I imagine what the accountant is you would depreciate the vehicle (a full years charge would be £2,500 @ 25% = £625) and then time apportion thecharge from the date trade commenced to the accounting period date. So if the business has been trading 9 months the charge for those months would be £625 x 9/12 = £468.75.
I would ask the accountant whether depreciation is to be calculated on a straight line (25% of the cost each year) or reducing balance (25% of the net book value) basis.
-- Edited by Truemanbrown on Friday 8th of March 2013 10:53:14 AM
Hi, I have recieved this instruction from my accountant and I can do the first part easily but I'm not sure what she wants me to do with the second bit about depreciation, any ideas?
'Introduce the vehicle at £2500.00 via capital introduced and depreciate at 25% apportioned for the time period of trading.'
He wants you top depreciate the vehicle which is normally done on a reducing balance basis.
For the first period apportion to the number of months the vehicle was available to the business (which I assume is from the start of business the way that the answer was phrased).
For example if vehicle available from the end on June and the business runs to the 5th of April then that would be £2500 * 0.25 * 10/12
In the second year that would be 1979 * 0.25 and so on.
kind regards,
Shaun.
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Shaun
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