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CA Foundation · Accounting · Depreciation and Amortisation

Rao Traders bought a machine on 1 October 2023 for ₹6,00,000 with no residual value and a useful life of 5 years. It charges straight-line depreciation on a time basis and its books close on 31 March. What is the depreciation for the year ended 31 March 2024?

Depreciation for the year ended 31 March 2024 is ₹60,000. The full-year straight-line charge is ₹6,00,000 divided by 5, or ₹1,20,000, and the machine was used for only six months, so half of that amount is charged.

  1. A₹60,000Correct
  2. B₹1,20,000
  3. C₹30,000
  4. D₹50,000

Explanation

Annual depreciation = 6,00,000 ÷ 5 = 1,20,000. The machine was used for 6 months (October to March), so the charge is 1,20,000 × 6/12 = ₹60,000. Charging the full ₹1,20,000 ignores the part-year use.

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