If someone can tell me the complete accounting with the percentage that would be great.
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If someone can tell me the complete accounting with the percentage that would be great.
I am assuming that you are asking the question with reference to the sole proprietorship business. In the case of a company, the rates as per the Companies Act, 2013 will apply. A sole proprietor can charge the depreciation in its books of accounts at whatever rate it wants but it should not be more than the rates prescribed in the Income Tax Act, 1961.
It is a general practice to take depreciation rate lower than the Income Tax Act, 1961, so that the financial statements look good because of slightly higher profit. There is no harm in it as it is a sole proprietor.
The Income Tax Act, 1961 has prescribed rates at which depreciation is to be given on different blocks of assets. For motor vehicles, the rates are as follows:
Let’s take an example to understand the accounting treatment:-So a business can choose to charge depreciation at rates slightly lower than the above rates.
Mr A purchased a lorry for ₹1,00,000 on 1st April 2021 for his business, to be used for transportation of the finished goods. Now, Mr A decided to charge depreciation on the WDV method @30% (prescribed rate is 40%).
Following will be the journal entries.
I hope I was able to answer your question.