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It is a common practice in business (not in theory) that when intangible non current assets are purchased part way through accounting period, they charge full year’s depreciation in first year irrespective of the time of its purchase then do not charge any depreciation in the year of its disposal.
My question is ..is this way of treatment only possible when straight line method is followed or it is also possible in reducing value method.
If it is also possible in reducing value method, how it is done?Charging a full year in the year of purchase and none in the year of sale is very common for tangible assets also, whether using straight line or reducing balance.
I am puzzled as to why you ask ‘how it is done?’. It is done in exactly the normal way but without ‘counting the months’.
I suggest that you watch my free lectures on depreciation – I work through examples with reducing balance depreciation with a full charge in the year of purchase and none in the year of sale.
I am told you before that the lectures are a complete free course for Paper F3 and cover everything needed to be able to pass the exam well – you cannot expect me to type them all out here 🙂
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