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Old Thursday, January 24, 2013
Rohail Khan Rohail Khan is offline
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Quote:
Originally Posted by seher bano View Post
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??
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.
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Last edited by Rohail Khan; Thursday, January 24, 2013 at 07:04 PM. Reason: further explaination
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