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I have a query with regard to computation of depreciation.
A company XYZ uses straight line method on the rate of 25% for machinery and tools – which means it has a 4 year useful life.
If it purchased at 3rd July 2016 and the year end is 31st March 2020. what would the depreciation charge be as at 31st March 2020?
Based on my computations, 2020 would be the last year of charging depreciation right?
So what would be the number of days used for computing depreciation?
Would it be: i) from 1st April 2019 to 3rd July 2019 or
ii) from 3rd July 2019 to 31st March 2020 or
iii) 365 days as the last year of depreciation charge?
It would depend on the policy used by the company, and most businesses would use a monthly policy as opposed to daily to keep it all as simple as possible.