Hello, we have come to end the remaining discussion of
depreciation accounting.
This is going to be the last lecture with you.
Conceptually, if we talk, then we will reach the journey of
teleprime.
As far as this topic depreciation is concerned.
I will also tell you how depreciation is calculated
according to income tax.
We are discussing accounts right now.
We will discuss this when we go to tele.
And how to tackle in audit report.
And what are the differences in them.
What is the treatment of that difference in income tax
return.
All these practical discussions will be done after today's
class.
Today, just for once, the remaining portion of accounting
should end.
The remaining things of accounting should be discussed more.
That's it.
What is left?
As you know, there are not many things left.
Revaluation remains.
And journal entries remain.
So starting with revaluation.
Let's try to fix the revaluation.
Revaluation.
Where are you hidden?
We suffer here.
I have come, I have come.
Revaluation has come in front of you.
Revaluation of property, plant and equipment.
PPE You have done a lot of decorations.
It seems that the topic is heavy.
It seems that the topic is just right.
Yes friend.
The topic should not be said well.
But it is important.
It is practical.
And It is important for you to know.
Important and practical.
What is the meaning of revaluation?
Come children, I will teach you the meaning of revaluation.
Sorry, the expression is wrong, sir.
I do not know the expression.
I was teaching accounting here.
You leave my expression and come to the concept.
Okay, sir.
Yes.
Look friend.
Like we bought a machinery.
How much money?
Today we bought 5 lakhs.
It's been a long time.
1 lakh 2 lakhs
Buying machinery.
Today we buy 5 lakhs of machinery.
Which day?
Should I tell you the date?
April 1, 2022
Its life has been kept.
5 years
Life has been told.
5 years
And 5 years later
Its SV
SV means
Who will tell me?
Sir, don't you want to say scrap value?
You are holding it right somewhere.
Scrap value, salvage value, residual value, fetch value.
All that used to happen.
Yes, yes, yes.
Means Means after 5 years
When this machine will become garbage.
By selling it in scrap
How much money will we get? 50,000 rupees
Yo 50,000 rupees
Let's go
So let's go 5 years ahead of this machinery.
Now we are 1 year
2 years
3 years
4 years
And 5 years 1st April 22 to 31st March 23 1st April 24 to
31st March
Sorry, sorry, sorry, sorry
Sir, pay more attention to singing.
You are right.
1st April 23 to 31st March 24 1st April 24 to 31st March 25
1st April 25 to 31st March 26 1st April 26 to 31st March 27
OK 22, 23, 24, 25, 26, 27, 28
Yes It's been 5 years.
Friends Friends Tell me depreciation.
Brothers and sisters
Take out depreciation and tell me.
Sir, depreciation will be done.
Which method to apply, sir?
Now you recognize from the data.
I have made an example of which data?
What do you think?
Which method would I like to ask you?
Depreciation What do you say by looking at the data?
Your senses
Sir The answer has come from our senses.
You are talking about the straight line method.
I said right, right, right, right, right, right, right.
Depreciation will come out.
Net cost divided by life
And how does the net cost come?
Whatever you spent
Minus the scrap value from it.
So your net cost will come out.
That is, if you say 5 lakh minus 50,000, then the net cost
will be 4,50,000 rupees.
Divide by who? 5 How much is life? 500 Depreciation How
much? 90,000 rupees
Cool Cool sir, cool
Yeah Next year will also be the same.
This is the benefit of the straight line method.
Once you take out the depreciation, keep applying it in the
coming year.
Ok Means the amount remains the same.
Yeah Depreciation 90, 90, 90, 90 and 90,000
This is your depreciation.
Okay, okay
No problem
We did not see
Should not come
Sir, change the color of the pen.
Which color should I take?
Should I take the purple color?
Sir, you come to purple every time.
Dude, I have this, then sky blue, then dark blue, purple
and this pink is left.
As soon as I take pink, I get the feeling of a girl.
