To calculate the depreciation on fixed assets like T.V., fridge, motorcycle, etc., you need the following information from your parents:
1. Date of Purchase: The date when the asset was bought.
2. Cost of the Asset: The amount paid to purchase the asset.
3. Useful Life: The estimated number of years the asset will be useful.
4. Depreciation Method: Whether they use Straight Line Method (SLM) or Diminishing Balance Method (DBM) for depreciation.
5. Residual Value: The estimated value of the asset at the end of its useful life (if any).
Steps to Calculate Depreciation
1. Using Straight Line Method (SLM):
Formula:
\(\text{Depreciation per year} = \frac{\text{Cost of Asset} - \text{Residual Value}}{\text{Useful Life}}\)
2. Using Diminishing Balance Method (DBM):
Formula:
\(\text{Depreciation} = \text{Book Value at Beginning of Year} \times \text{Depreciation Rate (%)}\)
Example
Suppose you get the following data:
T.V.: Bought in 2019 for ₹40,000, useful life 10 years, residual value ₹5,000.
Fridge: Bought in 2020 for ₹30,000, useful life 15 years, residual value ₹3,000.
Motorcycle: Bought in 2018 for ₹80,000, useful life 8 years, residual value ₹10,000.
Depreciation Calculation (SLM):
1. T.V.:
\(\text{Depreciation per year} = \frac{40,000 - 5,000}{10} = ₹3,500\)
2. Fridge:
\(\text{Depreciation per year} = \frac{30,000 - 3,000}{15} = ₹1,800\)
3. Motorcycle:
\(\text{Depreciation per year} = \frac{80,000 - 10,000}{8} = ₹8,750\)
Ask your parents for actual data, apply these methods, and you'll have the annual depreciation for each asset.
