Method -2
Example
ABC Ltd. Purchases a machinery for Rs. 30 lakhs with a useful life of 5 years and ‘Nil’ salvage value. It gets Rs. 10 lakhs as a grant from the government for this machinery.
a) The gross value of machinery will be shown as Rs. 20 lakhs (30 lakhs – 10 lakhs) in the balance sheet
b) Rs. 4 lakhs (20 lakhs / Useful life i.e. 5 years) will be charged to profit and loss account each year as a depreciation on this machinery.
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Example
ABC Ltd. Purchases a machinery for Rs. 30 lakhs with a useful life of 5 years and ‘Nil’ salvage value. It gets Rs. 10 lakhs as a grant from the government for this machinery.
a) The gross value of machinery will be shown as Rs. 20 lakhs (30 lakhs – 10 lakhs) in the balance sheet
b) Rs. 4 lakhs (20 lakhs / Useful life i.e. 5 years) will be charged to profit and loss account each year as a depreciation on this machinery.
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