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Depletion Method

Depletion refers to physical deterioration by the exhaustion of natural resources. This method is used for depreciating waste assets like mines, quarries, oil wells, etc. Annual depreciation will be equal to the quantity extracted multiplied by rate per unit. This method is also known as the productive output method.


The calculation of depreciation is done in the same manner as that of the production unit method.

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Illustration 11


A Ltd. acquired a lease right of a mine for 10 years of a mine on 1st April 2009 on a lump sum payment of ₹ 2,25,000 to the landlord. It was estimated by the expert that the coal deposit of the mine was 10,00,000 tonnes, 75 per cent of which could be raised within the time period allowed. A Ltd. decided to depreciate the lease on the depletion method. The sales and stocks (in tonnes) were as under:

Show the lease account from 1st April 2006 to 31st March 2015.


Working Notes:


Depreciation per tonne


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= ₹ 0.30 per tonne

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