‘unange in metnoa or vepreciauon According to Accounting Standard 6 issued by ICAI, the depreciation method selected should be applied consistently. A change in the method of providing depreciation can be made only in the following cases: + Adoption of new method is tequired by law/accounting standard. ‘+ The change is necessary for a better presentation of financial statements. When the method of providing depreciation is changed, the depreciation should be recalculated in accordance with the new method from the date of the asset coming into use. The deficiency of ‘surplus arising from retrospective 1e-computation should be adjusted in the books of accounts by passing an adjusting entry. In case the change in method results in deficiency, the deficiency should be charged to the profit and loss account. In case the change in method results in surplus, the surplus should be credited to the profit and loss account. Such a change should be treated as a change in accounting policy and its effect should be quantified and disclosed.Illustration 13, On Ist April 2010, A Ltd. purchased two machines, | and ll, costing ¥ 25,000 each and provided depreciation at 10 per cent p.a. on the straight line method basis. At the end of 2014, the company decided to change the method of depreciation from the straight line method to the written down value method retrospectively, the rate of depreciation remaining the same. Prepare the machinery account upto 2014. ‘Solution: ‘Step 1: Calculation of total depreciation already provided on assets existing at the end of the previous accounting year under the old method, up to the end of the previous accounting year: Total depreciation under old method = # 60,000 x 10% x 3 = # 15,000 ‘Step 2: Calculation of the total depreciation on assets existing at the end of the previous accounting year under the naw method, up to the end of the previous accounting year: z A, Cost as on 01-04-2010 50,000 B. Less: Depreciation for 2010 (6.000) ©. Book Value as on 01-04-2011 48,000 D. Less: Depreciation for 2011 (4500) E, Book Value as on 01-04-2012 45,500, F. Less: Depreciation for 2012 (4050) G. Book Value as on 01-04-2013 36,450 Total depreciation under new method = Z 5,000 + 2 4,500 + Z 4,05 713,550 Step 3: Calculation of the difference between the total depreciation under the old method (as per Step 1) and that under the new method (as per Step 2). z A, Total Depreciation under old method 15,000 B. Total Depreciation under new method 13,850 C. Difference being excess depreciation 1,450 ‘Step 4: Depreciation for the current accounting year = 10% of 2 36,450 = % 3,645 Step 5:Dr. Machinery Account cr Date | Particulars z Date | Particulars z 01-04-10 | To Bank A/c 50,000 | 31-03-11 | By Depreciation A/c 5,000 By Balance /d 45,000 30,000 50,000 01-04-11 | To Balance b/d 45,000 | 31-03-12 | By Depreciation A/c 5,000 By Balance o/d 40,000 45,000 45,000 01-04-12 | To Balance b/d 40,000 | 31-03-13 | By Depreciation A/c 5,000 By Balance c/d 35,000 40,000 40,000 01-04-13 | To Balance b/d 35,000 | 31-03-14 | By Depreciation A/c 3,645 31-03-14 | To Profit and Loss A/c 1.450 (10% of $36,450) (Excess depreciation written By Balance c/d 32,805 ‘back on account of change from WDV method to SLM) 36,450 36,450