01-29-2011, 10:38 PM
Companies normally have 3 types of policies for the depreciation charge;
(1). Full year depreciation in the year of purchase and no depreciation charged in the year of disposal,
(2). Vice versa of (1).
(3). Time apportionment basis
In the given scenario, year of purchase and disposal is same. Therefore, if either of the policy (1) and (2) is followed, no depreciation is charged. However, in the scenario, the time-apportionment basis gives a more fairer representation of the usage of the Machinery. It has been used for few months and is therefore not as good as a new machine
This is my understanding(i am not a professional)
(1). Full year depreciation in the year of purchase and no depreciation charged in the year of disposal,
(2). Vice versa of (1).
(3). Time apportionment basis
In the given scenario, year of purchase and disposal is same. Therefore, if either of the policy (1) and (2) is followed, no depreciation is charged. However, in the scenario, the time-apportionment basis gives a more fairer representation of the usage of the Machinery. It has been used for few months and is therefore not as good as a new machine
This is my understanding(i am not a professional)
