CSEET · Fundamentals of Accounting · Depreciation and Amortization
Kaveri Traders bought a licence on 1 July 2025 for ₹3,60,000, amortized straight-line over 6 years with nil residual value, with accounts closing on 31 March and amortization charged for the period of use. The amortization for the year ended 31 March 2026 is:
The amortization for the year is ₹45,000. The full-year charge is ₹3,60,000 divided by 6, which is ₹60,000. Since the licence was held for only nine months of the year, the charge is time-apportioned to 9/12 of that amount.
- A₹60,000
- B₹45,000Correct
- C₹30,000
- D₹15,000
Explanation
Annual amortization = 3,60,000 / 6 = ₹60,000. The licence was used for 9 months (July to March), so the charge = 60,000 x 9/12 = ₹45,000. Charging a full year (₹60,000) ignores the part-year use.
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