CA Foundation · Accounting · Depreciation and Amortisation
Rao & Sons bought a machine for ₹3,00,000 on 1 January 2024 and charges depreciation at 12% p.a. on WDV, with the year ending 31 March, on a time basis. What is the depreciation for the year ended 31 March 2024?
The depreciation is ₹9,000. The machine was in use for only three months of the year, so the annual charge of 12% on ₹3,00,000, which is ₹36,000, is multiplied by 3/12. Charging the full year would overstate the expense.
- A₹36,000
- B₹9,000Correct
- C₹27,000
- D₹12,000
Explanation
The machine was used for 3 months (January to March) in the first year. Depreciation = 3,00,000 × 12% × 3/12 = 9,000. The figure 36,000 is the full-year charge, ignoring the part-year period. The figure 27,000 wrongly uses 9 months.
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