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Accounting · Depreciation and Amortisation

Change in Method of Depreciation (AS 6) for CA Foundation

Updated 1 October 2026 · Fact-checked

A change in depreciation method under AS 6 is applied retrospectively. You recompute depreciation under the new method from the date the asset was first used, compare it with what was actually charged, and book the surplus or deficiency in the profit and loss account of the year of change. Then charge normal depreciation for that year under the new method.

Understand Change in Method of Depreciation

A business picks a depreciation method, usually Straight Line (SLM) or Written Down Value (WDV), and applies it year after year. This is consistency. But sometimes the method must change.

AS 6 allows a change only in three cases: the law requires it, an accounting standard requires it, or the change gives a more appropriate presentation of the financial statements. You cannot change it just to show a better profit.

When the method changes, it is not applied only from now on. The new method is treated as if it had been used from the date the asset was first put to use. So you recompute the depreciation for all past years under the new method.

The past years' books are not reopened. You compare two totals: depreciation actually charged in the past, and depreciation that would have been charged under the new method. The difference is a surplus if too much was charged, or a deficiency if too little was charged.

This difference is adjusted in the year of change. A surplus is credited to the Profit and Loss Account. A deficiency is debited to it. The current year's depreciation is then charged under the new method as usual. The change is a change in accounting policy, so its effect must be quantified and disclosed.

Key rules to remember

SLM depreciation per year
(Cost − Residual value) ÷ Useful life
If the question gives a rate, use: Rate % × Original cost. Residual value is zero unless stated.
WDV depreciation for a year
Rate % × Opening book value of that year
Book value falls every year, so depreciation falls every year.
Adjustment on change of method
Depreciation actually charged (past years) − Depreciation under new method (same years)
Positive result = surplus, credit to P&L. Negative result = deficiency, debit to P&L.
Total P&L effect in year of change
Current year depreciation (new method) ± Adjustment
Add a deficiency to current depreciation. Deduct a surplus from it. Show both items clearly.
Rule of AS 6
Recompute from the date the asset was first used; adjust the difference in the year of change
The change is allowed only if required by law, by an accounting standard, or for more appropriate presentation.

How to solve Change in Method of Depreciation questions

Use this order for any question on change of depreciation method. Keep the past years and the current year in separate blocks.

  1. 1Note the cost, date of purchase, old method and rate, new method and rate, and the year of change. Check the residual value.
  2. 2Find the number of full past years before the year of change. The current year is not part of the past years.
  3. 3Work out depreciation actually charged for the past years under the old method. For WDV, do it year by year on the reducing balance.
  4. 4Work out depreciation for the same past years under the new method, as if it had been used from the start.
  5. 5Subtract to find the difference. Label it clearly as surplus (old charged more) or deficiency (old charged less).
  6. 6Pass the adjustment entry. A surplus is credited to P&L and a deficiency is debited to P&L.
  7. 7Charge the current year's depreciation under the new method on the correct base. SLM uses original cost. WDV uses the recomputed opening book value.
  8. 8Show the asset's closing book value and check it: opening book value ± adjustment − current depreciation.

Quickest way: Two-total shortcut with a book value check

When to use it: Use it in any 5 to 8 mark question where you must show the adjustment and the current year charge.

  1. Write two columns: Old method and New method. Put the same past years in both.
  2. Total each column. Subtract once to get the surplus or deficiency.
  3. Write the entry straight away, with the amount, and the narration naming AS 6.
  4. Compute current depreciation under the new method.
  5. Check: Old book value ± adjustment − current depreciation must equal your closing book value. If it does not, find the error before moving on.
  6. Write the final P&L effect in one line so the examiner sees the final figure.

Common mistakes in Change in Method of Depreciation

  • Applying the new method only from the current year.

    Students treat it like a change in estimate, which is prospective.

    Fix: Remember that a change in method is retrospective under AS 6. Always recompute from the date the asset was first used.

  • Including the current year in the past years' comparison.

    The year of change feels like part of the history.

    Fix: Compare only the years before the change. Charge the current year separately under the new method.

  • Reversing surplus and deficiency.

    Students are unsure which total to subtract from which.

    Fix: Always do old charged − new method. If the answer is positive, too much was charged earlier, so it is a surplus and a credit to P&L.

  • Using original cost for WDV depreciation in the current year.

    The rate is applied to the wrong base after switching from SLM.

    Fix: For WDV, recompute the book value year by year first. Apply the rate to the opening book value of the current year.

  • Adjusting the difference against opening reserves or profit.

    Students confuse it with a prior period correction.

    Fix: As per AS 6, the difference goes through the Profit and Loss Account of the year of change, with disclosure.

  • Counting wrong number of years when the asset was bought mid-year.

    Time apportionment is ignored.

    Fix: Check the purchase date and the year end. If the asset was used for part of the first year, charge depreciation pro rata in the first year under both methods.

Worked examples

Example 1

A machine was bought on 1 April 2021 for ₹5,00,000. Depreciation was charged at 20% p.a. on WDV till 31 March 2024. From 2024-25 the company changes to SLM at 10% p.a. on original cost, with no residual value. The books close on 31 March. Calculate the adjustment, pass the entry and find the closing book value on 31 March 2025.

