Thank you. Hi guys, Yes sir Yes sir Ok guys, so you have done the inventory chapter and the exam questions Sir, I wanted to see the last lecture Okay, now we'll start with the next chapter. Do you have any doubt about the exam kit questions that the students have done? No, sir.
Okay. Hello guys, today we are going to start chapter number 8, that is tangible non-current assets. Now this chapter is very important for you guys, in terms of your F3, and when you go to F7, this chapter is also important for you.
In F7, in many places, this thing is said same to same. It is expected that you have read this thing in F3. So there it is done its advanced version.
Okay. So it is not that you don't think that this chapter is a little bit lightly read or anything. This chapter is very important.
In F7, there are two chapters of ours. In fact, there are three chapters which are its advanced version. So to do that, you should know this chapter very well.
This is tangible non-current assets. Now, in this chapter, basically, we have to study. Look, non-current asset, first of all, what are non-current assets?
So, anyone tell me, what are non-current assets? Sir, assets which cannot be converted into cash within 12 months of the business cycle. Assets which cannot be converted into cash in 12 months. Kind of, we can say that.
But the... The appropriate answer is the assets which company do not want to sell and company want to use the assets. The assets which company purchase to use and not to resell, those are non-current assets. The assets which company purchase to resell, that is called inventory which we have studied in the previous chapter. So all the assets which company purchase, which company will use and its life is...
More than 12 months, these are non-current assets. Current assets means the life of which is within 12 months. In 12 months, it is convertible into cash. And tangible means those assets which we can touch. Which we can touch, which we can feel.
That is tangible asset like building, plant and machinery. Vehicles. These are tangible assets. Apart from this, as I give you an example.
One is our computer. One is computer software. So in computer, your computer hardware. And one is computer software.
So tell me which one is tangible and which one is intangible. Or non-tangible. Sir, computer hardware is tangible and computer software is intangible.
Right. Everyone agree with this? Computer hardware is tangible because we can touch it, we can feel it.
And computer software is intangible. Okay? Yes, sir.
Guys, just give me one small second. Yes, Ratnesh. Yes, good afternoon, Ratnesh. I was calling you, I am not in the office, I am at home, there is no light in the office.
You go home today. Is there light there? There is no light, okay, go home.
Okay. Actually guys, there was no light in the center today, so I was taking a class from home, so a little, it can be that my voice is a little different. Come on, anyways.
So this is our tangible and non-tangible aspect. Now in this chapter, the first thing we will read is that what is the cost of a tangible non-current asset? How do we find the costing of it?
Now the cost is simple. What we purchased, when we purchased the asset, the price we paid for it, that is cost. But here, there is something else in cost.
Like we read in the inventory, although the inventory is completely different. Like material, labor, overheads we saw. We have to purchase and use the goods. It is not like we have to convert it with raw material.
So, here we will see that purchase cost comes with more cost. After that, here we have a term called depreciation. So, what is depreciation? All our tangible non-current assets have a life.
For example, if you purchase a mobile at today's rate, let's say you purchased an Apple phone for 1 lakh. So what will happen when you purchase a phone, now if I ask you, just an example, you purchased a phone worth 1 lakh Apple, after one year, after one year, if you go to sell this phone, let's say, So how much will the sale be approximately? Tell me by guessing.
Sir, 40,000. 40,000? No, it won't be that much.
Sir, I had sold it, so the same 40,000 rate had come. 40,000 for 1 lakh? Even if you exchange it in Apple Store, you would get 60,000. Sir, it was 40,000.
Apple 14 Pro. Really? Yes.
Okay, if you have done it practically, then 40,000. So this one year's asset value of 60,000, what is this? This is called depreciation.
So why does the value of the phone fall? It's not because our phone is one year old. It's because the phone has been used for one year.
So using means, we call it wear and tear. That whatever our assets are, they are wear and tear. We use them, they get a little damaged. This is why the asset value falls. So that depreciation every year, if we have purchased an asset of 1 lakh and after 1 year I know that it has incurred a loss of 20,000.
I have used it from 20,000. So this will be my depreciation. This will be depreciation. Now I will tell you a story about depreciation.
Where did the term depreciation come from? It is very interesting to listen to the story of depreciation. You will understand very well what depreciation is.
Those who don't even know the story of depreciation, they will know. And this story, you have to remember it as a story. Not as such that practically something like this happened.
But you have to remember it as a story. Practically, there were such things till a long time. Look, there is one businessman. Let me just open a blank page. Look, there is one businessman.
There is one businessman. Okay. Is he a businessman or a businesswoman?
And one is our income tax department. ITD is income tax department. Yes, tell me. Tell me, Sivam.
Hello. Screen is not showing. Screen is not showing. Sir, your screen is not visible.
Sir, your screen is not visible, sir. Guys, no one has my screen visible. No, sir.
I am visible. I can see your screen, sir. flow. Check it out.
Okay, sir. So, one is a businessman, businesswoman, and one is income tax department. Now, what happened? The businessman, let's say, purchased the goods.
Purchased the goods. 10 lakhs. 10 lakhs. He purchased the goods. 6 lakhs.
And he, let's say, 16 lakhs. And he, So, he got a profit of 6 lakhs. 6 lakhs of his profits came.
No problem. It's a good thing that profits came. What happened after profits came? He did some expenses of his business. Let's say, he did some expenses of his business of 2 lakhs.
So, if we see, the net money that he saved, he saved 4 lakhs. The net money that he saved, he saved 4 lakhs. Now, one thing, you all will have a hint or idea that Every person has to pay income tax on their income.
We have to pay tax on the amount we earn. So, after spending all the money he has earned, he had to pay tax on it. Let's say the rate of tax is 30%.
You have to pay tax on the amount you earn. So, 4,30,000 is 120. That means he has to pay tax on 120. So that person put a little mind, this is the story of when there was no such thing as depreciation. When there was no such thing as depreciation. What did he do?
He put his mind, he purchased a machine worth 4 lakhs. He purchased a machine worth 4 lakhs. Now when he purchased a machine worth 4 lakhs, what did he tell the income tax people?
He said that my profit was 4 lakhs before. I purchased a machine worth 4 lakhs, so I have nothing left. Practically, if you look at it, 4 lakhs were its profit.
If I purchased a machine worth 4 lakhs, then it has nothing left. So it said, when I have nothing left, how will I pay tax? When I have nothing left in business, how will I get money from my pocket? I don't have money. In fact, I can't take money home because I don't have money left in business.
So I can't pay tax. This is what I was talking about when there was no income tax concept. So at this time, the income tax department said, okay, no problem, the person is saying the right thing.
The profit he had, he purchased a machine of 4 lakhs in it, so he didn't have money in his pocket. Now we will ask him for tax, he will give tax, from where he can't give, he will take loan and give tax. So he said this thing, okay, no problem, it's okay, let's not take tax. This thing was looking at the income tax, he saw this thing. While looking at that, he saw that this person is doing this every time.
All the profits that used to come, all the money that used to be saved, with that money, sometimes machines, sometimes buildings, sometimes cars, sometimes mobile. Chahe business ke naam ke liye leta tha, but usne lena shuru kar diya. Jab is bandhe ne business shuru kiya tha, is person ne business shuru kiya tha, tab iske baas ek factory thi. Dheere dheere karte karte, iski 25-30 factories ho ghi, iske paas 50-60 cars hai business ke naam ki, iske paas itne saari employees hai, itna bada iska business ho gaya.
Aur income tax wale kya rahe hai, itne time se hume isne ek paisa ni diya, tax hi ni diya. To ye to garbad hai. Aise to pata nahi banda...
He will become the richest person in the world, but he will not pay tax. He will take a car from the money he will save. And how do we know if the car is being used at home or in the office? He didn't tell him. So by doing this, he started doing this work.
And the income tax department people were happy and sad. Now he said, we have to do something. The income tax department said, we are disallowing this thing.