Hmm Come on, sir, take the blue one.
I took dark blue.
Now it's fine.
Friends, as soon as we put a depreciation of 90,000 on the
machine purchased for 5 lakhs.
We will put a depreciation of 90,000 after the first year.
So you can tell how much value will be left in the books.
How much value will be left in the books?
Book value
Look, when you buy a machine for 5 lakhs, then you will
debit the machinery account.
You will enter the machinery for 5 lakhs.
You will put the machinery in the account.
You will say that a machinery has come for 5 lakhs in our
account.
And on that 5 lakhs, you will enter the first day for 5
lakhs.
When a year will pass, then you will put a depreciation of
90,000.
And what will be the value left? 5 lakhs minus 90,000 is
equal to 4 lakhs 10,000.
4 lakhs 10,000
After that, what will be the book value next year?
Minus 90 more from this.
3 lakhs 20,000 rupees
Minus 90 more.
2 lakhs 30,000 rupees 2 lakhs 30,000 rupees
Minus 90 more.
1 lakh 40,000 rupees 1 lakh 40,000 rupees
Minus 90 more.
90,000 will be left.
50,000 And friends see now.
In the end, 50,000 should also be left.
In the end, the value of 50,000 should also be saved.
That's what we were saying from the beginning.
That the scrap value will remain 50 at the very end.
The life of the scrap has ended.
And 50,000 value is still visible in our books.
Because we had assumed this in the beginning.
We will sell it at 50 and be happy.
Okay sir.
Now listen to my next thing.
When you bought machinery,
Then show 5 lakh rupees in the machinery account.
How much money? 5 lakh rupees
Which highlighter will be right?
Yellow is fine.
5 lakh rupees
By the time it comes to 21, 23
What is the value of that machinery? 4, 10
By the time it comes to 21, 24
Its value is 3, 20
By the time it comes to 25 2, 30
By the time it comes to 26 1, 40 and by the time it comes
to 27
Only 50,000 are left.
So are you able to see?
Value is decreasing.
So this is a misunderstanding in the market.
Depreciation does not mean
Falling below the value of the asset.
5 to 4, 10 4, 10 to 3, 20 3, 20 to 2, 30 2, 30 to 1, 40 to
1, 40 to 50
Depreciation does not mean
Falling below the value of the asset.
Depreciation has an effect.
Falling below the value of the asset.
Depreciation means
Distributing the value of the asset.
And because of that,
The value that decreases every year
Because you depreciate a small portion
And send it to P&L
Because of that, the value that decreases
That is the effect of depreciation.
Not depreciation.
This is the confusion in the market.
People teach the effect of depreciation
As the meaning of depreciation.
Oh, okay, sir.
Okay, this is clear.
But sir, we were studying revaluation.
Explain that to us.
Yes, I am explaining that.
Our balance sheet
Every year a balance sheet is also made.
Yes, sir.
So the balance sheet will also be made for 5 years.
1 year 2 years 3 years 4 years 5 years
Baby, come down
Come down
Na na na na na na na na na na na na na
Say na na na na na na na na na na na na
You will have to remember the lyrics of this.
I will tell you everything then.
Okay, that's all I know now.
Baby, come down
I remember the whole lyrics and tell you.
Okay, sir, done.
In the balance sheet of the first year
Asset side
How much will the machinery show? 4,10,000 4,10,000 rupees
The second year will show
Machinery 3,20,000 rupees
The third year will show 2,30,000 The fourth year will show
1,40,000 What am I writing?
The fourth year will show 1,40,000 And the last year will
show
Machinery value
Let's take this 50,000 rupees
Okay? Yes, sir.
Now friends listen
What is revaluation?
Whatever I have written in front of you
4,10,000,3,20,000,2,30,000,1,40,000,50,000 What is this
book value?
What is this book value?
Means After removing depreciation from the cost price
Year after year
The value that remains
It is called book value.
