Understand CA Foundation Depreciation for May 2025 Exams

Introduction to Depreciation in CA Foundation

Moreover, you can even know the weightage, syllabus and important tips and tricks related to the accountancy exam 2025. As per the CA Foundation Exam Date, the Accounts paper will be conducted on May 15, 2025.VSI Jaipur is briefly explaining the entire CA Foundation depreciation accounting chapter in this article. Hope this piece of information will help you to understand the simple concept of depreciation and eventually will help you to score good marks in your CA Foundation accounting paper.

In this blog, we will cover:

• The meaning and importance of depreciation
• Methods of depreciation with examples
• Accounting treatment and journal entries
• Depreciation-related questions expected in the May 2025 CA Foundation exams

Meaning and Importance of Depreciation

Depreciation is an accounting concept that ensures that the cost of an asset is allocated over its useful life. This helps in:

1. Accurate Profit Calculation – Ensuring expenses are matched with revenues
2. Asset Valuation – Showing a realistic asset value in financial statements
3. Tax Savings – Claiming depreciation reduces taxable income
4. Capital Budgeting – Helping businesses in long-term planning

Factors Affecting Depreciation

• The asset’s cost includes the cost of transportation and installation at the time of purchase. Estimated Useful Life: The period for which the asset is expected to be used.
•  Residual Value: The asset’s estimated value at the end of its useful life.
•  Obsolescence: Technological changes can reduce an asset’s lifespan.

Methods of Depreciation

There are two widely used methods of calculating depreciation:

1. Straight-Line Method (SLM)

• Under SLM, depreciation is charged evenly over the useful life of the asset.
• Formula:
• Example:
  • Cost of Machinery = Rs. 1,00,000
  • Residual Value = Rs. 10,000
  • Useful Life = 5 years
  • Depreciation per year = (1,00,000 – 10,000) / 5 = Rs. 18,000 per year

2. Written Down Value Method (WDV)

• Under WDV, depreciation is charged as a fixed percentage on the book value of the asset.
• Formula:
• Example:
  • Cost of Equipment = Rs. 80,000
  • Depreciation Rate = 10%
  • Year 1 Depreciation = 80,000 × 10% = Rs. 8,000
  • Year 2 Depreciation = (80,000 – 8,000) × 10% = Rs. 7,200

Difference Between SLM and WDV

Journal Entries for Depreciation

1. Charging Depreciation

Entry:

Depreciation A/c       Dr.  XXXX  

   To Asset A/c        XXXX  

(Being depreciation charged on asset)

2. Transferring Depreciation to Profit & Loss Account

Entry:

Profit & Loss A/c     Dr.  XXXX  

   To Depreciation A/c  XXXX  

(Being depreciation transferred to P&L account)

Expected Questions in CA Foundation May 2025 Exams

Here are some sample questions that might appear in the CA Foundation May 2025 exams:

1. Conceptual Questions:
   • Define depreciation and explain its need in accounting.
   • List any three factors affecting depreciation.
2. Numerical Problems:
   • Compute depreciation under SLM and WDV methods for given assets.
   • Calculate accumulated depreciation for a machinery purchased at Rs. 1,50,000 with a 10% WDV depreciation rate for three years.
3. Journal Entry-Based Questions:
   • Pass the necessary journal entries for depreciation charged on a Truck worth Rs. 5,00,000 at 20% WDV for two years.

Tips to Prepare Depreciation for CA Foundation Exam

• Avoid rote learning and concentrate on logic to clearly comprehend concepts. Practice numerical problems: Solve at least 20-30 different problems.
•  Revise journal entries: Ensure you can record depreciation correctly.
•  Use Mnemonics: To remember differences between SLM & WDV methods.
•  Exam pattern information can be found in previous ICAI sample papers.

Conclusion

Depreciation is a fundamental concept in CA Foundation Accounting.  A strong grasp of its principles, methods, and journal entries will not only help in exams but also in practical accounting applications.  Stay consistent with your preparation, practice multiple problems, and refer to ICAI study material to ensure success in May 2025 CA Foundation exams.

 Visit the official ICAI website or reputable CA coaching platforms for additional study materials and sample papers.