We are disallowing this thing. Meaning, if you purchase any asset, When you purchase that asset, you cannot show your expense. When I read your chapter on non-current asset, when I read the first chapter, I told you that the difference between asset and expense is that we do not show our expense to our assets. And expenses are like salary, rent, etc.
So I... income tax authority said that you cannot show it as expense. Okay, this will happen.
Now what happened in this situation? He had to pay 1,20,000. Now all the businessmen in the whole area reached in the income tax department.
What are you doing? From where should we pay tax? So there was a meeting of both.
Both, all the businessmen, this is the table, these are all businessmen and here is the income tax department office. They had a meeting. What to do So that you don't get hurt We 4 lakh ki machine purchase ki thi. Bahauchi baad.
Ye jo 4 lakh ki apne machine purchase ki hai na, hum is 4 lakh ke 4 lakh ko aapka expense allow nahi kare. Ye machine aapne bolay hai ki ye machine 5 saal tak chal sakte hai. 5 years tak ye machine chal sakte hai. That means, har saal ye machine 80,000 ka benefit degi aapko. Agar main 40,000, 4 lakh ko divide by 5 karta ho.
4 lakh divide by 5, that means 80,000. So 4 lakh divided by 5 is 80,000. So this is the loss of your machine every year. 5 years your machine will run.
So in one year your 80,000 is losing. Now claim the expense of 80,000. And this 80,000 you can claim for the next 5 years.
Means on this asset you can claim your expense for the next 5 years. So, what did the income tax people get from this? They said that 4 lakhs is 80,000. That means 320. So, at 320, that person had to pay tax.
Whatever comes, 30%. This will come to our 96. So, 96,000 income tax had to be paid. And the individual, i.e. the businessman, he is saying that I don't have any problem. I am getting benefits for the next 5 years. So, ultimately, let's see.
Every year, I can claim my expense of 80,000. So, every year, my... Approximate is 80,000 into 30%. I am saving tax of 24,000 every year.
I saved this year too. I will save next year too. So I am getting a full 4 lakh benefit.
But not in one year. Over the period of time. So this is how we came up with a solution.
That we too. That means even the businessman should get the full expense. But not in one year. And income tax people should get income tax. That's why our concept was Asset and Depreciation.
When we purchase an asset, we get a cost of 4 lakhs. And every year, the value of the asset that is less, we show it as expense. And this term is called...
depreciation. And in this chapter, we have to do accounting of this only. What is the cost of asset?
What is the journal entry of depreciation? What are the formats? We have to read all that in this chapter.
So, did you understand an actual concept of depreciation? As we are taught that depreciation is wear and tear of asset. All of this is the same.
This is the real reason. Did you understand the story? No one is answering.
Yes, sir. Yes, sir. Yes, sir.
Yes, sir. Whenever I read something, I always try to make some stories where it is needed. So that you have conceptual clarity.
If you are sitting somewhere tomorrow, you ask him about deposition, you will tell him this, they will say that it is true, nobody has ever thought about it. You tell them that depreciation is made by accounts, now it is made. When there was no depreciation, then what used to happen?
Then what used to happen? Then income tax people used to benefit from individual. And the main reason for making depreciation is this.
Although I am telling you this is just a story. But this is a very good story to explain the concept of depreciation. So this is our chapter, non-tangible asset and depreciation. Tangible non-current asset, sorry. So slowly let's start the chapter.
We will read one by one, whatever comes. So, first of all, let's see its definition. What is non-current asset? Non-current assets are assets which are intended to be used by the business on a continuing basis, including both tangible and intangible assets.
Intangible assets, we have to study in the next chapters. We will study that later. Intangible assets, as I have told you, are computer software, licenses.
These are intangible assets. So, non-current assets means those assets which we... use for purchase and they will sell on a continuous basis. Not like they will sell it after 6 months.
On a continuous basis, long term. And what are current assets? An asset should be classified as current when it is expected to realize, sell, or consume within normal operating cycle for 12 months.
Either we will study this in the normal operating cycle or later. I think we have studied the operating cycle a little bit. No, sir.
No, sir. So operating cycle, I told you, what is operating cycle? Look, this is us.
We are business people. We got an order from somewhere that we have to provide one lakh shirts to him. And the price of one shirt that he told us, that is one thousand. So let's not say one thousand, let's say hundred. That means we got an order of one crore.
This is our customer. Customer gave us an order of 1 crore. Customer will never give us all the money. He will give a little advance. That I am giving you 5 lakh advance.
You start making. Later when I get delivery, I will give you all the rest of the money. Let's not give 5 lakh, let's make it 20 lakh.
Customer gave me 20 lakh. That I should start working. When completion will happen, I will send it. He will give me balance 80,000.
So I have 20,000 and 80,000 are outstanding. Now I went to my supplier. From where I will purchase raw material. I cannot make everything myself. There is cloth in raw material.
Buttons are there. Stitches are there. Labor has to be paid.
There is a lot. Now where will I give the labor money? I will give it from here. But when I will purchase things from supplier.
When I will purchase things from supplier. Let's say I have. 80 lakh ka ya 70 lakh ka samaan purchase karna hai.
Toh mere paas itne baise nahi hongi ki main supplier ko saara paise de du ek baari mein. Toh main supplier se credit pe samaan purchase karunga. Normally business mein aisa hi hota hai. Main tumhe batai thi, journal entries karte hue, ke if nothing is mentioned, we will always assume sale and purchase are on credit.
Agar cash likha ho hai toh cash, otherwise sale or purchase hamesha credit pe hota hai. So on loan I purchased the goods, made the construction, manufactured the goods, made the goods, and then I sold the goods to the customer. So in 30 days I got the goods, it took 30 days to make the goods, and in 10 days I delivered the goods.
Within 30 days of delivering the goods, the customer gave me the money. As soon as I got the money, within 20 days I gave the money to the supplier. So this is the process of making the goods. The time that is called operating cycle.
A whole business cycle is made when I purchased the goods on credit. After that, when I paid it, that whole cycle is called operating cycle. So if I sell an asset in an operating cycle, then I know that is inventory.
And inventory is a current asset. So this is called operating cycle. It will come later. But let me tell you.
This is operating cycle. Does anyone have any doubt in operating cycle? No sir. Okay. Next is, it holds the asset primarily for the purpose of trading.
Assets are written for trading only, like inventories. It expects to realize the asset within 12 months after the reporting period. Now what is reporting period?
Reporting period is a small thing. You will know it when you read further. Reporting period means date of closing the book. The date on which we close the book.
If I talk about India or neighboring countries, mostly what we follow is 1st April to 31st March. It is called financial year. On 31st March, our book slows.
Whatever work is done throughout the year, we make proper books. We make financial statements of them. Profit and loss, balance sheet, we make all that on 31st March. So this is our reporting period. So 12 months after reporting period, If any asset inside will change, convert or sale, that will be a current asset.
And cash and cash equivalents. If I have cash, then that will also be my current asset. If cash is equivalent, cash equivalent means I have money in my bank.
I have taken shares which I trade in short term. So, all those will be my current assets. So, this is non-current asset and current asset. Once you read it properly, it is not very special, it is a simple theory. Now here comes some of our terms, now come some important terms.
So in non-current assets, now they have changed the name of non-current assets, property, plant and equipment. In short, you will hear it in many places, PPE. Property, plant and equipment.
Earlier non-current assets were called, but now... As per IAS 16, they have changed the name to PPE, Property, Plant and Equipment. So, Property, Plant and Equipment means our non-current assets, which we use in business, tangible non-current assets.
So, what are Property, Plant and Equipment? Property, Plant and Equipment are tangible items that are held for use in the production or supply of goods or services or rental for others or for administrative purposes. And are expected to be used for more than one period. That means 12 months.
Whatever property, plant and equipment we have. For what? To make goods. Or to rent that asset. Because my work can also be.
I purchase properties. I purchase properties and rent them. I purchase cars and rent them. That can also be my business. And administrative purpose means.