Show the solution
  1. Past years are 2021-22, 2022-23 and 2023-24, which is three years.
  2. Depreciation under WDV: Year 1 = 20% of ₹5,00,000 = ₹1,00,000. Book value ₹4,00,000.
  3. Year 2 = 20% of ₹4,00,000 = ₹80,000. Book value ₹3,20,000.
  4. Year 3 = 20% of ₹3,20,000 = ₹64,000. Book value ₹2,56,000.
  5. Total charged under WDV = ₹1,00,000 + ₹80,000 + ₹64,000 = ₹2,44,000.
  6. Depreciation under SLM for 3 years = 10% of ₹5,00,000 × 3 = ₹50,000 × 3 = ₹1,50,000.
  7. Difference = ₹2,44,000 − ₹1,50,000 = ₹94,000. Too much was charged, so it is a surplus.
  8. Entry, if depreciation was credited directly to the asset: Machinery A/c Dr ₹94,000 to Profit and Loss A/c ₹94,000. If a Provision for Depreciation A/c is kept, debit Provision for Depreciation A/c ₹94,000 instead of Machinery A/c (being excess depreciation written back on change from WDV to SLM as per AS 6).
  9. Current year depreciation under SLM = ₹50,000, charged to P&L.
  10. Book value before adjustment = ₹2,56,000. In the direct method the surplus is debited to Machinery, so book value rises: ₹2,56,000 + ₹94,000 = ₹3,50,000. Closing book value = ₹3,50,000 − ₹50,000 = ₹3,00,000. Check: ₹5,00,000 − 4 × ₹50,000 = ₹3,00,000.

Answer: Surplus of ₹94,000 is credited to P&L in 2024-25. Depreciation for 2024-25 is ₹50,000. Closing book value of the machine on 31 March 2025 is ₹3,00,000.

Example 2

A machine costing ₹2,00,000 was bought on 1 April 2022 and depreciated at 10% p.a. SLM on original cost for two years. From 1 April 2024 the company changes to WDV at 15% p.a. There is no residual value. Books close on 31 March. Find the adjustment, the total charge to P&L for 2024-25 and the closing book value.

Show the solution
  1. Past years are 2022-23 and 2023-24, which is two years.
  2. Depreciation actually charged under SLM = 10% of ₹2,00,000 = ₹20,000 per year. For two years = ₹40,000.
  3. Depreciation under WDV: Year 1 = 15% of ₹2,00,000 = ₹30,000. Book value ₹1,70,000.
  4. Year 2 = 15% of ₹1,70,000 = ₹25,500. Book value ₹1,44,500.
  5. Total under WDV = ₹30,000 + ₹25,500 = ₹55,500.
  6. Difference = ₹55,500 − ₹40,000 = ₹15,500. Too little was charged, so it is a deficiency.
  7. Entry: Profit and Loss A/c Dr ₹15,500 to Machinery A/c (or Provision for Depreciation A/c) ₹15,500 (being additional depreciation on change from SLM to WDV as per AS 6).
  8. Book value before adjustment = ₹2,00,000 − ₹40,000 = ₹1,60,000. After the deficiency = ₹1,60,000 − ₹15,500 = ₹1,44,500. This matches the WDV book value.
  9. Current year depreciation = 15% of ₹1,44,500 = ₹21,675.
  10. Total charge to P&L for 2024-25 = ₹15,500 + ₹21,675 = ₹37,175.
  11. Closing book value = ₹1,44,500 − ₹21,675 = ₹1,22,825.

Answer: Deficiency of ₹15,500 is debited to P&L. Current year depreciation is ₹21,675, so the total P&L charge for 2024-25 is ₹37,175. Closing book value on 31 March 2025 is ₹1,22,825.

Exam tips

  • Always write the words surplus or deficiency, and state the direction of the P&L entry. Examiners give separate marks for this.
  • Show the year-by-year WDV table. Even if the final answer is wrong, you earn marks for the working.
  • Read the question for the exact year of change. Count the past years from the purchase date up to the year before the change.
  • State the AS 6 rule in one line: change is retrospective and the difference is adjusted in the year of change. This earns presentation marks.
  • Use the book value check at the end. It catches most arithmetic and direction errors in under a minute.

Practice questions from Depreciation and Amortisation

Change in Method of Depreciation: frequently asked questions

When can a company change its depreciation method under AS 6?

Only when the law requires it, when an accounting standard requires it, or when the change gives a more appropriate presentation of the financial statements. A change just to improve profit is not acceptable.

Is a change in depreciation method retrospective or prospective?

Under AS 6 the new method is applied as if it had been used from the date the asset was first used. So depreciation is recomputed retrospectively. The difference is adjusted in the year of change, and past accounts are not reopened.

Where is the surplus or deficiency shown?

It goes through the Profit and Loss Account of the year in which the method is changed. A surplus is a credit and a deficiency is a debit. The effect of the change must also be disclosed.

How do I calculate depreciation for the current year after the change?

Apply the new method in the normal way. For SLM, use the original cost and the given rate or life. For WDV, apply the rate to the opening book value of the current year, which is the recomputed book value.