CA Foundation · Accounting · Depreciation and Amortisation
Under the straight-line method, Ganga Traders bought a machine on 1 October 2023 for ₹2,40,000 and charges depreciation at 10% per annum on a pro-rata (monthly) basis. The financial year ends on 31 March. What is the depreciation for the year ended 31 March 2024?
The depreciation is ₹12,000. The machine was in use for only six months of the year, so the annual charge of ₹24,000 (10% of ₹2,40,000) is multiplied by 6/12. Charging a full year would overstate the expense.
- A₹24,000
- B₹12,000Correct
- C₹6,000
- D₹18,000
Explanation
The machine was used for 6 months (October to March). Depreciation = 2,40,000 × 10% × 6/12 = ₹12,000. Charging the full year's ₹24,000 ignores the pro-rata period and is wrong.
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