What is book value? there is another meaning of book value
how much money is shown in the balance sheet that is also
called book value it is shown in the balance sheet at 410
so book value becomes 410 book value means what value is
shown in the balance sheet ok friends, book value and
market value both are same give me this answer book value
is equal to market value bv is equal to mv first tell me is
this true or is this false is this true or is this false
tell me
I will give you 10 seconds take your time and tell me is
book value equal to market value 10 9 8 7 6 5 4 3 2 3 2 1 0
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 and our
asset is only 4 lakhs so there is a loss of 10,000 and
whose shoulder will the loss fall on? most of all the loss
falls on one person's shoulder whose name is P&L account he
is the one who suffers he is the one who carries everyone's
deeds on his shoulders
P&L account debit to machinery account machinery account
what would have happened if it had increased in the first
time? what would have happened if it had increased in the
first time? what would have happened if it had increased in
the first time? machinery account debit to P&L but what is
written here? to revaluation reserve to revaluation reserve
sir, I did not understand this you said that the debit
balance of the asset is there
I said okay if we are doing revaluation for the first time
and suppose we had taken 4 lakhs and 10,000 in our books
for example, we would have got to know the value of 4 lakhs
and 20,000 we would have to increase the value of our
machinery from 4 lakhs to 10,000 and sir, you said a while
ago you said a while ago that machinery is an asset if the
value of the asset increases, we will debit so machinery
account has been debited to 10,000 we understand this but
sir, this is a benefit and if you
the loss on the shoulders of P&L then you should credit the
benefit to P&L so here to P&L should come to revaluation
reserve what is this? if there is a loss, we call him no
one asks him for the benefit in sorrow, we leave him alone
and in happiness, we call him to cut the cake no, no, I
said it wrong in sorrow, we leave him alone and in
happiness, we go to him this is wrong yes, so why did the
revaluation reserve come?
I will tell you friends your P&L is made like this debit
debit includes all the expenses all the expenses and credit
includes all the incomes
wait a second
ok, so debit includes all the expenses and credit includes
all the incomes ok then what happens expenses are deducted
from the incomes and net profit comes
on this net profit the owner has the right he can take it
home can run the expenses of his house can have fun can
give gift to his wife can pay fees to children can do
anything the owner has the right on this money he can take
it home now friends if you on the income side you will
write that the value of our asset has increased by 10,000
so your profit will also increase say yes or no say yes or
no because if the income will increase, the profit will
also increase you said that the value of my machinery has
increased by 10,000 and the profit has increased by 10,000
and the owner says ok so this time I will take a little
more money
I will take 10,000 more but the reality is that 10,000 has
not come in the business your value of books is 410
increased in books to 420 so did you get some money tell me
one thing did you get some money
I am saying that I have a diary and my last month's earning
is 1 lakh rupees and I said yes
I zoomed it
I increased the value to 1.5 lakh so will I get 50,000
means whatever we do in books, it will become reality which
serial was that
Shakala's boom boom we don't have a pencil like that magic
pencil of Sanju whatever we write, it will become reality
you increased the value of machinery in books you didn't
get money yes sir yes sir that's why we don't record it
here in P&L we say that the machinery of 4 lakh 10 thousand
which is coming in our books we increase the market value
to 4 lakh 20 thousand by increasing it to 10,000 so we say
that if we sell this machinery tomorrow next day, then we
will get 420 we didn't get it yet
extra we didn't get it yet we say that we will get it if we
sell it we will get it if we sell the machinery this is the
meaning of revaluation if we sell it, then we will get this
money we are not going to sell it 買 Dear friends ok ok sir,
I can understand you we are not going to sell it prudence
also says when you sell then you will get that profit when
you will sell, then you will get that money if you are not
selling if you are not selling if you didn't sell then you
will not get this money
Prudence says don't record expected income, record expected
losses.
If the value is going down, then you can record it.
This is the concept of Prudence.
But income cannot be recorded on expected basis.
