ABC company installed a plant useful life 8 year costing Rs1 Million and 200000 on its instalation,there is a legal requirment to restore the place after useful life.it is estimated that 200000 have incurred on 31 december using technology as they have past practiced,however if existing techonology on this time of restoration it would cost 100000 only the entity uses discount rate 10% where applicable. Requirement :calculate the amount of provision ?
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
ABC company installed a plant useful life 8 year costing Rs1 Million and 200000 on its instalation,there is a legal requirment to restore the place after useful life.it is estimated that 200000 have incurred on 31 december using technology as they have past practiced,however if existing techonology on this time of restoration it would cost 100000 only the entity uses discount rate 10% where applicable.
Requirement :calculate the amount of provision ?
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