Definitions [1]
Definition : Fixed Instalment Method
It is a method of depreciation where the same (fixed) amount is reduced from an asset’s value every year until it reaches its scrap value or end of life.
Formulae [2]
Formula : When Scrap Value is Given
\[\mathrm{Depreciation~(p.a.)~=~\frac{Original~cost~-~Scrap~Value}{Estimated~life~of~the~asset~(in~years)}}\]
Original cost of Asset = Purchasing price of an Asset + Incidental charges, etc.
Formula : When Rate of Depreciation is Given
\[\text{Depreciation (p.a.)}=\frac{\text{Cost of the Asset × Rate of depreciation}}{100}\]
Note: If the asset is used for only part of the year, charge depreciation in proportion to the time used.
Concepts [10]
- Perpetuity Fund
- Sinking Fund
- Calculate Perpetuity
- Differentiate Between Sinking Fund and Saving Account
- Valuation of Bond
- Calculate Value of Bond Using present Value Approach
- Concept of EMI
- Calculation of EMI
- Fixed Instalment Method
- Interpretation Cost, Residual Value and Useful Life of an Asset
