Yes, friends, how are you?
Good? Having fun outside?
It should always be like this.
Sir, we were talking about depreciation.
And while discussing about depreciation, we reached on the
calculation of written down value.
We understood the calculation of written down value.
And what was there to understand?
Basically, there was an opening WTP.
And we added the assets that we purchased.
We minused the sale price of the assets that we sold.
The value that came out, we put depreciation rates on it.
And our depreciation came out.
I want to ask you one thing.
What did we add in the opening WTP?
The assets that we acquired that year.
The assets that we purchased that year.
We had to include the cost of that in the calculation of
our WTP.
Is it true?
What are we going to study today?
What all things will come in that cost?
What all things will be included in that cost?
At what cost, the machinery that I am buying, or if I am
buying an asset, what all things will be included in that
cost?
Please understand this with me.
For example, this is a machine.
Is it right, sir?
The value of this machine is, for example, one crore rupees.
Not every person has that much money.
Not every businessman, what does he do?
He never takes out the money from his pocket.
What does he do?
He takes out a loan to buy the machine.
There are two benefits of taking out a loan.
Sir, the benefits of taking out a loan.
We used to think that taking out a loan is a bad thing.
The loan drowns you in debt.
Debt is a bad thing.
Sir, you are a man of finance.
These things don't suit you.
In India, leave alone India, all the businesses in the
world are run on loans.
The biggest reason for this is, that the interest I will
pay on this, for example, it is one crore rupees, and the
interest will be 16%.
So, this interest, in my Profit and Loss account, can I
write it as an expense?
Will I get a deduction for that?
Is it an allowable expense?
Think about it.
It is related to my business.
If I don't buy machinery, how will I produce?
If I don't produce, if I don't make goods, how will I sell
it in the market?
If I don't have machinery, my business will be ruined.
To run a business,
I will have to buy a machine.
And to buy a machine,
I need a loan.
And on top of the loan,
I will pay interest.
So, somewhere, this is an expense related to my business.
I will get a deduction for this in my Profit and Loss
account.
This is a benefit.
Your Profit will be reduced by investing in expenses.
This is the first benefit.
Secondly, my liquidity won't be ruined.
If I withdraw one crore rupees today, my entire cash
balance will be taken.
My entire bank balance will be taken.
Right now, I have money in my pocket, and I am taking a
deduction for that expense.
I have also reduced my income tax.
These are some of the benefits.
Now, suppose, you took a loan of one crore rupees, at a
rate of 16%.
You got a loan of 16 lakh rupees.
Right? For example, you got this machine imported from
somewhere.
You got this machine from South Africa, imported from
abroad.
You also got an import duty on it.
Because it has come to India, for example, my drawing is
very bad.
Please accept this.
I am not doing any insult.
My drawing is very bad.
If you are sitting here, for example, and you got this
machine imported from abroad, then the transportation
expenses from here to here, the ship expenses, then once it
comes here, if you have a machine at the port, from this
port, you will take it from here to here.
You will take it to your office, to your factory.
Then the transportation expenses, the ship expenses, the
truck expenses, what should I do with these transportation
expenses?
Should I add them to my cost?
Because my machine has not been installed yet.
My machine is coming now.
Whatever expenses are being done because of that machine,
I will add them to the cost of that machine.
Shall I go ahead?
Whatever expenses are being done related to that machine,
they will be added to its cost.
Transportation expenses will also be added.
You have given this interest.
Sir, just now you were saying that you will take the
interest to P&L account.
Now you are saying that interest will be added here.
Why are you talking double?
I am not talking double.
I am just saying that till the time my machinery is not
installed, till the time my machinery is not installed, the
loan expenses that I am paying in interest,
I will capitalize that.
I will add it to its cost.
But once my machine starts here, after that the interest
will go to P&L account.
This is the concept of accounting.
I am not talking about any high tax.
Till the time machinery is being made or till the time it
is not installed, whatever expenses are there,
I will add it to its cost.
Transportation, interest, tax, tax duty,
I will add it.
I will add these expenses.
For example, it took one year to install a machine worth 1
crore.
In one year, my interest was paid.
16 lakhs interest on a machine worth 1 crore.
Assume that the cost of transportation is 4 lakhs.
And I paid some custom duty on this machine.
I imported it and paid some duty.
Assume that it is worth 5 lakhs.
Now the actual cost of this machine will not be 1 crore.
Its cost will be 1 crore 25 lakhs.
Sir, why are you taking out the cost?
The purpose of taking out the cost is that its cost is 1
crore 25 lakhs.
Now the depreciation that you will get will not be on this
but on this.
You will not get depreciation on this but on this.
The cost has increased.
You will get a little more depreciation.
What is the benefit of getting more depreciation?
You are getting more expenses.
To reduce the profit, you are getting more expenses.
So your profit will ultimately decrease.
And because of that, your profit will also decrease.
Is the point clear?
Am I clear?
This is the point.
Is there any problem?
There is no problem.
Yes, you have to do something minus.
A boy is asking me again and again that you have to do
something minus.
It is a simple thing.
The expenses that you are doing to install the machine, but
if you get any benefit from the government, the government
will say that this machine which a businessman will install
in his factory, we will give him some cash incentive.
We will give him a grant in cash.
For example, a grant of 5 lakhs is given to me by the
government.
That you have installed a very good machine and this
machine is very needed in the country.
People will get a lot of employment from this machine.
