Quote:
Originally Posted by seher bano
I am confused about the depreciation. Some time we have to take the whole year into account while depreciating. on the other hand, sometimes we use specific months and dates??? Why??
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because it is wrong to charge those months depreciation expense in which asset is not available.
For example we purchase a asset in july @ Rs:20000 with a life of 10years depreciate on straight line method.
so the depreciation expense for the year is Rs 2000( 20000/10years)
but the asset is only available for 6 months.. and it is wrong to charge whole years depreciation against the economic bebefits of only 6 months..
so the depreciation charge to this year is 1000(2000/12months*6monts)
but practically some companies have different polices.. for example a company have the policy not to charge depreciation in the purchasing year and charge full year's depreciation in the year of disposal.. or vice versa.