Schedule II – Complete Details and Notes with Examples. Hi Friends Here we are providing Complete Notes for Schedule II with Examples. Schedule II is very important for CA Final CA IPCC Nov 2015 Exams. These notes are compiled as per companies act 2013. we already provided Applicability of Schedule-II as per Companies Act 2013. and Depreciation Calculation chart and notes as per companies Act 2013. Now you can scroll down below and check complete details regarding Schedule II – Complete Details and Notes with Examples.
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Schedule II – Complete Details and Notes with Examples
On 29th of August, Ministry of Corporate Affairs had published a notification in the official Gazette to amend Schedule II of the said act with effect from the date of this notification (G.S.R. 627 (E) ). The details of the same and it’s implication has been mentioned hereunder
- With the introduction of Companies Act, 2013 method for calculating depreciation has changed.
- Schedule XIV has been replaced with Schedule II.
- As per Schedule II , useful lives will be mentioned for all the assent in Part C of the act.
- For a class of companies, specifically prescribed by MCA, can adopt useful life longer than prescribed in schedule II, but the same should be disclosed in Notes To Accounts with justification. For other companies, life cannot be longer than that prescribed in Schedule II.
- As per this schedule, the residual value of should not exceed 5% of the original cost of the asset.
- In case of Double shift – Additional Depreciation 50% ( If depreciation is 2000 for single shift it will be 4000 for double shift ) and triple shift – Additional depreciation 100%
- Previously the asset whose cost was Rs.5000/- or less was made 100% depreciation , but now it shall be depreciated as per the provisions specified in Schedule II ( i.e as per is useful life )
What happened before :
Say my Asset is Rs. 20000 , depreciation rate is 10% . Now if Asset is revalued to Rs.30000/- we do the following :
|Asset a/c Dr. 10000|
To Revaluation Reserve 10000
The total amount of depreciation = 30000 * 10 % i.e 3000
|Revaluation Reserve Dr. 1000|
P/L Dr. 2000
To Asset 3000
What will happen now
Depreciation will be 10 %
|Dep A/c Dr. 3000|
To Asset 3000
|P/L a/c Dr.3000|
To Dep 3000
Balance in Revaluation Reserve = 10000
- Useful lives are specified in Part C , if useful life / Residual value not in accordance with Part C then necessary disclosures of such difference with justification by technical advice is required.
Remaining Useful life as on 1/4/2014 as per Co’s Act
|Exits||Does not exit|
|The carrying amount as on 1/4/2014 depreciated over the remaining useful life of the asset as per Schedule. II.||Net Carrying amount after retaining Residual value, will be charged to opn Revenue Reserve.|
Let’s take up some examples
Formula for depreciation – S.L.M = (Cost – Scrap) / useful life
Formula for depreciation – W.D.V = 1 – (s/c)1/n ( ‘s’ stands for scrap, ‘c’ stands for original cost and its (1 – s/c)1/n , n stands for useful life )
- Eg. (1) – Original Cost of Plant and Machinery – 100000
useful life as per old provision – 20 yrs
useful life as per new provision – 15yrs
depreciation as per old prov (wdv) – 13.91%
depreciation rate as per new prov – 18.10 %
Expired Life – 5 yrs
Accumulated Dep for expired life – 52711
(Q) What shall be the carrying amount?
(A) 100000 – 52711 = 47289
(Q) What shall be the remaining useful life of the P.M?
(A) 10 yrs (life as per new prov – expired life)
(Q) What should be the rate of Dep ?
(A) 1 – ( Scrap value/Original cost)1/useful life i.e 1- (5000/100000)1/10 = 25.89%
- Eg (2) Original cost of P.M – 100000
useful life (old prov) – 20 yrs
dep old prov. – 13.91 %
useful life (new prov ) – 15 yrs
dep new prov. – 18.10 %
expired life – 16 yrs
accumulated dep – 90896
carrying amount – 9104
Since there is no useful life as per schedule II i.e. the remaining useful life is NIL. the carrying amount (i.e. 9104) as reduced by the Scrap Value (i.e. 5% of 100000 ) should be charged to opening retained earnings
Entry as on 1/4/2014
Opening retained Earnings A/c Dr. 4104
To Asset A/c 4104
- Eg (3)
|Year of acq||Original Cost||No. of yrs used as on 31/3/2014||Dep charged as on 31/3/2014 as per Sch XIV||Srap value(5% of orginal cost)||Useful life as per sch II||Remaing useful life||Amount to be charged to Opn Rev. reserve||Dep (14-15)|
|02-03||100000||11||6963So net ca = 3037||500||10||0||2537||–|
|04-05||100000||10||6330So net ca = 3670||500||10||0||3170||–|
|05-06||100000||8||5064net ca 4936||500||10||2||–||2218|
This requirement of calculating dep as per Sch II was voluntary wrt F.Y. commencing from 1/4/2014 but mandatory for F.Y 1/4/2015 onwards.
Source – Article is Written by Mr Anirudh Sonpal