CA Foundation Exam > CA Foundation Videos > Principles and Practice of Accounting > How to calculate depreciation using Machine hour, Production Unit & Depletion Method
How to calculate depreciation using Machine hour, Production Unit & Depletion Method Video Lecture | Principles and Practice of Accounting - CA Foundation
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FAQs on How to calculate depreciation using Machine hour, Production Unit & Depletion Method Video Lecture - Principles and Practice of Accounting - CA Foundation
| 1. How do you calculate depreciation using the machine hour method? |  |
Ans. To calculate depreciation using the machine hour method, you need to divide the cost of the machine by its estimated total hours of usage. Then, multiply this hourly rate by the actual number of machine hours used during the accounting period to determine the depreciation expense.
| 2. What is the production unit method of calculating depreciation? | |
Ans. The production unit method calculates depreciation based on the actual production units achieved by a machine or equipment. To calculate depreciation using this method, divide the cost of the asset by its estimated total production units. Then, multiply this per unit depreciation rate by the actual production units achieved during the accounting period to determine the depreciation expense.
| 3. How does the depletion method calculate depreciation? | |
Ans. The depletion method is used to calculate depreciation for natural resources such as oil, gas, or minerals. It considers the depletion of the resource as it is extracted or used up. To calculate depreciation using the depletion method, divide the cost of the natural resource by its estimated total units of production. Then, multiply this per unit depletion rate by the actual units of production during the accounting period to determine the depreciation expense.
| 4. Can I use different depreciation methods for different assets in my business? | |
Ans. Yes, businesses have the flexibility to use different depreciation methods for different assets based on their characteristics and usage. For example, you can use the machine hour method for machinery, the production unit method for vehicles, and the straight-line method for buildings. It is important to choose the most appropriate method for each asset to accurately reflect its depreciation over time.
| 5. What are the advantages of using the machine hour and production unit methods for calculating depreciation? | |
Ans. The machine hour and production unit methods offer advantages in situations where the actual usage or production units can be easily measured. These methods provide a more accurate reflection of the asset's depreciation compared to methods like the straight-line method, which assumes equal depreciation over time. By considering actual usage or production units, these methods can help businesses allocate depreciation expenses more accurately and make informed decisions regarding asset replacement or retirement.
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Nov 21, 2024 Last updated |
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