To use in my office. Like I have in one factory. production kari, ek factory ko main apna office bana de, jahaan pe mere employees bettege, sales department hoga yahaan production nahi ho rhiye, production nahi ho rhiye but yeh mera hi office hai, in sab ko hum bolte property, plant and equipment next up humari aatiye cost cost kya hotiye, cost is the amount of cash and cash equivalent paid or fair value of other consideration given to acquire the asset at the time of acquisition or construction, ke ya to humne jitna usko cash diye Let's say I had purchased a property from him. I had purchased a property. Against that, I gave him 20 lakhs or 2 million cash.
I gave him 2 million cash. And I gave him my property in exchange. And my property's value was 3 million.
I had a property whose value was 3 million. I wanted a big property. So I named my property after him.
2 million he gave him cash and he took the property so what was the value of this property what was the cost how much amount I paid plus I paid something else its fair value that means market value that means total asset I got was 5 lakh so cost will be 5 lakh why I am focusing on these small things because recently there are a lot of F3 students who have given exams and passed with good numbers they all told me one thing that now F3 The concept paper is very conceptual. The typical paper doesn't come that you calculate small things. They ask such conceptual questions a lot.
They can also make a question of this, as I gave an example. That we paid cash to purchase a property. We gave it to our machinery, which had a fair value of this.
And gave this. So tell me what will be the cost of the asset? You might wonder, will the cost be the same as the cash? No.
Whatever we have given it, the cash is as it is. And if we have given something else, then its fair value will be the total cost of asset. Next term comes, our fair value.
What is a fair value? Fair value is the amount for which an asset could be exchanged between knowledgeable willing parties in arm length transaction. Fair value means, as I am talking about this property, which I have given to my property. If I had not given this property to him, then my property in the market would have been easily sold for 3 million.
So that means this is the fair value. And next comes our carrying amount. Carrying amount is... How do I show my asset in books? How do I show my asset in books?
For example, in first year, the cost of asset will be there. For example, I talked about Apple phone. Or the example I took, my asset was of 4 lakhs. The cost was of 4 lakhs. I am just telling you roughly.
You will understand in detail when you will read further. After that, the depreciation of the first year was 80,000. So, in the first year end, after one year, My CA, that means carrying amount will be 320. My asset's value will be 320. Next year, its value will fall from 80,000 again.
Then the value will come to 240. This is called the carrying amount. So carrying amount is the amount at which the asset is recognized after deducting any accumulated depreciation or impairment loss. Impairment loss is your...
It is not in F3. It is a chapter of F7. But here they have given a little reference. And what is accumulated depreciation?
You know the depreciation. What is accumulated? I will tell you that later.
Once you see this, if there is any doubt in anything, ask me. If there is no doubt, then we will move ahead. Sir, explain the fair value once.
Fair value means the value at which we can sell the asset in the market. For example, I asked about iPhone. So, our iPhone was purchased for 1 lakh. After one year, we have to see what is its fair value. So, what will we do?
We will ask around, ask in the market, go to Apple store. So, the value we will get from there, that will be called as fair value. So, fair value is the amount. For which an asset could be exchanged between knowledgeable and willing parties. Knowledgeable means those who know about iPhone.
Now the person who always uses Oppo's phone or Vivo's phone. Or these phones are also coming in good quality these days. Like a very old phone came of carbon. That phone is an IQO company which comes with 8-9000 phones.
They don't have knowledge about Apple. They have shown Apple's phone. Same feature is also in our phone. So how much value will it have? 8-10,000 only?
No. So knowledgeable person who knows iPhone, willing parties means those who want to exchange, I will ask him that what is the rate, he will tell me less. If I have to take it or give it to him in actual, then the genuine price will come. In the arm's length transaction, arm length means that at what price our transaction will happen, more details need to be known in arm's length. Arm length transaction means at what price we close our deal, that is fair value.
Okay guys? Yes sir. Let's move on. If there is any doubt, this is an example. Let's leave it.
This is not necessary for us. Now, our next is recognition. Recognition means we have read the definition of asset. Recognition means when and how much asset we will recognize in our books. Recognition simply means incorporating the asset in the business accounts.
In the books, we are recording the asset. The recognition of property, plant and equipment depends upon two criteria. There should be two things. First, it is probable that future economic benefits associated with asset will flow to the entity. What does this line mean?
I purchased an asset. Let's say I purchased a car. Listen carefully.
I purchased a car. I bought that car and kept it in business as it is. This car has no use for my business.
I bought it and made a mistake by purchasing a car. This car has no use for my business. That car is like this. I had a lot of money. Okay, I will take it and leave it.
I am not doing anything with this car. So is this car giving us any kind of benefit in business? No. Chahe humne business ke naam pe car purchase ki hai, but if koi future economic benefit, economic benefit ka matlab hota hai paisa, economic matlab simple paisa. Agar wo asset hume future me paisa kama ke nahi dega, to hum usko business me record nahi kare.
To hume lag raha hai, ki jo hum asset purchase kar rahe hai, wo future me hume paisa kama ke dega, pehli cheez. Aur dosra, uski cost jo hai, usko hum measure kar sakte hai. Means we know the cost of it, we can measure its cost. Only then we will recognize it in our books. Now if there is a person, we were going like that.
Just an example, we have a car. My drawing is a little like this. This is a car. It was standing on the roof, it looked like a very good car.
There was a person, he was a very rich man. He got out of this car, he was very frustrated. He put the key on the roof of the car and he left.
He left the car and went. Okay. I went to him.
I asked him. What happened? What is the problem?
He said. I have a lot of money. I don't want this house. You want it.
You keep it. No problem. I was very happy. I brought that car to my office. Now that guy.
Okay. He doesn't need it. He gave it to me. I brought my car to the office.
When I brought my car to the office. So. All my clients. They saw. What a good car.
My reputation will start to be made in the market. So. Because of this car.
Because of this car. Because of this car. Because of this car. I started to get more orders.
It's a very good car for a person. I mean, his work must be going very well. He must be delivering good things. It is said that the big businessmen, they used to keep heavy phones.
They keep good phones with them. They will never get a cheap phone. Okay.
Property dealers, they keep big cars with them. Because it is important to show. Because their work is like that.
Okay. So, when I kept this car in my business, I started getting benefits from it. So, this is that I am getting benefits from this car.
But can I measure the cost of this car? I haven't given a single penny for it. So the cost of this asset cannot be measured reliably. And this car was imported. No one was going to buy it.
If I sold it, no one would buy it. It was an imported car, very expensive. A car worth 6-7 crores. No one would buy this car.
Because there are no papers or anything. So it cannot be sold in the market. When it cannot be sold, there is no willing person. nor is it knowledgeable, then its fair value cannot be calculated.
That means, I cannot calculate its cost, so that's why I will not recognize it in books. If you want to recognize non-current asset in books, then two things should happen. In future, it will give us benefit and we can properly measure its cost. Clear guys, Aziz?
Yes, sir. Yes, sir. Now, let's move on to our next piece. Next thing is, what will be the cost of asset?
Then we will do the next part. Now comes the cost of asset. What will be the cost of asset? There is a simple term for it. What will be the cost of asset?
Listen carefully. Before starting asset. Start or use. Assets are added to the cost before using them. Baki ka kharcha Normal expense.
Asset to start using. Before that. The cost is added. And other than that. It is our normal expenditure.
See an example. You purchased a car. The cost of that car. The X showroom price.
That was 9 lakh. You got 1 lakh insurance. This was the cost of the car.
This was cost. This was his insurance. After that, you did his pollution. Pollution is of 100 rupees.
What to write about pollution? After that, there is road tax. You paid road tax of 30,000.
There were other taxes. You paid other taxes of 50,000. You got accessories in the car of 20,000. And after that, you did his first service. And you have to pay 50,000 for the first service.
It is free. This is the total cost of purchasing the asset. For its first service. So if I ask you.
