Why depreciation is not charged on land?

  • Interview Candidate
  • 92
  • 40569

Showing Answers 1 - 75 of 92 Answers

chowdary.thakkella

  • Dec 10th, 2006
 

this is not used in the daily transactions. this only used in the company purpose and hence is not depreciable.

  Was this answer useful?  Yes

archana

  • Dec 12th, 2006
 

Land is such an asset whose value goes on increasing, unlike other assets whose value gets reduce over a period of time. depreciation is charged on assets so that when in future , asset will be replace we will have money to purchase new asset. But in case of land this not happens that is why depreciation is not hcarged on land

  Was this answer useful?  Yes

Rajagopalan Gowrisankar

  • Dec 13th, 2006
 

Depreciation is charged to keep the asset intact with the market value of the asset. Value of assets will decrease due to the usage and also because of the efflux of time. Because of the above said reason value of the asset will be reduced every year by way of depreciation. Rate of depreciation,amount and method will be adopted because of the regulations and convenience. In case of land the value is keep on increasing and hence we are not providing for depreciation. If the value decreases definitely it should be recognised in the books by way of depreciation. We cannot provide for appreciation because it is a notional profit.

L.Rajeshwar Rao

  • Dec 26th, 2006
 

Land is such an asset whose value goes on increasing always, unlike other assets whose value gets reduce over a period of time. depreciation is charged on assets so that when in future , . But in case of land this not happens that is why depreciation is not charged on land

  Was this answer useful?  Yes

Maria

  • Mar 5th, 2007
 

For calculating depreciation, you need to know the life of the assets. i.e. How long the asset will be used. As far as land is concerned there is no estimated life available. Hence we cannot depreciate land.

  Was this answer useful?  Yes

Monkey Cuthbert

  • May 19th, 2008
 

Depreciation aims to spread the cost (or value) of an asset over it's economic useful life (i.e. the preiod over which it is to be expected to be used up). The reason land is usually not depreciated is that the land itself does not get used up. There are some exceptions to this rule (e.g. quaries are depreciated as the land does get used up).

  Was this answer useful?  Yes

nahidul

  • Mar 14th, 2009
 

First of all Land is a fixed asset. Like all fixed asset we dont depreciate on land as we do on other fixed asset like building, or vehical. Its because all the other asset we use and depreciate is likely to have a total year of life time or total number of product it can produce or can cross definite number of kilometers (for car). But you can not count the life time of land or total amount of production. We also depreciate other asset on what will suppose to be future market value. But as we know land dont usually lose its market value. But if on some aspect land lose its market value we can use DEPLETION a/c to depreciate the land. Its not actually depreciating the land but adjusting with present market value.

So, this is the reason why we dont depreciate on the land.

Nilam

  • Jul 16th, 2011
 

Land is not depreciated because land is assumed to have an unlimited useful life.
Other long-lived assets such as land improvements, buildings, furnishings, equipment, etc. have limited useful lives. Therefore, the costs of those assets must be allocated to those limited accounting periods. Since land’s life is not limited, there is no need to allocate the cost of land to any accounting periods.

  Was this answer useful?  Yes

mangiraj yumkham

  • Jul 24th, 2011
 

Land has no wear and tear value and also it has no is life cycle. So, it cannot be charge depreciation.

  Was this answer useful?  Yes

prabha singh

  • Jul 31st, 2011
 

land is only asset . the price of which does not come down.
Also there is no maintenance charges for land

  Was this answer useful?  Yes

shilpa

  • Aug 4th, 2011
 

depreciation is not charged on land because u cannot estimate the usefulness of land. the value of land does not deteriorate with time like equipment, etc.

  Was this answer useful?  Yes

PREETAM SINGH

  • Aug 7th, 2011
 

Because land is for ever, Depreciation can calculate only on those assets which are having a life limit or estimation of life can be done.

  Was this answer useful?  Yes

Nivesh Tater

  • Oct 10th, 2011
 

As per AS 6 " ACCOUNTING FOR DEPRICIATION " - Depreciation is charged on depreciable asset and in general term depreciable asset means asset whose value will be diminished over a period of time due to wear n tear,affix of time etc. Their is fixed period for use of an asset.
And for land their their is no any time lag for period of use of land,and it doesn't diminished by afflux of time.
That's why depreciation is not charged on Land.

  Was this answer useful?  Yes

MANINDER SANDHU,9958214206

  • Sep 10th, 2012
 

Because it is fixed assets . it only appreciates.

  Was this answer useful?  Yes

rakesh

  • Nov 22nd, 2012
 

Land value always appreciates unlike other fixed assets.

  Was this answer useful?  Yes

NAGESH KUMAR KOLUKUNDE

  • Jan 16th, 2013
 

As per depreciation formula : cost of the asset-scrap value/expected life time of the asset= depreciation.

