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CA Foundation · Accounting · Depreciation and Amortisation

Sharma Traders bought furniture on 1 April 2022 for ₹2,00,000 and depreciates it at 10% per annum on the written-down value method. The 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 ₹18,000. Under the written-down value method the rate applies to the opening book value of ₹1,80,000, which is cost ₹2,00,000 less first-year depreciation of ₹20,000. Using the original cost would give ₹20,000, which is the straight-line figure.

  1. A₹20,000
  2. B₹18,000Correct
  3. C₹16,200
  4. D₹36,000

Explanation

Depreciation for 2022-23 = 10% of 2,00,000 = 20,000, so the WDV on 1 April 2023 is 1,80,000. Depreciation for 2023-24 = 10% of 1,80,000 = ₹18,000. The figure ₹20,000 is wrong because it applies the rate to the original cost, as in the straight-line method.

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