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Hello sir, I had a question.
I want to ask like in RBM method we do not subtract scrap value from Cost to find depreciable amount as it is already calculated in that percentage.
My question is that when we are given percentage or rate of depreciation in SLM so do we subtract residual value and than find percentage or we do with cost straight away.
Demonstration
SLM = (cost – residual value) x Rate of depreciation %
Or
SLM = (cost) x Rate of depreciation %
We are not subtracting Scrap value here.It is the first method. The aim is to spread the loss of value over the expected useful life of the asset. However, if there is a residual value you are more likely to be told the life of the asset. So, if 5 years, the difference between cost and residual value is spread over 5 years – ie 20% of the difference per year.
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