CA Foundation Depreciation Accounting for June 2024 Exams

CA Foundation Depreciation Accounting: Depreciation is a crucial topic in the CA Foundation accounts paper. According to Schedule II under the Companies Act, 2013, it refers to spreading out the cost of an asset over its useful life.

CA Foundation Depreciation Accounting June 2024

1. Ensuring that every operation involving fixed assets yields the expected output.
2. Providing an accurate and truthful assessment of the financial position.
3. Determining the correct accumulated fund amount for asset replacement.
4. Establishing the true cost of production.

1. The anticipated useful life of the assets.
2. The initial cost of the assets.
3. The estimated market value or residual value of the asset.

Understanding Asset Depreciation

1. Wear and Tear: When things get used a lot, they naturally wear out. This applies to assets used in businesses or personally.
2. Time: Even if something isn't used, just the passage of time can make it lose value.
3. Obsolete Technology: As technology advances, older assets can become outdated and less valuable.
4. Market Changes: Sometimes, the market decides that certain assets aren't as valuable anymore, causing their value to drop.

Methods of Providing Depreciation

1. Straight-Line Method: Also called the Original Cost or Fixed Installment method. With this method, we assume the asset's value stays the same over time, resulting in a consistent decrease in value throughout its useful life.
2. Diminishing Balance Method: With this method, the asset's value decreases continually over its useful life.
3. Units of Production Method: Here, the depreciation depends on how much the asset is used or how much it produces.

Formula of Depreciation

CA Foundation Accounts RTP 2022