In this. Understand the upper line and tell me. What will be the cost of the asset? Try it. What will be the cost of asset?
which i will record in books guys what is happening? sir 11,50,000 11,50,000 Yes, sir. 11,50,000.
Okay. Guys, just give me one small second. Hello? Yes?
Yes. I am calling from sector 10. SCO number 6. There is no light here since morning. No.
There are 3-4 showrooms. It's not like we have one showroom. No, no.
In the market outside. In front of his bus stand. Yes guys, sorry, actually he went out of the light, so we will talk about it now. 11,50,000 was the cost? Yes sir.
Yes sir. Any other answer? 9 lakhs, 10 lakhs, 10.30 lakhs?
10 lakhs. Okay, any other answer? 10 lakhs?
11.30 sir. 11.30? Yes.
11.30. Okay. I am happy. At least everyone is responding. And everyone is taking the initiative.
So mostly I have to answer. Sir, I have to correct my answer. Sir, subtract 50,000 from that.
Remove the first service. So I will take 11.9. Yes. Because the first service will come later, right? We will add all the first service and add the asset value.
Okay, I have one answer, one is this, one is this and one is this. Is there any other answer? So guys, our answer is 11 lakh.
Earlier I was expecting that no one gave the correct answer, but I have the answer. 11 lakh is the answer. Asset to start and use before the cost of the car I have to give to purchase Okay, you have to give cost Insurance without insurance Car can't get out of showroom Without road tax, I can't bring car on road Other taxes will also have to be paid When I start using the car Accessories will be used That means, the entire expense will be added to the cost of my asset. The first expense of service, this asset started to be used, I will go and service it after that.
So, that's why all this expense is added to the cost of my asset. Okay, and this will not be added to the cost of my asset. Guys, just give me one small second. Sorry, just give me one small second. Yes, guys.
Okay, so the example I gave you, according to that example, our asset, the 50,000 we gave for service, that asset is not before or after starting. That is our later expense. So this 50,000 would be a normal expenditure which is our...
profit and loss expense. And the 11 lakhs that I spent on assets, the expense before starting to use the assets, this will be added to the cost of my assets. So, how much will be spent on the cost?
11 lakhs and 50,000 will be spent on my profit and loss. This is called capital or asset expenditure. This is called capital and asset expenditure.
And this is called revenue and other expenditure. The expense that is not added to the cost of the asset, that expense is our normal expenditure. And the expense that is added to the cost of the asset, that is called asset expenditure.
Now, for example, I purchased an AC for the office. Centralized AC I purchased for office. So my cost of AC, that AC came to my office because centralized AC is very big.
So its transportation money, when it came to office, it was installed. So installation cost. So all this cost will be added to my asset.
This is how we find out the cost of asset. Yes, Shivam? Sir, in the car example, if some companies take the charge of the service first.
No, they take it first. They do it free of cost. Yes, free of cost. So, does it get included in that or does it have to be shown separately? No, that is free.
When the company is giving free of cost to something, then why is it a cost? Okay, sir. It is not that the company has... It is included in the cost.
It is free as it is. Okay sir. So this is our capital and revenue expenditure. Apart from this, we have two types of expenses.
Yes Ishpreet? Sir, I just wanted to know that what are the accessories that you have counted before using it? Yes. Do you use the car before? When we purchase a car, in the company, actually, there are some accessories that we get from outside.
Like we got it from an open market. One is, when we purchase a car from a company, the company itself says, that you need this and that in the car, you need to install foot mats, mud flaps, speakers, you have to do this and that. So those additional things, if we do it on the spot, in the company, then when we get a car, those things will be installed in it. If we go out of there, in the sense that we have a car, we have started using the car, after that we install it, then we can call it expenditure. then the cost of that asset will not be added.
Now next comes guys, we have already purchased the asset. We have already purchased the asset. Now we are spending more on it.
We are doing further expenditure on our asset. So when we do further expenditure on the asset, there are two types of expenditure which we do further. One is which enhances the efficiency which enhances the efficiency of the asset or 2nd one is which is for maintaining the efficiency of the asset 1st one is which is for enhancing the efficiency and 2nd one is for maintaining the efficiency I will give you 2 good examples 1st one is car example what is the example of car guys watch carefully I had purchased a car, the average of that car was 20 km per liter. That means that car runs 20 km in 1 liter petrol or 20 km in 1 liter diesel.
Now, normally when we use a car, it takes 6 months or a year, then the average of the car falls, reaches 16 km, sometimes 15 km. So what do we do with that car? Service karate hain?
Jab hum us car ki service karate hain, to service wala isme engine oil change karta hai, sab kuch change karta hai, aur wo change karane ke baad, iski average dubara say 20 km pe pohunch jati hai, jo pehle average aare ki. Average ki ho giri thi, oil purana ho gaya tha, sab kuch ho gaya tha, to humne usko maintenance ka kharcha diya, service ka kharcha diya, aur ab wo dubara say 20 km ki speed de rahi hai, average de rahi hai. To ye jo humara kharcha hai, Tell me carefully, has it increased my car's efficiency or has it maintained my car's efficiency?
Maintained. Maintained. Maintained.
So, the expenditure that maintains my asset's efficiency, I call it my other or revenue expenditure. which is my expense. But in the same example, if I say that the company said that we have a new battery or something new which will increase its efficiency by 25 km per liter. If you install this in the car, then the average of your car will increase by 25 km per liter.
That means this thing has increased my car's efficiency. The level which was earlier is much better than that. That will be my asset expenditure. It will be my asset expenditure. And that will be added to my asset cost.
Okay. I will give you another example. Let's say I purchased a building.
Listen carefully. I purchased a building. There are two floors in it.
In this, the paint was a little bit damaged. Everything was happening. The paint was falling.
So I repainted it completely. So tell me, is the cost of repainting maintaining the efficiency or enhancing it? Maintaining, sir. Maintaining, sir. Maintaining means that it will be my normal expenditure.
Perfect. If I make another floor on it, I made another floor on it. So, is this maintenance or enhancing the efficiency of building? Or increasing the value?
Increasing the value, sir. Increasing the value means enhancing the efficiency? So, the expense I have spent on this, that will be my asset expenditure.
And I will add this to the cost of my asset, that is, building. Is this clear to everyone? Yes, sir.
Yes, sir. Yes, sir. Okay.
Guys, I'm just giving you for 23 years 7 minutes break. Okay. 7 minutes break. After that, we'll start with the next part where our calculation and all our working will come. Okay.
Till then, what we have read once in the book, revise it well. What we have read, revise it once. Yes guys, have you read it?
Yes sir Yes sir I think sir is a little disturbed today Actually guys, I told you that there was no light in the office where I took him So I got a call from the department that your light is cut Your owner did not pay the bill So now the same things are going on behind I have work ahead of me, I have MA class too, so let's plan something. So because of this, those calls are coming again and again, which I can't ignore. I hope there is no issue with this. So let's move ahead in this.
So asset expenditure versus other expenditure, I have explained this to you. You have to read this once, as I will read it with you once. So, asset expenditure is expenditure which results in acquisition. Guys, one second.
I got a call. One second. Yes, sir.
Okay. Okay. That's when they will cut it today.
Okay, sir. Okay. Yes, guys.
So, asset expenditure. Asset expenditure is the expenditure which results in acquisition of non-current asset or improvement to existing non-current asset. As I told you, our efficiency is enhanced.
And what can be our expenditure in asset expenditure? Acquisition, replacement. improvement of non-current asset.
And other expenditure, the normal expenditure that I told you, that is repair, maintenance, service, all these will be our normal expenditure, which we will show expense in our books. And these expenditures of acquisition, replacement and improvement, we add them to the cost of asset. I told you above, there is only one illustration.
Read this illustration and tell me what will be the answer. 42,000 sir. How much? 42,000. What will be our 42,000?
Purchase of building sir and the legal cost. And then the extension of building. Asset expenditure.
Oh yes, sorry. 42,000 will be asset expenditure. Which will be added to my asset cost. Right. And other expenditure?