That's why instead of writing it in P&L, we write it in a
new account, whose name is Revaluation Reserve.
10,000, 10,000.
Machinery Account Debit to Revaluation Reserve Account.
10,000, 10,000.
Okay, sir.
So if the value increases on the first evaluation, then the
entry will be Machinery Account Debit to Revaluation
Reserve.
And if the value decreases on the first evaluation, then
the entry will be P&L Account Debit to Machinery Account.
Okay, now let's move ahead.
Now let's move ahead.
Listen carefully to the following cases.
First time you did Revaluation, the value increased.
You entered Machinery to Revaluation.
Next year after doing Revaluation, if it increases again,
then you will enter it again.
Machinery Account Debit to Revaluation Reserve.
Absolutely right.
Assume there is an increase of 5,000 next time.
Then you will enter this again next year.
Machinery Account Debit to Revaluation Reserve.
5,000, 5,000.
Absolutely right, sir.
But, but, but, but, if the value decreases next year, what
if the next year the value is decreasing?
What if the value decreases next year?
For example, let's say the fall of Rs.17000.
So, this is for sure.
If the value of the asset decreases, then the asset account
will be credited.
Machinery account will have to be credited with Rs.17000.
This is for sure.
Sir, you said, at the time of fall, we should debit P&L
account.
Sir, let's debit P&L account.
But, no.
You have to debit P&L account, first use the 10 and 5, 15
in the revaluation reserve.
If you need more than that, then call P&L.
Now, P&L is saying, you have put all the increase in the
revaluation reserve.
You are calling me at the time of decrease.
Okay, I will come.
First, use the revaluation reserve completely.
Use the revaluation reserve completely first.
After that, remember me, if something is less.
So, to bear the loss of Rs.17000, first we will use the
revaluation reserve, how much?
Rs.15000.
Then we will call P&L, with how much money?
Rs.2000.
Then we will call P&L, with Rs.2000.
So, the entry will be, revaluation reserve account debit
Rs.15000,
P&L account debit Rs.2000.
To machinery account,
Rs.17000.
To machinery account, Rs.17000.
In this way, this scenario will continue.
Now, come to the second case.
First time, did the revaluation, value fell.
As soon as head bowed,
OLE fell.
For the first time, did love, did not understand anything,
what to do?
Value fell.
P&L account debit to machinery, entered.
Next year, again fell in value.
So, again this entry,
P&L account debit to machinery account, again this entry,
P&L account debit to machinery.
I say, next year, fell of Rs.5000.
So, next year also, you will pass this entry,
P&L account debit to machinery,
Rs.5000.
But, but, but, but, but, but, but, but,
but, but, but, but,
but, but, but, but, but, but, but,
but,
but, but,
but, but, but,
but, but, but, but, part.
take it one-third take two whole lot,
You will credit in the machine reserve and you will debit
the machinery with 17000.
Here also it was like this.
First year increase, machinery account debit to revolution
reserve.
Second year also increase, machinery account debit to
revolution reserve.
Third year also decrease, in the third year decrease.
So revolution reserve debit, P&L debit to machinery.
It will continue like this.
Sir, if it is directly decreased after the first year
increase, yes, it will still be the same entry.
Revolution reserve P&L to machinery.
I am just saying that the P&L you have used earlier to
debit or credit, first reverse it and then bring the
revolution reserve in the middle.
That's it.
Okay sir.
So remember these entries.
If after the first year decrease, the second year
increases, then also the entry will be the same.
Machinery to P&L to revolution reserve.
For example, the first year decrease was of 10000.
You entered P&L account debit to machinery, 10000, 10000.
Next year, it increases to 12000.
So in the machinery account, we will debit 12000.
In P&L, we will credit 10000.
Till now, we have debited 10000.
And then in revolution reserve, we will credit the
remaining 2000.
Oh, this is the thing, sir.
Yes, this is the thing.
So friends, note this down and understand.
This was the topic of revaluation of property, plant and
equipment.