Depreciation calculation using multi-shift refers to the method of calculating depreciation for fixed assets that are used for multiple shifts or operations throughout the day. This method takes into account the fact that an asset that is used for more than one shift per day will experience more wear and tear and will have a shorter useful life than an asset that is used for a single shift.

To calculate depreciation using the multi-shift method, the company will need to determine the total number of shifts that the asset is used for each day, as well as the total number of hours per shift. For example, if a machine is used for two shifts per day, each of which is 8 hours long, the machine is considered to be used for 16 hours per day.

Next, the company will need to calculate the total number of days that the asset is used during the accounting period. This is typically done by subtracting any downtime or scheduled maintenance from the total number of days in the period.

Finally, the company will calculate the annual depreciation expense using the formula:

(Asset cost – Residual value) / (Total estimated production hours x Useful life in hours)

To adjust for multi-shift operations, the formula is modified as follows:

(Asset cost – Residual value) / (Total estimated production hours x Useful life in hours x Number of shifts per day)

Using the example above, if the machine has an asset cost of ₹100,000 and a residual value of ₹10,000, and a useful life of 5 years or 20,000 hours, the calculation for annual depreciation expense using the multi-shift method would be:

(₹100,000 – ₹10,000) / (16 x 5 x 20,000) = ₹0.03125 per hour

The total annual depreciation expense for the machine would then be calculated by multiplying the hourly rate by the total number of hours the machine is used during the accounting period.

It is important for companies to carefully consider the impact of multi-shift operations on the useful life of their fixed assets and to use an appropriate depreciation method to ensure that the asset’s value is accurately reflected on their financial statements.