It will be 900. 900. Guys, does everyone think this is the answer or can we get some more answers? Same. Okay.
Neerajan, Talha, Simran. Same, sir. Okay, guys.
So, this is the answer. The original purchase and the cost of extension are asset expenditure because they are incurred to acquire, then improvement. The legal cost 200 can also be capitalized because when we purchase a building, we cannot purchase a building without paying 2000. We have to pay the legal expenditure.
900 is our other expenditure. Hello. Okay. I will call them.
I will call them right now. Okay. So, this is our asset and other expenditure.
Now, after this comes a distinction. We have already done this. I have already told you.
I have explained all this. You have to study this in your homework. You have to just give it a plain read.
I have told you all the concepts. There is nothing special in this. Now there is a question, everyone has to do this question.
Write your solution of 8 things in the copy. Write everyone's solution in the copy. I will ask everyone one by one that tell me what is the answer to this.
Do it guys, start. Guys, did everyone do it? Yes sir.
Yes sir. Good, everyone has done it. Now I will ask the answer to everyone.
So guys, first is our purchase of property of office building. I will tell you the cost, this is very difficult. This is asset expenditure.
Next, annual depreciation of such property. Ishpreet, tell me what will happen? Expense. Expense, sir. Expense.
Please tell me the name. Solicitor fees in connection with purchase of property. What will this be? Asset, sir. Asset.
Very good. Because we cannot pay this expense until the asset... Sorry.
We can't purchase assets until we pay the fees of the solicitor government. Absolutely right. Nirajan, tell us the fourth and fifth. Sir, asset four and fifth expense. Fifth expense, fifth expense.
Why did you say fourth asset? Because additional storage has been done there. We have done additional storage in our computer.
We have increased the RAM, we have increased its space. The efficiency has increased. Very good.
6th, Simran 6th and 7th tell me 6th asset, 7th asset 6th be asset, 7th be asset 7th, why 7th is asset? Because the charge that is applied will be done by adding to the plant No, why will we add to it? Because it is enhancing it No Seventh is custom duty charge on plant.
Guys, just one small second. Yes, sir. Okay, I will send them.
I will forward the phone to them. Okay, sir. Custom duty charge on plant when imported to country.
When we purchased a plant, what happened was that we imported that plant from abroad. So when we import something from abroad, when something comes to India, we have to pay custom duty. Meaning that when that plant reaches us for use, this expense is before that.
Without paying this expense, that plant does not reach us. That's why it is to be added in the cost of asset. Clear guys?
Yes. So, we will give any answer very well. Okay.
Next, 8th, 9th, 10th. 8th will tell me Talha. Sir, eighth is asset, ninth is asset and tenth is expense.
Eighth is asset, ninth is asset and tenth is expense. Reason? Yes, sir. Without carriage cost, asset supply, transportation cost is added.
We have expenses till we reach office, so without this, asset does not reach us. Cost of installing new plant and machinery, this is also asset. wages for the machine operator.
This is our expense. Why? Because this is the expense of the machine operator. Absolutely right. Now, if I ask you a question, wages for construction of building.
If we are constructing a building, we have paid wages in that. So, tell me, is that our asset or expense? Asset. That will be our asset.
Because we have paid wages for building construction. So if we would not have spent this, then building would not have been made. It is the cost of construction. This asset will be added to the cost. Absolutely right guys.
Now we move ahead. Now we have already done this. That the purchase price comes in property, plant and equipment.
Now here is a little bit what has been told. Whenever we purchase an asset. If it had sales tax with it, So we will not add sales tax to the cost of the asset.
And if we have got any trade discount, we will not add it to the cost of our asset. But import duty, as we have read, custom duty, we add it. Example, we purchased a plant from outside, its cost was 10 lakh. So we purchased it from outside, it gave us a trade discount because we purchase a lot of things from there. It said, I am giving you a 10% discount.
So, he gave us a discount of 1 lakh. So, we got the net machine which was 9 lakh. First thing. After that, some import duty was applied.
We will add import duty in the cost. After that, let's say in India, it reached 990. And Indian government said that you have to pay sales tax on it. So, whatever government, we will pay sales tax to India. Whatever taxes we will pay in India, sales tax.
We will not add that to the cost of the asset. Remember. Whenever we purchase an asset, we do not add the expense of our sales tax to the cost of the asset. And initial estimation of cost of dismantling or removing the item and restoring the site which should be suited.
This thing will normally be covered in F7. It is not covered in detail in F3. What is this basically? Like our mines, basically what are mines?
Like coal mines. Like this is a mountain. This is a mountain. So here we have installed a coal mine to dig and extract coal.
Now these very big mines, after some time, as we know that so much coal can be extracted from here, after that, like after 6-7 years, we will have to shift it here. So it will be our cost of dismantling, that means shifting. So when we purchase an asset, the purchase price will also be added to the cost.
Plus in the future, the initial estimate, how much do we think it will cost to dismantle it and shift it there in the future? That will also be added in the cost. Why? Because you will have to do this expense as well. It's not like you will leave the building here after 5 years.
After 5 years, you will have to destroy it here. You will have to remove it. Or you have to dismantle it and take it somewhere else. That is added in the cost of acid.
In more detail, it is not in F3. This will be covered in F7. For theory, this is important. We have read all this, guys.
You just have to read this once properly. This is an important point for theory. These expenses of ours, this will not be included in the cost of acid. Which expenses?
Cost of menthol. maintenance contract. Jo bhi maintenance ki.
Jaisa humne computer purchase kiya tha. To humne ek saal ki maintenance ki. Jaisa humne ek saal tak koi bhi issue aay.
To aap usko thik kar jana. Wo humare asset ki cost maad nahi hogi. Ye saara humara expense jayega. Startup and similar pre-production cost.
Ab ye kya hoti hai. Dekho jaisa maan lo tumne ek machine purchase ki. Ye tumhari factory hai. Is factory mein ye machine tumhari yaha pe install hoge. This is your machine.
installed. When you start the machine, before starting it, it has a cost. How?
Like it will take double, triple electricity because once the machine is on, it will take a lot of water. Once the machine is washed, it means it has its own process. That will be all.
In its startup, you will have to apply so much oil extra. You will have to do so much. Those are called startup cost.
cost bhi humare asset ki cost mein add nahi hogi. Asset humare lag chuka hai. Abhis startup cost jo hai ye humare expense hoga.
Yad rakhna asset agar humare start ho chuka hai. Ek baar install ho chuka hai. Abhis ke baad humne start nahi kar alag baat hai. Abhis jab hum start karenge aur startup cost jo iss machine ki aayegi woh humare expenditure mein jaayega.
Woh asset ki cost mein add nahi hoga. Staff training cost ye bohat baar exam mein poochha gaya hai. that for this machine, we have to train the staff. If we didn't bring this machine, we wouldn't have trained the staff.
There was a case study that we purchased a machine, we purchased that machine, so we had to train the staff. If we didn't purchase this machine, we wouldn't have trained the staff. So will this training also add to the cost of our asset?
Think about it and tell me. No sir. It shouldn't happen. Why shouldn't it happen?
Because this is not increasing the efficiency of assets. And it has no relation to assets. I am giving training. Who knows, someone else would have kept it in train. Who knows, I will keep it in train.
There is no need to give training. So this will also be our expenditure. Administration and other general overhead costs. Expenses of operation that are incidental to construction and development of the item.
These will all be our expenditure. This will not be added in the cost of assets. What happens?
Whatever is added in the cost of our assets. Whatever asset. Ki cost me add Hote hain Un pe hum Depreciation Charge karte hain Aur jo Humare expense Hote hain Wo directly Profit and loss Me Humare Expense Aaga Tike Chalo Ab ek kaam Karte hain Isme Tumhara Ye saara Hum pad chuke hain Subsequent expenditure Ye saara Hum kar chuke hain Activity number 3. I know the answer to this.
