Acca financial Accounting (FA) Study Text ac ca (FA)

Assets bought/sold in the period 

If a non

­

current asset is bought or sold in the period, there are two ways in 

which the depreciation could be accounted for: 

•

 

provide a full year’s depreciation in the year of acquisition and none in the 

year of disposal 

•

 

monthly or pro

­

rata depreciation, based on the exact number of months 

that the asset has been owned. 

 

 

Illustration 1 – Reducing balance method 

 

Dev, a trader, purchased an item of plant for $1,000 on 1 August 20X1 

which he depreciates on the reducing balance at 20% pa. 

What is the depreciation charge for each of the first five years if the 

accounting year end is 31 July? 

 

 

 

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