Depreciation is the reduction in the usable value of fixed assets due to normal wear and tear of time. Depreciation is an indirect non – cash expenditure which is provided on SLM or WDV basis. Rahul is new junior accountant with Hardwork Mills Private Limited he wants to understand normal depreciation differs from additional depreciation. As a tax adviser, guide him on the two concepts and discus the cases where additional depreciation is not allowed.
Question.
Rahul is new junior accountant with Hardwork Mills Private Limited he wants to understand normal depreciation differs from additional depreciation. As a tax adviser, guide him on the two concepts and discus the cases where additional depreciation is not allowed.
Normal Depreciation:
It refers to the reduction in the usable value of fixed assets due to normal wear and tear of time. Depreciation is an indirect non — cash expenditure which is provided on the straight-line method(SLM) or Written down method(WDV) basis.
Additional Depreciation :
It refers to the deduction(20%) in the value of the new Assets such as plant and machinery(excluding some fixed assets such as second-hand assets, airships, etc.). It can only be used by industries manufacturing or producing any item or industry involving in the generation, the transmission of energy(if SLM is not applicable).
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