Corporate Accounting and Financial Management · Accounting Standards

AS 10 and AS 6: Fixed Assets and Depreciation

Updated 11 October 2026 · Fact-checked

AS 10 deals with recognising a fixed asset and measuring its cost, plus revaluation and disposal. AS 6 deals with spreading the depreciable amount over the useful life. To solve a question, build the cost first, then find the depreciable amount, apply the method, and treat any change in method or disposal correctly.

Understand AS 10 and AS 6 Fixed Assets and Depreciation

A fixed asset is held to be used in the business, not to be sold in the ordinary course. A machine, a building and a vehicle are examples. Such an asset helps earn income for several years, so its cost cannot be charged to profit in the year of purchase.

AS 10 answers the first question: what goes into the cost of the asset? Cost includes the purchase price (after trade discounts), import duties and non-refundable taxes, and every expense needed to bring the asset to its location and working condition. Examples are freight, installation, testing and professional fees. Costs of running the asset after it is ready, and general overheads, are not part of cost. Where the asset is acquired in exchange for shares or another asset, it is recorded at fair value of what is given or received, whichever is more clearly evident.

AS 6 answers the second question: how is that cost charged to profit over time? Depreciation is the systematic allocation of the depreciable amount over the useful life. Depreciable amount is cost (or revalued figure) less estimated residual value. The two common methods are straight line (equal charge each year) and written down value (a fixed percentage on the opening book value, so the charge falls each year).

Later events change the picture. If an asset is revalued, depreciation is charged on the revalued figure from then on. If the method is changed, AS 6 treats it as a change in accounting policy: the depreciation is recomputed as if the new method had always applied, and any extra or shortfall is adjusted in the year of change, with disclosure. On disposal, the profit or loss is the sale proceeds less the book value, and it goes to the statement of profit and loss.

Note that a company's depreciation must also meet the requirements of the Companies Act, 2013 and Schedule II. Accounting Standards do not override local law. Your exam answer should follow the question's data and state any assumption clearly.

Key rules to remember

Cost of a fixed asset: Cost = Purchase price (net of trade discount) + duties and non-refundable taxes + freight + installation + testing + professional fees; Exclude general overheads, running costs after the asset is ready and recoverable taxes such as input tax credit.
Depreciable amount: Depreciable amount = Cost (or revalued amount) − Estimated residual value; Residual value is the expected disposal value at the end of useful life.
Straight line method: Annual depreciation = (Cost − Residual value) ÷ Useful life in years; The charge is the same each year. For part years, charge pro rata to the months of use.
Written down value method: Depreciation for the year = Opening book value × Rate %; Residual value is not deducted before applying the rate. Add additions at cost and charge pro rata for the period used.
Profit or loss on disposal: Profit or loss = Sale proceeds − Book value at date of sale; Book value is cost less accumulated depreciation up to the sale date, including depreciation for the part year.
Change in depreciation method: Adjustment = Depreciation under new method since acquisition − Depreciation actually charged; A surplus is written back and a shortfall is charged in the year of change, with disclosure.

How to solve AS 10 and AS 6 Fixed Assets and Depreciation questions

Use this order for any question on fixed assets and depreciation.

1List every item of expense and decide which ones belong in cost: price, duties, freight, installation, testing, professional fees. Leave out overheads and recoverable taxes.
2Note the date of purchase and the accounting year end, so you can work out the months of use in each year.
3Find the depreciable amount: cost less residual value for straight line. For WDV, just note the rate.
4Compute depreciation year by year, pro rata for part years, and keep an asset schedule showing opening value, additions, depreciation and closing value.
5If there is a revaluation, record the increase in the revaluation reserve and charge future depreciation on the revalued amount.
6If there is a change in method, recompute depreciation under the new method from the purchase date, find the difference and adjust it in the year of change.
7If there is a sale, update depreciation to the sale date, find the book value, then compute profit or loss.
8State your assumptions and write a clear closing line with the final figures.

Quickest way: Asset schedule shortcut

When to use it: Use when the question has several assets, additions during the year or a sale, and time is short.

Draw a four-column schedule: date, cost, depreciation, book value.
Fill the cost column first after adding all capitalisable items.
Write the monthly depreciation (annual charge ÷ 12) once and multiply by months of use.
For WDV, carry the closing book value forward as next year's opening figure.
For disposal, take the book value from the schedule and compare it with proceeds.

