Accounting Standard 6 (AS 6) is an accounting standard issued by the Institute of Chartered Accountants of India (ICAI) that governs the principles and methodologies for depreciation accounting. It defines depreciation as the measure of the wearing out, consumption, or loss of value of a depreciable asset arising from use, time, or obsolescence.
The document discusses AS-6 depreciation accounting, focusing on the treatment, calculation, and measurement of depreciation for fixed and depreciable assets. It outlines key concepts such as historical cost, useful life, residual value, and methods of depreciation including straight-line and reducing balance methods.
Accrual Basis of Accounting (AS 1) Accrual Basis of accounting is a Fundamental Accounting Assumption for the preparation and presentation of general-purpose financial statements as per Accounting Standard (AS) 1, Disclosure of Accounting Policies.
The four common types of depreciation methods used in accounting are Straight-Line, Double Declining Balance, Units of Production, and Sum-of-the-Years'-Digits, each spreading an asset's cost differently over its useful life to reflect usage or decline in value, with Straight-Line being the simplest and most common.
6 types of assets
Equities, fixed income, cash and cash equivalents, real estate, commodities, and currencies are examples of asset classes. There is usually very little correlation and sometimes a negative correlation between different asset classes.
The main components of current assets typically include cash and cash equivalents, marketable securities, accounts receivable, inventory, prepaid expenses, and other liquid assets.
Depreciation Methods
You may depreciate property that meets all the following requirements:
It then explains 8 different depreciation methods - straight line, sinking fund, sum of years digits, declining balance, double declining balance, working hours, constant unit, and output.
1 This Standard prescribes the basis for presentation of general purpose financial statements to ensure comparability both with the entity's financial statements of previous periods and with the financial statements of other entities.
Accounting Standard (AS) 7, Construction Contracts (revised 2002), issued by the Council of the Institute of Chartered Accountants of India, comes into effect in respect of all contracts entered into during accounting periods commencing on or after 1-4-2003 and is mandatory in nature2 from that date.
Main Types Of Accounting You Can Specialize In
Understanding residency eligibility criteria. The AS6 category is a term used in the U.S. immigration process to identify asylum granted individuals applying to become permanent residents. To be eligible for these benefits, there are a number of requirements that applicants must meet in advance.
The Big Six accountancy firms – Price Waterhouse, Peat Marwick McClintock, Coopers & Lybrand, Ernst and Young, Deloitte Touche Tohmatsu and Arthur Andersen – play an important and influential part in the world economy.
As per revised AS-6, Depreciation should be charged consistently on a systematic basis based on the estimated life of an asset. If an assessee wants to change the method of depreciation, then a new method can be applied, only if required by law, or for better presentation, or to comply with AS.
One Big Beautiful Bill Act
In 2025, the OBBB reinstated 100% bonus depreciation. Starting with property placed in service after Jan. 19, 2025, businesses can again deduct 100% of the cost of most qualifying property up front moving forward.
Test 1 – asset costs $300 or less
To claim the immediate deduction, the cost of the depreciating asset must be $300 or less. The cost of an asset is generally what you pay for it (the purchase price), and other expenses you incur to buy it – for example, delivery costs.
Straight-line depreciation is the most frequently used method, and it involves spreading the cost of an asset evenly over its useful life. This results in a consistent amount of depreciation expense each year.
Depreciation is the accounting method of spreading the cost of a physical asset (like a machine or vehicle) over its useful life, recognizing that it loses value (due to wear, tear, or obsolescence) each year rather than recording the entire expense at purchase, which gives a more accurate financial picture and helps with taxes.
To properly depreciate an asset under GAAP, accounting professionals must calculate the total cost of the asset, how long the asset will last before it must be replaced and how much an asset can sell for at the end of its useful life.
The 7 common current liabilities, representing short-term obligations due within a year, typically include Accounts Payable, Short-Term Notes Payable (or Debt), Accrued Expenses (like salaries/wages/interest), Taxes Payable (income/payroll), Unearned Revenue (deferred revenue), Payroll Liabilities, and the Current Portion of Long-Term Debt, all critical for assessing a company's liquidity.
The five major asset classes are Equities (Stocks), Bonds (Fixed Income), Cash & Cash Equivalents, Real Estate, and Commodities, with Alternative Investments often being the fifth or a broad category encompassing others like private equity, hedge funds, and sometimes even crypto, used for diversification to balance risk and growth. Each class behaves differently in markets, offering distinct risk/return profiles for building a balanced investment portfolio.
The basic accounting equation states that assets = liabilities + stockholders' equity. In the accounting industry, assets are defined as anything that a business owns, has value, and can be converted to cash.