What is the answer of activity number 3? 20,700. 20,700.
I got one answer. twenty thousand seven hundred twenty thousand seven hundred twenty thousand seven hundred hello here guys twenty thousand seven hundred is the right answer no sir Someone cut the wire from the back that the bill is not on. I told you. So the bill has come.
So the person I talked to, he has to tell me that the bill is on. I never do that. I'm really sorry, guys.
This had to happen right now. What should I do? And I would have delayed it.
But there is a government department. It's 4.50. It will be closed at 5.00.
And the light won't come till tomorrow. So I have to tell you. I'm really sorry, guys. Just give me two minutes. Hello, yes sir.
Okay, fine, fine, sir. Thank you very much, sir. Okay, sir.
Okay, guys, finally everything is sorted. Now, our next term, guys, that is depreciation. Depreciation, what I told you, the value of the asset is less, or the cost of the asset, we spread that.
over the useful life of asset, that is called depreciation. For example, our asset was 10 lakhs, or we call it millions, our asset was 1 million, 5 years is our life, so 1 million divided by 5, that means 2 lakhs, this will be our depreciation each year. This is depreciation. So depreciation is a means of...
Spreading the cost of non-current asset over the useful life. Now, here comes an important thing, guys. Land normally has an unlimited useful life.
And therefore, it is not depreciated. Building have a limited life. Therefore, they are depreciable assets.
Means, if the question has only land written, then that means land never gets depreciation. It also has a question. Which of the non-current asset, which of the non-current asset, is a non-depreciable asset.
Which non-current asset does not have depreciation? That is land. Land never has depreciation.
If it is a building, then it will have depreciation. Although you will say, how does a building have depreciation? If we build a house today, then the value of the house keeps increasing. The value of the house is not less. If I have a land, and I have built a house on the land, then the value of the house is also increasing.
The value of the land is increasing. The value of the house is also increasing. Practically, this is what happens.
But for knowledge, for books, for bookish language, we have that the value of building falls. Like we have made a building, we know that the life of the building is 50 years. After 50 years, we will have to renovate it.
It will break. All the structures will be broken. So, no depreciation on land, depreciation on building.
Let's read a little theory from the beginning. After that, our practical portion will start. Now, what is our theory? Depreciation.
So, what is the definition of depreciation? Depreciation is the systematic allocation of depreciable amount of an asset over its useful life. I have systematically allocated my expenses over the useful life of asset.
That is called depreciation. Next is depreciable amount. Depreciable amount means that cost of asset.
On which we calculate depreciation. Now as I told you. We took the example of car. So 11 lakh was coming to us.
Car's cost. 50,000 was coming to our normal expenditure. So this is my expense. This will be added to the asset's cost. Depreciation which I will calculate.
I will do it on this 11 lakh. Depreciation is calculated on the cost of asset. So depreciable amount. Is the cost of asset.
And. other amount substituted for historical less this. This I will tell you later what it is. So cost which is ours that is called depreciable amount.
Next comes our useful life. Useful life is of two types. This is not for you.
You may not have read this in your 12th class. One is period over which acid is expected to be available for the use by the entity. Means whatever we think for years. We can use that asset and after that we can't use it.
Like if I purchase a car, we know that it is the regulation of the government. If it is a diesel car, it has a life of 10 years. After 10 years, we will have to scrap the diesel car.
Nowadays, even in the telephone, if you purchase a phone, you can use your phone for 5 years. After 5 years, you have to buy a new phone by scrapping your phone. That is a limit.
Whether it is not... It is an exact but there is a limit that the frequency of the phone increases and mostly mobile companies will work on it and increase the frequency. So that thing happens.
So this time period is called period over which acid is expected to be available for use. Next comes our number of production and similar units expected to be obtained by the acid. Now listen to a good example of this. What is the example guys? Now let's say there is a plane.
This is a plane. Okay? Now tell me one thing. This plane. This plane.
It has been said about it. That it can fly for this many hours. This plane. It can fly for 10,000 hours. After that, this plane will end.
Its life is not in years. It is not in years. By the way, they are saying that it will last for 20-30 years.
It will last for 20-30 years. There is no problem. But 10,000 hours. hours tak hi ye plane oor sakta hai uske baad ye jo plane hai isko scrap karna pade.
That means yahan pe jo asset ki life hai that is not in years it is in hours. Ki itne hours ho chal sakta hai. Ab ye plane agar let's say 25 million ka plane hai. Agar ye 25 million ka plane hai.
10,000 hours ye chal sakta hai. 10,000 hours ye chal sakta hai. It means per hour 2500 ki iski deposition lagi.
Abhi calculate kaise karege, har saal kitni aegi, wo baat ki baat. Lekin abhi ke liye, hume samajna hai, ki useful life, do tarike ki hoti hai. Ek hoti hai years me, ek hoti hai, number of production, aur similar units expected.
Aisi kai asset humare aise hoti hai, kai machines aise hoti hai, jinki years me life ni hoti. Jinki life hoti hai, ki wo machine, itne hi units bana sakti hai, isse zyada nahi bana sakta. So, you can make as many units as you want.
Now, let me give you a simple example. You have taken a pen. Let's say, it is a very costly pen.
It costs 1 crore rupees. It is a very good pen. Just an example.
This is a pen. We know that this pen can travel up to 1 or 20 kilometers. It is said in the pen that it can travel up to 20,000 meters.
So, let's say, I will say 1 kilometer. 1 or 20 kilometers. one kilometer one kilometer means thousand meters our pen can run this is its life now if I don't use this pen for 50 years will its life be reduced or not tell me if I don't use this pen for 50 years will the value of this pen be zero means this pen will not be able to be used it will be able to be used it will be able to be used means the life of pen that is not in years is how many meters it can run. Some of our assets are of production base that they can make only this many units.
So this is useful life. Take two minutes. Read this well. Or I will teach you the lower one.
Leave this lower one. Now you read this well. Then let's move ahead.
And then I will teach you the practical part. Did you guys read it? Yes, sir.
Let's move further. This is a theory. Read this little theory. Next comes our term, that is residual value.
What is residual value? When our life of an asset ends, when its life ends, at that time, how much asset can be sold? That is called residual value. Like when we purchase a car, after purchasing a car, if we use the car for 10 years, after that it will be sold in scrap, let's say 50,000. So this is called the residual value.
Now let's do our question. Now comes our method of depreciation. What are the methods of depreciation that we use on assets? So there are two methods of calculating depreciation on assets. First is straight line method.
Straight line method is also called and we call it fixed cost or original cost method. Straight line method and we call it original cost method. What does this mean? We purchased an asset of 10 lakhs. It has a life of 5 years.
So every year, we will directly deposit a depreciation of 2 lakhs. Every year, we will deposit a depreciation of 2 lakhs. That is called straight line method. So the formula of straight line method to get a depreciation is cost minus residual value, whatever value is left, like mobile, I told you, or car, I told you, that after so many years, it can be sold till this much. So cost minus residual value divided by useful life.
So this will be our absolute figure. If I want to get absolute figure like 2 lakh. If I want to get in percentage that is cost minus residual value into 100. Sorry, into 1 divided by 100. That is my depreciation on percentage. Cost minus residual value. Now for example, Cost is 10 lakh.
I think they have shown the formula. Minus. They have shown the formula.
Guys, wait. If we want to get deposition in percentage. That will be 10 lakh. divided by useful life, divided by cost into 100. How will we basically get our depreciation?
2 lakh divided by 10 lakh into 100. So 20% will be the depreciation. This formula is wrong. If we want to calculate the percentage, then our formula will look like this.
Depreciation divided by the cost is 100. And normally, this is not asked in the exam. Normally, this is what you get. Cost minus residual value divided by useful life.
This was a simple thing. Now guys, I will tell you a little term. What is this accumulated depreciation carrying amount? This is very important for you to know.
This is something that is new for you all. Look at this thing carefully, which I am telling you now. Although there was a little theory till now, now it is practical. Now see, as I purchased an asset, its cost was 10,10,000.
