James, a business person started a transport business with two cars TA and TB which he
purchased for Kshs 600,000 and Kshs 945,000 respectively in year 2010. In March 2012, vehicle TB
was involved in an accident and was written off. In the same year he bought two cars TC and TD
for Kshs 800,000 each. In September 2013 he sold vehicle TC for Kshs 726,000. In January 2014
he purchased vehicle TE for Kshs 765,000. In March 2014 he purchased vehicle TF for Kshs
930,000.
James depreciates vehicles at the rate of 25 per cent on cost on vehicles at hand at the end of the
year irrespective of the date of purchase. He does not provided depreciation for vehicles disposed
during the year. His accounting date is 31st December.
Required:
i) What do you understand by the term accounting date? (1 marks)
ii) Calculate the amount of depreciation charged in the statement of incomes for each of the five
years. (7 marks)
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