CMA Foundation · Fundamentals of Financial and Cost Accounting · Depreciation (Straight Line and Diminishing Balance Methods)
Gupta & Co. bought a machine on 1 July 2023 for ₹4,00,000 and charges depreciation at 15% p.a. on the diminishing balance method, accounting year ending 31 March, with depreciation charged for the period of use. What is the depreciation for the year ended 31 March 2024?
The depreciation for the year is ₹45,000. The machine was used for only nine months from 1 July 2023 to 31 March 2024, so the annual charge of 15% on ₹4,00,000, which is ₹60,000, is multiplied by 9/12. Charging a full year would overstate the expense.
- A₹60,000
- B₹45,000Correct
- C₹15,000
- D₹30,000
Explanation
The machine was used for 9 months in the year. Depreciation = 4,00,000 × 15% × 9/12 = ₹45,000. ₹60,000 ignores the part-year use, which is the key distractor error.
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