10,10,000 was its cost. Its residual value is That is 10,000. And useful life of asset is 4 years. Useful life is 4 years. Now we will calculate depreciation of 4 years.
How we will calculate depreciation of asset. And how we will treat it. Watch carefully. And what I am doing guys. You don't have to do this in your copy right now.
You will have to do this in the rough sheet you will get in the exam. This is my... rough work to calculate depreciation. Reason kya hai iss cheez ka?
Kyuki tumhare ko iss subject me formats banane ko nahi aayi. 11th me tumne formats banayate depreciation ke machine account, depreciation account. Yaha ho sakte banane ko aayi.
Lekin banane ko, sorry, ke kaunsi jeez kaha aayi. Uske liye tumhe concept jaanna bhoot sarhoge. To sabse pehre main likhunga first year. First year me On the purchase date, I have purchased the asset in 10 lakh 10,000.
I have purchased the asset in 10 lakh 10,000. Absolutely correct. First year end. What will happen on the first year end?
Depreciation will be applied to this. So, I will calculate depreciation above. What is the formula of depreciation? Cost.
minus residual value divided by useful life, that is 4. Depreciation, tell me guys, how much is coming per year in this? Guys, how much is the depreciation per year? 2,50,000 sir. 2,50,000. What's the matter?
Is everyone getting bored today? Neerajan, Simran, Talha, Tanya. I need to know.
I need your review. What happened? Nothing, sir.
Nothing, sir. Okay. I asked the question. No one answered. It was a very simple calculation.
Let's go. Okay. So 250 is my depreciation. Absolutely right.
So what will happen in the first year end? I will write depreciation. 250 will be my depreciation.
Remember my purchase value. Here 10,10,000 will remain. To get depreciation, I minus the residual value. But my purchase price, my cost, will remain 10,10,000. So 10,10,000 minus depreciation.
So in the first year end, I will get. carrying amount it is depreciation would be 2,50,000 so it is 7,60,000 carrying amount so it will be depreciation of first year now next year second year end again depreciation same depreciation 2,50,000 Now again in the second year end, my carrying amount will be 5,10,000. In the third year end, my depreciation will be 2,50,000.
And in the third year end, my carrying amount will be 2,60,000. In the fourth year, my depreciation will be 2,50,000. And my carrying amount will be 10,000.
which was my residual value, as much as I sell the asset. Is this chart clear, guys? Yes, sir.
Now, the important thing is, you have to see from here. Now, in the first tier, if I talk about how we show this thing in books, the way to show it in books, guys, that is cost minus Accumulated depreciation means total depreciation charged till date. Remember, accumulated depreciation means total depreciation charged till date.
So if I talk about the first year, what was the cost of my asset in the first year? 10,10,000. How much total depreciation was incurred by the end of the first year?
2,50,000. So I will say my carrying amount at first year end would be 7,60,000. When we show in books, this is how we show it in the books.
Means we show cost separately, we show accumulated depreciation separately. Depreciation is never minus from cost. We will minus it to do calculation, how much value is coming. But if we want to show in books, then we never minus depreciation from cost. we will put all the depreciation in a separate box which is called Accumulated Depreciation same way if I tell you how I will show it in the second year now in the second year I told you that our cost will be same cost will never change so if I make books of second year I will show you my cost is 10,10,000 and how much will be the accumulated depreciation Pahle saal ki itni lag chuki hai.
Doosre saal ki itni. To doos years ki total depreciation kitni hogi? Meri 5 lakh.
5 lakh ki total depreciation meri lag chuki hai. To 5 lakh 10,000 would be the carrying amount. Is tarah se main apni books pe carrying amount show karunga. 5 lakh 10,000 would be the carrying amount.
I think maine yaha bhi aise kar diya hai. 5 lakh 10,000 would be the carrying amount. Is tarah se main apni books me isko show karta. That means.
Depreciation is never less than the value of our asset in the books. We show depreciation in a separate box which is called accumulative depreciation. We will show in our books that we purchased this much asset. Till today, the total depreciation on it is this much. So this is our book value which is the value of the book today.
Is this clear to everyone? All the old students who have done 11-12. You must have read that we show here that our carrying amount opening will be 750 minus our current year's depreciation. This does not happen in ACCA.
In ACCA, we always show assets at cost and depreciation is always totaled, which is called as accumulated depreciation. Okay? Yes, sir.
Is this clear to everyone, guys? Yes, sir. So if I talk about your depreciation journal entry, tell me what is the depreciation journal entry? I have made you do it in the journal entry chapter.
Depreciation, debit, credit, cash. Debit depreciation, credit, you said cash. Tell me one thing, I think earlier also some kid made a mistake.
When you purchased an asset, you purchased a mobile for 1 lakh. After 1 year, its value will remain 60,000. 40,000 was your loss, absolutely.
Did you pay 40,000 loss in cash? Tell me, Talha. No, sir. So, cash didn't go from your pocket of 40,000.
So the entry of depreciation is Debit Depreciation Credit Accumulated Depreciation. Debit depreciation, credit accumulated depreciation. Remember all these things. Debit depreciation, credit accumulated depreciation.
Some of you might be thinking that asset can also come down. We had read that depreciation account debit to asset. Asset never comes. We should never directly reduce the value of asset in books. I had told you that depreciation, whatever we charge, will go to accumulated depreciation.
the cost of the asset will never be less. Is this entry clear to everyone? Yes, sir. Now, there is a small question.
Question all of you. Activity number 4. Everyone has to do this. Yes sir. Okay. Tanya is not answering.
Yes, sir. Actually, network problem. Okay, no problem.
Tanya, tell me. So, the cost is 2500. First year. Second year cost?
And 750. Second year cost? Okay, cost. One thousand seven hundred fifty. Okay.
And one thousand. One thousand, okay. accumulated depreciation 750 for each year fanning amount one thousand seven fifty one thousand and 250. okay or the student just answer the other guy sir cost to same regular cost 25 starts in 2500 and accumulated deposition first year is 750 second year 1500 and third year 200 and 250 2250 okay and carrying amount is the same yes sir okay ishpreet talha same as first like First year 2500. Yes, sir. Okay.
Tala? Same, sir. Which same? There are two answers. This one, sir.
2500, 1750, 1000. Okay. Cost? Niranjan, give me the answer once. Sir, 250. Sorry, 200. 2500 cost are same uh cost are same accumulator uh accumulator this one uh yeah okay concept Now, like Niranjan, Niranjan, I think you are from a non-commerce background, right?
Yes, sir. Now, look guys, he is from a non-commerce background. He didn't know how it was in 12th. So, what I told you, he followed that and he gave the right answer. And I think Simran also gave the right answer.
Because I think Simran has a commerce background, but Niranjan doesn't have a commerce background. But still, he gave the right answer. He left the concept of 11th and 12th.
I told you many times to leave the concept of 11th and 12th. That we are doing with ACCA. The answer I got is exactly the concept of 11th. That every year the depreciation will be the same. Our cost will keep decreasing.
This carrying amount will come. Now I told you that this does not happen in ACCA. In ACCA, the cost never decreases. The cost will be 2500 every year.
The cost never reduces. Accumulated depreciation means total depreciation charged till date, so first year our depreciation was 750, next year it was old 750, plus this year's 750, so that means 1500 is the total depreciation, and here it will be 1500 plus again 750, that means 2250 is the accumulated depreciation till date. So accumulated depreciation means total depreciation till third year.
And carrying amount comes to us, cost minus accumulated depreciation, it is 1750, 1000 or 250. So, whatever you have in 12th and 11th, leave that, it is different in ACCA, there are many mistakes here. The depreciation we have is 750, every year's depreciation is there, that is right. Accumulated depreciation means total depreciation charge till date, first year's 750. Next year, 750 has been taken.
Plus 750 has been taken, so 1500. After that, 750 has been taken again. So, by this date, by the third year, total depreciation has been taken, 22,500. Cost will always remain the same. No change in cost. Carrying amount comes to us.
