation) on straight line.
Solution:
- This
is basically intangible asset, par principle same.
- (1,00,000
– 0) ÷ 5 = ₹20,000 each year.
Table:
|
Year
|
Opening
|
Amort
(₹)
|
Closing
|
|
1
|
1,00,000
|
20,000
|
80,000
|
|
2
|
80,000
|
20,000
|
60,000
|
|
...
|
...
|
...
|
...
|
Hinglish
Explanation:
- Har
saal 20k charge karke 5 saal me patent ko amortise kar dete hain.
Machinery Impairment plus
Depreciation
Example
8:
A machine cost ₹3,00,000, life 5 years SLM, no salvage. After 2 years, due to
damage, it’s impaired to
₹1,00,000. The firm still plans to use it for 3 more years. Show the new
depreciation from year 3.
Solution
1.
Original annual =
3,00,000 ÷ 5 = 60,000. So 2 years total 1,20,000. CV = 1,80,000.
2.
Impairment →
reduce to 1,00,000. So we record loss 80,000.
3.
Remaining life 3 yrs.
4.
New depreciation =
1,00,000 ÷ 3 = 33,333 approx.
Table:
|
Item
|
Calculation
|
Amount
(₹)
|
|
Dep for 2 yrs
|
60,000 × 2 = 1,20,000
|
–
|
|
CV after 2 yrs
|
3,00,000 – 1,20,000
|
1,80,000
|
|
Impairment to 1,00,000
|
loss = 80,000
|
–
|
|
New dep over next 3 yrs
|
1,00,000 ÷ 3 = 33,333
|
–
|
Hinglish
Explanation:
- 2
saal ke baad machine ki value 1,80,000 thi, par impairment se 1,00,000 ho
gayi. Bache 3 saal me 1,00,000 spread kar rahe hain: 33.3k each.
Sum-of-the-Years’-Digits
with Salvage
Example
9:
An asset cost ₹3,00,000, salvage ₹30,000, life 3 years. Use SYD. Compute depreciation each year.
Solution
- Depreciable
= 3,00,000 – 30,000 = 2,70,000.
- SYD
for 3 yrs = 1+2+3 = 6.
- Year 1:
fraction 3/6 → 2,70,000 ×
3/6 = 1,35,000
- Year 2:
fraction 2/6 → 2,70,000 ×
2/6 = 90,000
- Year 3:
fraction 1/6 → 2,70,000 ×
1/6 = 45,000
Table:
|
Year
|
Fraction
|
Dep.
|
Closing
|
|
1
|
3/6
|
1,35,000
|
1,65,000 (3,00k – 1,35k)
|
|
2
|
2/6
|
90,000
|
75,000
|
|
3
|
1/6
|
45,000
|
30,000 (salvage)
|
Hinglish
Explanation:
- Bas
same SYD formula, par salvage minus karke hamper kar diya. End me 30k
salvage bachta hai.
Double Declining Balance
(No Salvage)
Example
10:
An asset costs ₹2,00,000, life 5 years. Using Double-Declining
method (twice the SLM rate). SLM rate would be 20% (1/5). So DDB = 40%. Compute
depreciation for first 3 years.
Solution
- DDB
rate = 40% on opening WDV.
1.
Year 1:
2,00,000 × 40% = 80,000 → closing 1,20,000.
2.
Year 2:
1,20,000 × 40% = 48,000 → closing 72,000.
3.
Year 3:
72,000 × 40% = 28,800 → closing 43,200.
(It continues in years 4 & 5 until maybe final is 0 or small leftover. Some
adopt a shift to SLM in the last year to salvage 0.)
Table:
|
Year
|
Opening
|
Dep @40%
|
Closing
|
|
1
|
2,00,000
|
80,000
|
1,20,000
|
|
2
|
1,20,000
|
48,000
|
72,000
|
|
3
|
72,000
|
28,800
|
43,200
|
Hinglish
Explanation:
- Double
Declining = 2 × (1/5) = 40%. Har saal WDV pe 40%.
- Pehle
saal sabse zyada depreciation, phir kam hota jayega.
Final Hinglish Recap
1.
Straight Line
(SLM) = (Cost – Salvage) / Life → same depreciation har saal.
2.
Written Down Value
(Reducing Balance) = har saal opening book value × rate.
3.
Sum-of-the-Years’-Digits
= fraction (remaining life / sum of years) × (Cost – Salvage).
4.
Units-of-Production
= (Cost – Salvage) / total units × actual units.
5.
Partial year →
proportionate months or firm’s policy (like half-year convention).
6.
If estimates change (life, salvage), next
years me revised approach se depreciation nikalte hain (prospectively).
7.
Impairment
reduces carrying value forcibly if asset is damaged or market falls.
8.
DDB
(Double-Declining) = 2 × SLM rate on opening WDV.
