1. What is Depreciation As Per Companies Act?

The Companies Act specifies methods and rates for calculating depreciation on fixed assets. It ensures consistent accounting practices and proper allocation of asset costs over their useful lives.

2. How Does the Calculator Work?

The calculator uses the depreciation formula:

Where:

• \( Cost \) — Original cost of the asset
• \( Salvage \) — Estimated residual value at end of useful life
• \( Rate \) — Depreciation rate as per Companies Act

Methods:

• Straight Line Method (SLM): Equal depreciation each year
• Written Down Value (WDV): Depreciation calculated on reducing balance

3. Importance of Depreciation Calculation

Details: Proper depreciation calculation is essential for accurate financial reporting, tax compliance, and asset management as required by the Companies Act.

4. Using the Calculator

Tips: Enter asset cost, salvage value, depreciation rate, and select method. All values must be valid (cost > salvage, rate between 0-100).

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between SLM and WDV?
A: SLM gives equal depreciation each year, while WDV applies the rate to the reducing balance each year.

Q2: How are rates determined under Companies Act?
A: Rates are specified in Schedule II of the Companies Act based on asset class and useful life.

Q3: When should salvage value be considered?
A: Salvage is mandatory for SLM but optional for WDV method calculations.

Q4: Can I change depreciation methods later?
A: Method changes require justification and disclosure in financial statements.

Q5: How does this differ from tax depreciation?
A: Tax depreciation may use different rates/methods as per income tax laws.