In case of land we can find out the cost of the asset and scrap value also, but we not able to estimate the life time vale of the asset , thats the reason depreciation in land not provide properly

  Was this answer useful?  Yes

CA Ramakrishna Nagaraja

  • Feb 6th, 2013
 

As per Accounting Standard 6, depreciation has to be provided only on assets which has a limited useful life. Land does not have a limited useful life. Its useful life is unlimited. So depreciation is not provided on land.

  Was this answer useful?  Yes

tariqmomand

  • Feb 27th, 2013
 

Not many would know the fact that Land differs from Field. there is no depreciation on Land but there is some kind of depreciation on Field or so i feel. Why is there no depreciation on Land when Land does decrease in value if we raise certain type of crops most certainly the land will not be as suitable for raising rice as other lands. This will result in decrease in demand of that land and ultimately decrease in the price (at least for a season).

Tariqmomand B.Com Student from City University, Peshawar.


  Was this answer useful?  Yes

wadood khan

  • Mar 8th, 2013
 

Land is a scarce resources hence we cannot do depreciation on land.

  Was this answer useful?  Yes

niranjankumar

  • Mar 14th, 2013
 

We saw in previous answers there is no depreciation on land. Because land have no useful life time and total amount of production its correct and testified answer i will agree with it.

But in case of mines like iron ore, petroleum, natural gas, Cole etc. the land has useful time and total value of production at this time we provide depreciation on land but it is called as depletion.

Then after completion of mining the land is not useful to any other purposes in maximum of the cases. so the mined land have no value in this cases. actually at initial stage of mining the land have good value by continuing the mining the land value reduces gradually. so it leads reduction in the value of the land.

So we see depreciation on land only in case of mines but it called as depletion.

  Was this answer useful?  Yes

vinita pareek

  • Jul 8th, 2013
 

Land generally does not depreciate in value because it is a limited resource with an infinite life and can be used for a range of purposes. Explanation: All assets wear out and eventually cease to exist, except land. Land is not considered to ever be able to be destroyed, so it cant lose value and go down to zero value like other assets.

The land generally retains or increases in value Over the long term, land will go up in value over because the demand is always increasing, while they are not “making� any new land. If there is something built on the land which the business owns, the accountant has to subtract the cost of the land from the overall cost of the property in order to determine the depreciation expense for the buildings,

  Was this answer useful?  Yes

WASIM

  • Dec 2nd, 2013
 

Land generally does not depreciate in value because it is a limited resource with an infinite life and can be used for a range of purposes.

  Was this answer useful?  Yes

debashis bhattacharya

  • Feb 11th, 2014
 

The value of land depends on the development surrounding the land so if Their is no development their will be depreciation. In economic slowdown the value of land depreciate

  Was this answer useful?  Yes

pavan kumar

  • Mar 5th, 2014
 

Is Land depreciable -?

Land generally doesn't depreciated in value because it is a limited resource with infinite life and can use for a range of purpose.. Scarcity of land increase the value, there is one exception rule to deprecate land when some aspects of land is actually used up such as when a mine in these case you can depreciate the natural resources in the land by using "Depletion method".

  Was this answer useful?  Yes

Umesh

  • Aug 11th, 2014
 

We generally depreciate the assets considering the important aspect that is Life period of that asset, and in the this we cannot estimate the life of Land, without life depreciation cant be calculated. Land always appreciate....

  Was this answer useful?  Yes

Pramod Swarnkar

  • Nov 28th, 2015
 

A Hydro Power developer company purchased land and constructed building on that land. As per the agreement with the government, the company can use the assets for a period of 30 years and hand over all the asset to government after 30 years. in this case, in my opinion, the company has to depreciate the value of land as well within 30 years.

  Was this answer useful?  Yes

Pramod

  • Nov 28th, 2015
 

Land is not depreciated as the life of land in infinite. However, if the land use is finite for any entity then it has to depreciate the value of land. For example, a hydropower development company has got licence to develop the hydropower and after 30 years has to handover back to government. I this case, the land use is finite for the hydropower developers and the company has to depreciate the value of land for 30 years on straight line.

  Was this answer useful?  Yes

sagar

  • May 4th, 2016
 

No Mam...its because land does not have limited useful life...Depriciation is just a replacement cost of an asset, hence assets like land that has unlimited useful life are not depriciated. if land is taken on lease it should also be depriciated like any other fixed asset.

  Was this answer useful?  Yes

Satya Yata

  • Jun 9th, 2016
 

No we should not provide Depreciation on Land Because the life of Land is Unlimited.
We provide depreciation on Leased land because of there is a Time limit for leased land.

  Was this answer useful?  Yes

AJIT TIWARI

  • Sep 22nd, 2016
 

But why we also do not appreciate it in companys final A/C

  Was this answer useful?  Yes

Shilpa Borsare

  • Feb 19th, 2017
 

Because we cannot define useful life of land

  Was this answer useful?  Yes

vijay

  • May 8th, 2017
 

The Land always will get appreciation.

  Was this answer useful?  Yes

Give your answer:

If you think the above answer is not correct, Please select a reason and add your answer below.

 

Related Answered Questions

 

Related Open Questions