Cost minus accumulated depreciation. Guys, is this clear to everyone? Yes, sir. Sure? Yes, sir.
Don't make this mistake again. It happens. It's very common.
Don't make this mistake again. Now comes our next part. Next is Diminishing Ballast Method Depreciation.
Next is Diminishing balance method depreciation. And this is also called return down value method. Now this is a second method of depreciation.
It is not like there is some other rule in it. This is a second method of depreciation. And we don't have to learn in concept. This is a formula which I will have to learn in the formula. So, what happens in diminishing balance method?
Depreciation is given in percentage. For us, depreciation is given in percentage. Example, as I said, the cost of asset is 10 lakh and depreciation is...
10% each year diminishing balance method. DBM is written. Depreciation is 10% each year. That is diminishing balance method. How will we calculate depreciation in this?
So the working I told you. We have to do that working every time. So our asset cost is 10 lakh.
Depreciation which will be our. 10% of this 10 lakh. So our depreciation of 1 lakh.
So carrying amount is 9 lakhs. Now the depreciation we will calculate next year, that will not be 1 lakh. 1 lakh every year is 1 lakh in state line method.
Here what will happen, whatever is our carrying amount, whatever is coming in our carrying amount books, on that we charge depreciation. So I will charge depreciation on 9 lakhs, 10% so 90,000 will be the depreciation. So now my carrying value is 8,10,000. Now when I charge depreciation again, This 8,10,000's 10%, that means 81,000, this is how my depreciation is charged. So depreciation is charged on the carrying amount each year.
It means, what concepts are made here? First, in diminishing balance method, depreciation is less every year. Second, depreciation is changed every year. In straight line method, depreciation is the same. But in diminishing balance method, depreciation will reduce every year and every year will be less unless the asset value does not increase that is the next thing this is diminishing balance method quickly see this understand if you have any doubt ask me if you don't have then tell me that you don't have doubt then we will move forward we will do a question of this I will keep a little light in today's class rest I will tell you for tomorrow what I said that for tomorrow today I will inform you It's clear.
Okay. Clear sir. Yes sir. Okay, now let's move on. We will do a question for this.
Activity number 4. This was about the storyline, sorry. Now you will tell me by calculating the figures. Read the question carefully, what is written in the question and what is asked. okay answer this Ishpreet give this answer yes sir so the first year I was carrying amount is 6000 then second year sorry 2400 2400 accumulation accumulation Carrying amount? And 3600. Okay.
Next, Talha will tell me. Talha, tell me what will come next. Talha. I will calculate.
Okay, you are calculating. Tanya. 5760 5760 okay no sir sorry it's 3600 3600 okay depreciation expense 144 1, 4, 4. 1, 4, 4 or 1, 4, 4, 0? 1, 4, 4, 0. Okay.
Accumulated depreciation? It will be 3, 8, 4, 0. 3, 8, 4, 0. Good. Carrying amount closing?
For 2. 2160. 2160. Okay. Third, I will tell you. If the carrying amount is closing, then the carrying amount opening is 2160. On this, 40%, 864. This is 4704. And 1296. If you do this according to my chart, then how do you do it? Cost is 6000. 6000. First year depreciation is 6000. into 40 percent that means 2400 so value will be 3600 next year depreciation 3600 40 percent it is 1440 so our carrying amount will be 2160 then 2160 next year 40 percent depreciation It is 864 and carrying amount will be 1296. So accumulated depreciation in the first year is 2400. Next year this plus this 3840. Next year the total of these three is 470. So here we have been asked carrying amount.
If we were asked cost, then cost would have been 6000. Cost would have been 6000 every year. So carrying amount is cost minus accumulatory deposition. So you gave the correct answer.
Is this clear to everyone? Yes, sir. Yes, sir.
Yes, sir. Let's go, guys. So let's do one thing.
Let's sum up today's class first. So today's homework is that whatever is above, read the theory once. Because I have told you the theory. Theory questions are asked in the exam. Every time it comes that sir, practical questions are not so many, all conceptual theories are there.
So, read the theory questions very well. Because after this, the whole practical chapter is there. After that, only practice, practical question solving is there. So, this is your first homework.
Second is that I have just talked to a few children about syllabus. Most of the students are those who have not done the syllabus properly till the inventory. One and a half students have not done it. So you do one thing. This week, in the sense that Wednesday, I am giving you a break.
I said that tomorrow we will do the class. So don't do the class on Wednesday. Now what is your homework? You have to complete the pendencies once.
You will revise this chapter of course today. And all the previous chapters you have done, listen carefully. All the previous chapters that you have done, you have to revise them properly. And ACCA Study Hub, you must have made your login for ACCA.
So in ACCA Study Hub, there are practice questions for every chapter. There are practice questions for every chapter in ACCA Study Hub. You have to do those practice questions.
So that at least all the chapters that you have done so far, you get to know. What kind of questions you expect from ACC. Why?
Because when you practice those questions. After that only you will start to understand. What type of questions are asked in ACCA.
So that when you start to study further. You will know. This is important. Because what is a misconception. There is a little bit of theory.
What is in this. You know this. But when it comes in the form of the same question.
Then you don't understand. Like I gave you an example. Production units. They will make a figure of it.
There is no figure in this. They will make a figure of it. You will not be able to do it. So in this situation, once you do the study of your questions, leaving this chapter, up to the old chapters, up to the inventory, this is your homework.
Share your doubts with me in the group. I'll try my level best to solve all the doubts. Otherwise, on Friday, I'll take doubts about all the chapters.
Reason is that the chapters we are going to read next, they have no link with the old chapters. Like this chapter is there, then more chapters will come. So you won't be able to read the old base again.
So, read your base properly once. Do the questions of ACC study hub. After that, the next class will be on Friday.
From there, our two hours without break continuous class will be done. And second thing guys, for today's class, I am really really sorry. You have never seen me doing as much as I did in the previous class. I don't do any such kind of thing. But there was some urgency today that I had to make all those calls at this time.
I felt bad that I couldn't hold it. But it was not possible for me. So for today's class, please say sorry for that. The calls that will come in between.
So this is the thing guys. Rest, in case if any student feels. In case if any student feels.
That sir, this has also happened to me. My revision has also been done. I have to do further. Then tell me.
So at least I will provide a video of next part. If you feel, then you can watch the video. If you feel like it, it's not that you have to see it.
If you feel like it, then see it. Otherwise, you can just do this thing. This is also important. We have to do this too.
Because from what we have read, you can expect 30% of the paper. 30% of the questions that will come, you can expect from above what we have read, which is the base there. Is it clear to everyone?
Yes, sir. Can you think anyone want to ask? Yes, sir. Sir.
I haven't registered yet. What are you saying, Niranjan? I haven't registered yet. Study hub won't open.
You haven't registered yet? I will. I have the documents.
Then get it done quickly. Have you completed the entire chapter? I have to do the kit.
Then do the kit and get your registration done. Okay sir. Okay?
Does anyone have to ask me anything? Sir, will Wednesday be the class? No, Wednesday will not be the class. Our class will be on Friday.
Okay sir. Sir, I am from Nepal. Can you do my registration? You can talk to Mohsin. Ask Mohsin.
Okay sir. He will help you in the registration. Whatever will happen to you, if he can do it, he will do it.
No problem. Okay sir. Thank you.
Thank you, sir. Chalo guys, ab class karte hain Friday. Agar kisi ko lage ki unko chapter chahiye agay wala, toh main wo chapter provide karadunga.
Koi dikkat ki baat nahi. Meri pas surane batch wala woh hai. Wo I'll provide. But let's, main chahata hu ke main khudi karahungo.
Toh tum ye cheez kar lena. Lage toh mujhe bata dina. I'll provide you the recording.
Yes? Yes, sir. Chalo, bye guys. Take care.
Bye, sir. Bye, sir. Thank you. Thank you.