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How to Calculate Depreciation of Software Company

>> June 19, 2013

Respected sir,

 I am working as an accountant for software company and I want to know the how to calculate depreciation on assets of the company for the financial year 2012-13 and I want to know the how to close and finalize the accounts of the company as per present company rules. Am requesting you please give me the solution for my queries.

 Narendra from India

Narendra, not just software company but for any company, we follow following simple formula for calculating the depreciation.

= Rate of Depreciation X Value of Fixed Asset

( Important note : For calculating the value of fixed asset, we should use any on method of depreciation. It may be fixed installment method or diminishing value method.)

For calculating the depreciation, you need to make the list of all fixed assets. Building, furniture and computer, vehicle, machines and equipment are the main the fixed assets. Except this, there are lots of softwares which may company bought or developed. All are also fixed assets of company because company will get its benefits for long time. There may be some softwares whose production is just for sale. It will be the inventory. So, depreciation will not charge on these inventory. We just record the sale and purchase these inventory. Its closing stock will be the current asset of company. There are some software which are given on rent basis. All are intangible assets. As per company law and as per income tax law, there is the rate of depreciation on such software assets. So, refer both updated books for knowing current rates.

You also want to know the finalization of company's account. For, please read the written lecture of our corporate accounting section.

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