Under higher system buyer of assset chsrges the depreciation on
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Whether the depreciation on assets (acquired under hire-purchase agreement) should be charged or not is a disputed question since, under hire-purchase system, ownership is not transferred from the seller to the buyer till the last installment is paid.
From the practical point of view, of course, depreciation should be charged at the specific rate on the cash price of the asset either under Fixed Instalment Method or under Diminishing Balance Method as per instruction of the problem.
The following points may be advocated:
Firstly:
Since the asset is used by the buyer, whether the ownership is transferred or not, depreciation must be provided in the books of the purchaser, i.e., to be shown at its real value.
From the practical point of view, of course, depreciation should be charged at the specific rate on the cash price of the asset either under Fixed Instalment Method or under Diminishing Balance Method as per instruction of the problem.
The following points may be advocated:
Firstly:
Since the asset is used by the buyer, whether the ownership is transferred or not, depreciation must be provided in the books of the purchaser, i.e., to be shown at its real value.
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