CMA/FM Tools || How to Feed Depreciation Chart

CMA/FM Tools || How to Feed Depreciation Chart

How to Feed Depreciation Chart In Cma:
What is Depreciation:
The concept of depreciation serves to gradually allocate the cost of an asset over its useful life. It's a necessary deduction in the profit and loss statements of entities employing depreciable assets. The Act provides for two methods of deduction: the Straight-Line method or the Written Down Value (WDV) method.

The WDV method is commonly used for depreciation calculation. However, if the undertaking is involved in power generation or its generation and distribution, the straight-line method can be opted for.
In certain circumstances, the Act permits an additional depreciation deduction in the year of purchase.

What is Conditions For Claiming Depreciation:

1) The assets must be owned, wholly or partly, by the assessee.
2) The assets must be used for the business or profession of the taxpayer. If the assets are not used exclusively for the business, but for other purposes as well, depreciation allowable would be proportionate to the business use. The Income Tax Officer also has the right to determine the proportionate part of the depreciation under Section 38 of the Act.
3) Co-owners can claim depreciation to the extent of the value of the assets owned by each co-owner.
4) Depreciation cannot be claimed on Goodwill and the cost of land.
5) Depreciation has been mandatory from A.Y. 2002-03 and shall be allowed or deemed to have been allowed as a deduction irrespective of a claim made by a taxpayer in the profit & loss account. Thus, the taxpayer can carry forward the Written Down Value (WDV) after reducing the depreciation amount.
6) If opted for the presumptive taxation scheme, the deemed profit is considered to have included the effect of depreciation.
7) Depreciation under the Companies Act, 1956, differs from that under the Income Tax Act. Therefore, only depreciation rates prescribed under the Income Tax Act are allowed, regardless of the depreciation rates charged in the books of accounts.

What is The Concept of Block Of Assets:
Depreciation is computed based on the Written Down Value (WDV) of a Block of assets. A Block of assets comprises:
1) Tangible assets, such as buildings, machinery, plant, or furniture,
2) Intangible assets, including know-how, patents, copyrights, trademarks, licenses, franchises, or any other business or commercial rights of a similar nature.

The identification of a block of assets depends on its lifespan, nature, and common use. Additionally, the depreciation percentage within the asset class must be considered for asset classification. Each asset class with the same depreciation rate is recognized as a block of assets.
Under the Income Tax Act, individual assets lose their distinct identity as depreciation is calculated on the block of assets rather than on individual assets.

Amount of Depreciation Allowed:
1) Depreciation is calculated using the Written Down Value (WDV) method, with rates specified.
2) Except for undertakings engaged in power generation or its distribution, which have the option to choose either the WDV method or the Straight-Line method if exercised before the due date of filing the return.
3) In cases of amalgamation or demerger, the total depreciation allowance is divided between the amalgamating and amalgamated companies or the demerged and resulting companies. The total depreciation is computed as if the amalgamation or demerger did not occur and is apportioned based on the number of days the assets were used by each company.
4) For finance lease transactions, the lessee capitalizes the assets in accordance with AS-19 - the Accounting Standard on Leases. In such cases, the lessee can exercise the rights of the owner and is allowed to claim depreciation.

How to Fill Data in Software:
Go to Transaction >> Profit and Loss Account: 

Click on Depreciation >> Click on Details:

Step 1: Select the Year.
Step 2: Enter the Particulars, Rate and Opening WDV Details.
Step 3: Click on Additions >> Enter the Addition details.
Step 4: Click on Deductions >> Enter the Deduction Details.

Step 3: Click on Additions >> Enter the Addition details.

Step 4: Click on Deductions >> Enter the Deduction Details.

The same Depreciation Chart is also displayed in the Balance Sheet > Depreciation option.

Hope This Helps.