Because I need at least 5-7 people to operate this machine.
You are generating employment.
Because of this, we give you a grant of 5 lakhs.
You have received 5 lakhs.
If I receive 5 lakhs, is that my cost?
I will reduce that money from my cost.
The actual cost of this machine will be 1 crore 20 lakhs.
And how much depreciation will I get?
I will get 1 crore 20 lakhs.
My dear, this is a simple concept.
Is there any problem in this?
Any problem?
Nothing? Let's move ahead.
One more point related to the actual cost.
This is the map of India.
For example,
I will tell you because we also have a business.
I am giving you real-life examples.
In that business,
I have made a little bit of India.
My drawing is like this.
Please forgive me.
For example, this is India and I live somewhere here.
We also have a business.
I am not joking.
I have my own export house.
For that, I needed a machine.
I am telling you, this is a real-life example.
I have imported it from USA.
It has come here.
I have ordered it from a truck.
The machine has come from USA.
I need a lot of machines in the export house.
I am talking about the actual cost.
I just told you.
I am not telling you this.
I am telling you something else.
My supplier in USA, who will give me a machine,
I spoke to him.
I told him,
I have a machine here. I spoke to him on 1st January, 2022
that I will give you this machine for 100,000 dollars
I had promised him that I will give him 100,000 dollars for
this machine
I spoke to this man in January
He was Mr.
This is a real life example
There is no such person in this
He was Mr.
Henry, his name is also the same
I had to buy a machine from him for 100,000 dollars
At that time, the rate was 80 rupees per dollar
I had to pay 80,00,000 rupees for this machine
I asked him for advice on what I should do
I asked him for 3 months
I told him that I have 80,00,000 rupees payment
Once I get the machine, I will install it
I will run it and see if it is working properly or not
If it is working properly, I will pay you for it
If it is not working, I will return the machine to you
I got the machine installed
The production is going on very fast
I have started exporting from there
It is a very special type of machine, you can see the cost
I had to pay the payment after 3 months
Around 31st March
On 31st March, I didn't have any problem with the payment
The only problem was that I had to pay 1,00,000 rupees
The rate on this date was 83 rupees
Here, I was getting a rate of 80 rupees
Here, I was getting a rate of 83 rupees
My payment has increased from 3,00,000 rupees
Earlier, if I had paid this date, it would have been
80,00,000 rupees
Now, I will have to pay 83,00,000 rupees
I will have to pay 3,00,000 rupees extra
That person is only getting 1,00,000 dollars
There is nothing to worry about
What can I do?
I have to pay 3,00,000 rupees
I have to pay 3,00,000 rupees after 3 months
Now, the problem is that if I take the actual cost of the
machine, what should I take?
Should I take 80,00,000 rupees or should I take 83,00,000
rupees?
How much should I take in its value?
I went to the Finance Minister
I said, Madam, this is not how it works
I want you to take the value of 80,00,000 rupees
I will make the payment around 80,00,000 rupees
She said, 83,00,000 rupees
I said, the advantage of 83,00,000 rupees is that I will
get more depreciation
I said, Madam, I will do one thing
I will make the payment according to 80,00,000 rupees
I will take the value of 83,00,000 rupees
I will take 83,00,000 rupees of the actual cost of the
machine
I will make the payment around 80,00,000 rupees
She said, what is going on?
You are making the payment according to 80,00,000 rupees
And you are taking the cost according to 83,00,000 rupees
They are reconciling things
Will that person agree?
Will this Mr.
Hindu agree for the payment of 80,00,000 rupees?
Because 80,00,000 will not be equal to 1,00,000 80,00,000
will be equal to 98,000 dollars
Ultimately, I am reducing the payment of that person
Will he agree for this?
He will say, give me the value of 1,00,000 dollars
Ultimately, how much payment will I have to make?
I will have to make the payment according to 83,00,000
rupees
Will my cost increase or not?
So, should I add the cost of the machine to my cost?
The loss of 3,00,000 rupees due to foreign exchange currency
Should I add it to my cost?
The answer is yes
I should add it to my cost
Because the payment that I am making according to the rule
The payment that I am making according to the rule
That is 83,00,000 rupees
How much money did I get from my pocket? 83,00,000 rupees
The machine has not been installed yet
It is still in the process
It will be added to my actual cost
Due to the fluctuation of foreign exchange
I have lost 3,00,000 rupees
That is why I added it
For example, if instead of 83,00,000 rupees
The rate would have been 75,00,000 rupees
If the rate would have been 75,00,000 rupees
Then how much payment would I have to make? 75,00,000 rupees
Where was I making the payment of 80,00,000 rupees?
I would have to make the payment of 75,00,000 rupees
In that case, I would have benefited from 5,00,000 rupees
So, what was the actual cost? 80,00,000 or 75,00,000 rupees?
In that case, the actual cost would have been 75,00,000
rupees
Friends, at today's rate, I have this machine
I have made the payment of 1,00,000 rupees
I made the payment at the rate of 83,00,000 rupees
The machine works in a full-fledged way
The production is very good
And the depreciation that I take on it
That is above 83,00,000 rupees
I take my depreciation
Friends, you are welcome
My machine is installed in Greater Noida
You can come there
And I will show you my machine
We were talking about foreign exchange fluctuation
If there is any loss, you can add it
At the cost of the machine
If there is a profit, you can minus it
This is it
Thank you very much, friends