Briefly explain what are the three main methods of calculating depreciation provisions for assets bought or sold during an accounting period

February 2nd, 2011 Comments off
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Three methods namely:

  1. FULL year’s depreciation is charged in the year of purchase ignoring the dates during the year that the assets were purchased. No depreciation is charged in the year that the assets were disposed of irrespective of how many months they were in use
  2. No depreciation is charged in the year of purchase but a FULL year’s depreciation in the year of disposal
  3. Provision for depreciation is on a TIME BASIS i.e. one month’s ownership needs  one month’s provision.

For examination purposes, where the dates on which the assets are purchased or sold are shown, the examiners would normally expect the time basis method. If no such dates are given, Method no.1 should be used unless stated otherwise.

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Financial Accounting

 
 

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