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capital allowances on reducing balances with scrap in final year, can anyone help?

Forums › ACCA Forums › ACCA FM Financial Management Forums › capital allowances on reducing balances with scrap in final year, can anyone help?

  • This topic has 1 reply, 2 voices, and was last updated 14 years ago by carl29.
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  • November 11, 2010 at 8:52 pm #45897
    jrow
    Member
    • Topics: 27
    • Replies: 15
    • ☆

    Hi all,

    can anybody help firstly understand the reducing balance for depreciation and then how to treat it for Capital allowances?

    much appreciated

    November 16, 2010 at 11:31 am #70432
    carl29
    Member
    • Topics: 14
    • Replies: 245
    • ☆☆☆

    Reducing balance applies an annual rate to amount of Depreciation to be applied, ie if you had a capital sum of 100k, and depreciated using the reducing balance method at a rate of 25% per annum, year one you would depreciate by 25k, year 2 18.75k (25% of 100k-25k), year 3 14.06k (25% of 100k-25k-18.75k) and so on.

    For capital allowance purposes, it’s the same principal, except the reducing balance is used as tax relief

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