# Depreciation

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Registered Posts: 122 Dedicated contributor 🦉
Hello if a business has an accouting year starting Dec 08, they buy a photocopier for 300,000 in July 09 and sell it in 2 years time for 200,000 what is the chargeable gain, assuming you have and FYA and depreciation at 10%?

• Registered Posts: 479 Dedicated contributor 🦉
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Sorry, do you mean a chargeable gain as in for capital gains tax purposes? Because you're selling it for less than the original cost, so I don't see where the gain is coming from.
• Registered Posts: 1,809 Beyond epic contributor 🧙‍♂️
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Sounds like someone's homework to me!
• Registered Posts: 6,970 Beyond epic contributor 🧙‍♂️
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Sounds like someone's homework to me!

I hope so
• Registered Posts: 122 Dedicated contributor 🦉
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depreciation

Hi I meant balancing charge for the profit/loss on sale of the asset, not a capital gain;

Would it be 300,000 less 50,000 AIA
250,000 *0.20 =50,000
200,000*0.20=40,000

less sale price of 200,000 would be a profit to the P&L of 40,000? Or something similar!!!
• Registered Posts: 6,970 Beyond epic contributor 🧙‍♂️
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300000 Original cost
200000 selling price

depriciation @ 10% for 2 years = 300000x 10% *2 = 60000

300,000 - 60,000 - 200,000 = 40,000
• Registered Posts: 495 Dedicated contributor 🦉
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Thats one expensive photocopier
• Registered Posts: 6,970 Beyond epic contributor 🧙‍♂️
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or is it just as worring that someone in member discussion is asking such a simple question?
• Registered Posts: 122 Dedicated contributor 🦉
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Depreciation

It's only simple if you know it!!

I did my tax exams a few years ago now and I couldn't remember what the AIA was, or if there were certain rules surrounding the AIA and first year depreciation.
It wasn't a real life situation, just an example question which yes - was a fairly expensive example!!!

• Registered Posts: 68 Regular contributor ⭐
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Hi lgarside

The problem is that you are talking about two completely different things and would be something that people placing posts here would know as it is pretty basic knowledge.

Depreciation is the way that you account for the use/wearing out of an asset in your accounts.

Depreciation is not accepted as a tax deductable expense by HMR&C and must be added back to profits in a business tax computation when calculating the amount chargeable to tax.

AIA = annual investment allowance (its new and only started in April 2008) and is one of the ways to write off qualifying expenditure on plant and machinery against profits for tax.

Capital allowances including the AIA are deducted from profits in the business computation to reduce the tax liability.

Have a look here for some information

http://www.hmrc.gov.uk/budget2008/bn12.pdf

Julia
• Registered Posts: 122 Dedicated contributor 🦉
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depreciation

Thanks, I did wonder why I couldn't remember anything about the AIA. Can you just clarify for me, so the AIA and FYA's don't actually appear in the accounts. They are simply for the computation of tax?

When you sell the asset do you have to deduct the AIA and FYA, or do you simply take the cost of the asset less depreciation less what you sell it for?

The chargeable gain/allowance - is this in relation to a tax computation or something that goes into the accounts.

• Registered Posts: 4,234 Beyond epic contributor 🧙‍♂️
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groundy wrote: »
Thats one expensive photocopier

i remebr working in a factory making various filtering covers for different stuff and the boss came back from a factory and then needed a cover for a photcopier and the sizes he gave me was 76 x 68 x 60.......so i made the cover 76" x 68" x 60" .....which looked big for a normal photcopier but looks ok for a industrial one.....

when i showed the boss he flipped and said the sizes he gave was in cm !!!!

which is a lot lot smaller !
• Registered Posts: 6,970 Beyond epic contributor 🧙‍♂️
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mark130273 wrote: »
i remebr working in a factory making various filtering covers for different stuff and the boss came back from a factory and then needed a cover for a photcopier and the sizes he gave me was 76 x 68 x 60.......so i made the cover 76" x 68" x 60" .....which looked big for a normal photcopier but looks ok for a industrial one.....

When i showed the boss he flipped and said the sizes he gave was in cm !!!!

Which is a lot lot smaller !

O mark
• Registered Posts: 4,234 Beyond epic contributor 🧙‍♂️
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A-Vic wrote: »
O mark

hey it was not my fault who in this modern world would write down sizes in cm !!! no-one

the digram was on the paper with the sizes written down as 76 x 68 x 60 but there was not any sign of the actual measuring system that he was using .....and if a business was looking for a small cover for their small photcopier im sure they could of just bought a cloth from abacans or something simular !
• Registered Posts: 2,415 Beyond epic contributor 🧙‍♂️
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mark130273 wrote: »
ii made the cover 76" x 68" x 60" .....which looked big for a normal photcopier but looks ok for a industrial one

I'd love to see an industrial photocopier 6' 4" long, 5' 8" wide and 5' tall... probably weighs a couple of tons too.
• Registered Posts: 68 Regular contributor ⭐
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