What is gross block and net block



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How to identify Gross block and net block in the Balance Sheet

3 Answer(s)


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Gross block is the sum total of all assets of the company valued at their cost of acquisition. This is inclusive of the depreciation that is to be charged on each asset. Net block is the gross block less accumulated depreciation on assets. Net block is actually what the asset are worth to the company.

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Simply , Gross Block Means - Total Value of Asset ( Its Original Puirchase price+any capex)

             Net Block Means - Original Value Of Asset( As Above) - Till Date Charged Depreciation 

Normally "Accumulated depreciation account " is maintained which is credited by the depreciation charged each year on the asset of the company , Once you debit current period depreciation , such depreciation shall be trasnferred to Accumulated Depreciation Account .

 

For Reporting purpose under companies act, it need to be made like Gross Block -Accumulated Depreciation - Net Block , Pls find example below it shall clear your query more precisely .

 

Eg. Asset purcahsed on 1.4.2013 , at price of Rs.20,000 Rate of depreciation as per companies act ,say 20%,Simply First FY 2013-14 Depreciation shall be of Rs. 4,000 and WDV on 31.3.14 shall be 16,000,For Next FY ie.2014-15 , WDV shall be 16,000 depreciation charged shall be Rs. 3,200 .Now How it will be reported in Block system ?

Ans. - FY 13-14 Gross Block Rs.20,000

          Less- Depreciation -4,000

        Net Block on 31.3.14.     16,000

FY 14-15 Gross Block Rs. 20,000

 Dep.as on 1.4.14.Rs. 4,000

Add- For period FY14-15Rs. 3,200

Accumulated Depreciation - Rs. 7200

Net Block ( Rs.20,000-7,200) = Rs.,12800

It will continue until company absorb full value or not sold off .

 

Why Block , Suppose in above exmaple asset is Mini Laptop, If company acquire any new laptop it shall also come under this block ,which have same depreciation rate and useful life .

 

Thanks 

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