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CPT Section A: Fundamentals of Accounting Chapter-5  
Part 3: Methods of Depreciation 
CA. Poonam Patni 
Page 2


CPT Section A: Fundamentals of Accounting Chapter-5  
Part 3: Methods of Depreciation 
CA. Poonam Patni 
Journal Entries for Depreciation 
Factors to be considered for Depreciation 
Objectives of Depreciation 
Causes of Depreciation 
Understand the Meaning & Need of Depreciation 
Page 3


CPT Section A: Fundamentals of Accounting Chapter-5  
Part 3: Methods of Depreciation 
CA. Poonam Patni 
Journal Entries for Depreciation 
Factors to be considered for Depreciation 
Objectives of Depreciation 
Causes of Depreciation 
Understand the Meaning & Need of Depreciation 
Sum of Digits Method 
Differences between SLM & WDV Method 
Reducing Balance Method (WDV) 
Straight Line Method (SLM) 
Page 4


CPT Section A: Fundamentals of Accounting Chapter-5  
Part 3: Methods of Depreciation 
CA. Poonam Patni 
Journal Entries for Depreciation 
Factors to be considered for Depreciation 
Objectives of Depreciation 
Causes of Depreciation 
Understand the Meaning & Need of Depreciation 
Sum of Digits Method 
Differences between SLM & WDV Method 
Reducing Balance Method (WDV) 
Straight Line Method (SLM) 
What is 
Annuity 
Page 5


CPT Section A: Fundamentals of Accounting Chapter-5  
Part 3: Methods of Depreciation 
CA. Poonam Patni 
Journal Entries for Depreciation 
Factors to be considered for Depreciation 
Objectives of Depreciation 
Causes of Depreciation 
Understand the Meaning & Need of Depreciation 
Sum of Digits Method 
Differences between SLM & WDV Method 
Reducing Balance Method (WDV) 
Straight Line Method (SLM) 
What is 
Annuity 
Consider the element of 
interest on capital outlay. 
Interest is calculated on 
the book value of 
account. 
Depreciation considers 
cost of the asset and 
appropriate amt. of 
interest.  
This method is suitable for 
Long Leases.  
Annuity 
Method 
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FAQs on PPT : Depreciation Accounting - 3 - Accountancy Class 11 - Commerce

1. What is depreciation accounting?
Ans. Depreciation accounting is a method used to allocate the cost of an asset over its useful life. It recognizes that assets lose their value over time due to wear and tear, obsolescence, or other factors. By recording depreciation expenses, businesses can accurately reflect the decrease in value of their assets on their financial statements.
2. How is depreciation expense calculated?
Ans. Depreciation expense is calculated using various methods such as straight-line depreciation, declining balance method, or units of production method. The most commonly used method is the straight-line method, where depreciation expense is determined by dividing the cost of the asset by its estimated useful life.
3. What is the difference between depreciation and amortization?
Ans. Depreciation and amortization are similar concepts but are applied to different types of assets. Depreciation is used for tangible assets such as buildings, machinery, or vehicles, while amortization is used for intangible assets such as patents, copyrights, or trademarks. Both methods allocate the cost of the asset over its useful life.
4. How does depreciation affect financial statements?
Ans. Depreciation affects the financial statements by reducing the value of assets on the balance sheet and increasing expenses on the income statement. It also reduces the net income and, consequently, the taxes payable. Additionally, depreciation is used in calculating the book value of assets and determining the company's financial health.
5. Can depreciation be reversed or adjusted in the future?
Ans. Depreciation is an accounting method that reflects the decrease in the value of assets over time. Once depreciation expense has been recognized, it cannot be reversed or adjusted in the future unless there is an error or a change in the estimated useful life or salvage value of the asset. In such cases, the depreciation method may be revised, and the adjustments are made accordingly.
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