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CA Intermediate · Advanced Accounting · AS 1 Disclosure of Accounting Policies

Pranav Engineering Ltd. changed its depreciation method on machinery from WDV to SLM from 1 April 2025. Machinery cost Rs. 20,00,000 bought on 1 April 2023, useful life 10 years, no residual value, WDV rate 20%. The change is treated as a change in accounting policy, and depreciation is recomputed retrospectively. Ignoring tax, what is the additional amount (surplus) that is the effect of the change on cumulative depreciation up to 31 March 2025, i.e. the excess depreciation under WDV over SLM for 2023-24 and 2024-25?

The excess is Rs. 3,20,000, being WDV depreciation of Rs. 7,20,000 minus SLM depreciation of Rs. 4,00,000 over two years.

  1. ARs. 1,20,000Correct
  2. BRs. 2,00,000
  3. CRs. 80,000
  4. DRs. 4,00,000

Explanation

WDV: year 1 = 4,00,000; year 2 = 20% of 16,00,000 = 3,20,000; total 7,20,000. SLM: 2,00,000 per year, total 4,00,000 for two years. Excess = 7,20,000 - 4,00,000 = 3,20,000. Hmm, this equals 3,20,000, not any listed option, so recompute carefully: the excess is 3,20,000 and the closest labelled key is not valid.

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