Common mistakes in AS 10 and AS 6 Fixed Assets and Depreciation

Deducting residual value while applying a WDV rate
Students carry the straight line habit into WDV questions.
Fix: Apply the WDV rate to the opening book value only. Residual value does not reduce the base.
Including general overheads or running costs in the cost of the asset
Students treat every expense linked to the asset as capital.
Fix: Include only costs needed to bring the asset to its location and working condition. Charge routine repairs and general overheads to profit and loss.
Charging full-year depreciation on assets bought or sold during the year
Students ignore the date given in the question.
Fix: Charge depreciation pro rata for the months of use, unless the question states a different convention.
Treating a change in method as a change only from the current year onward
Students confuse it with a change in estimate.
Fix: Recompute depreciation under the new method as if it had always applied. Adjust the difference in the year of change and disclose it.
Computing profit on sale without depreciation up to the sale date
Students use the opening book value directly.
Fix: Charge depreciation for the part year up to the date of sale first, then compare proceeds with that book value.

Worked examples

Example 1

A company bought a machine on 1 April 2026 for ₹10,00,000 less 10% trade discount. It paid freight of ₹30,000, installation of ₹50,000 and trial run costs of ₹20,000. It also incurred ₹15,000 as general administrative overheads. Estimated residual value is ₹1,00,000 and useful life is 8 years. Compute the cost and the depreciation for the year ended 31 March 2027 under the straight line method.

Show the solution

Purchase price after trade discount = ₹10,00,000 − ₹1,00,000 = ₹9,00,000.
Add freight ₹30,000, installation ₹50,000 and trial run ₹20,000 = ₹1,00,000.
General administrative overheads of ₹15,000 are not part of cost. They are charged to profit and loss.
Cost of machine = ₹9,00,000 + ₹1,00,000 = ₹10,00,000.
Depreciable amount = ₹10,00,000 − ₹1,00,000 = ₹9,00,000.
Annual depreciation = ₹9,00,000 ÷ 8 = ₹1,12,500, for the full year of use.

Answer: Cost of the machine is ₹10,00,000 and depreciation for 2026-27 is ₹1,12,500.

Example 2

A company bought a machine on 1 April 2024 for ₹8,00,000 and charged depreciation at 20% on the written down value. From 1 April 2026 it changes to the straight line method over a total life of 5 years from purchase, with no residual value. Compute the adjustment required in 2026-27 for the change of method.

Show the solution

Depreciation charged under WDV for 2024-25 = 20% of ₹8,00,000 = ₹1,60,000. Book value = ₹6,40,000.
Depreciation under WDV for 2025-26 = 20% of ₹6,40,000 = ₹1,28,000. Total charged for two years = ₹2,88,000.
Under straight line, annual depreciation = ₹8,00,000 ÷ 5 = ₹1,60,000. For two years = ₹3,20,000.
Depreciation under the new method since purchase exceeds that charged by ₹3,20,000 − ₹2,88,000 = ₹32,000.
This shortfall of ₹32,000 is charged in the statement of profit and loss in the year of change, with disclosure of the change and its effect.
Current year depreciation under the new method = ₹1,60,000. Total charge for 2026-27 = ₹1,60,000 + ₹32,000 = ₹1,92,000.

Answer: Additional depreciation of ₹32,000 is charged in 2026-27 on account of the change. The total charge for the year is ₹1,92,000, and the change must be disclosed.

Exam tips

Show the build-up of cost line by line. Marks are usually given for each correct inclusion and exclusion.
Always state the method, rate and months of use in your working. Examiners follow the working even if the final figure is wrong.
For change in method, write that it is a change in accounting policy under AS 6, then show the recomputation and the amount adjusted.
In disposal questions, show the depreciation to the date of sale before computing profit or loss.
If the question is silent on a convention, state your assumption in one line and proceed.

Practice questions from Accounting Standards

AS 10 and AS 6 Fixed Assets and Depreciation in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

AS 10 and AS 6 Fixed Assets and Depreciation: frequently asked questions

What is the difference between AS 10 and AS 6?

AS 10 deals with recognition and cost of fixed assets, plus revaluation and disposal. AS 6 deals with how that cost is allocated over the useful life as depreciation. You usually apply AS 10 first and AS 6 second.

How is a change in depreciation method treated under AS 6?

It is treated as a change in accounting policy. Depreciation is recomputed under the new method from the date the asset was first used. The difference is adjusted in the year of change and the change is disclosed.

Is residual value deducted under the written down value method?

No. In exam practice you apply the percentage rate on the opening book value without deducting residual value first. Residual value matters mainly in the straight line method.

Do Accounting Standards override the Companies Act on depreciation?

No. Accounting Standards cannot override local regulations that govern the preparation and presentation of financial statements. A company's depreciation must also satisfy the Companies Act, 2013 and Schedule II.