Depreciation

How to Record Depreciation in Zoho Books

Since Zoho Books does not auto-calculate depreciation, you post it manually. Create a journal entry: debit “Depreciation Expense” (an expense account) and credit “Accumulated Depreciation” (a contra-asset account linked to the fixed asset). The net book value of the asset on the Balance Sheet is the original cost minus accumulated depreciation.

To avoid forgetting monthly depreciation, set up a Recurring Journal Entry in Zoho Books. Define the debit and credit accounts, the amount, and the frequency (monthly), and Zoho Books will generate the entry automatically each period until the asset is fully depreciated.

Depreciation Methods Used in India

The two most common depreciation methods in India are Straight-Line Method (SLM) and Written Down Value (WDV). Under SLM, you deduct the same amount each year (cost minus salvage value, divided by useful life). Under WDV, you apply a fixed percentage to the remaining book value each year, resulting in higher charges early in the asset’s life. The Companies Act 2013 Schedule II prescribes specific useful lives and WDV rates for different asset classes, which your chartered accountant will use to determine the correct depreciation amounts.

Depreciation and Tax in India

For income tax purposes under the Income Tax Act, depreciation is computed on the block of assets concept using WDV rates prescribed by the IT Act, which often differ from Companies Act rates. This creates a difference between book depreciation (used in Zoho Books P&L) and tax depreciation (used in IT return), giving rise to deferred tax. Your CA will handle the deferred tax calculation; your job is to keep the Zoho Books depreciation journal entries accurate and complete.