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Sir ,should depreciation be always deducted from capital employed? In BPP kit there’s one solution where it was deducted at year end total investment, but in another situation-based question the depreciation from a new asset only got deducted from profit and not from Capital employed, even though they said to find Annual ROI (specifically Qs.324 Biscuits and Cakes).
If a new machine is bought and we are to find the ROI and RI should we or should we not deduct depreciation from Capital employed??This is very confusing to me..
There are arguments for using either the opening capital employed (which will not have this years depreciation subtracted), the closing capital employed (which will have the depreciation subtracted) or even the average capital employed.
In the exam, unless specifically told to do different, use the opening capital employed provided the information is available.
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