Practice questions:
A business purchases machinery in July 1993 for £120,000 with an expected life of 8 years and a residual value of £24,000. The business uses the straight line method of depreciation.
In the year of purchase the business charges depreciation only for the period it has owned the asset. The businesses year end is 31 December.
Describe the correct treatment for the purchase of this machinery in the profit and loss account and the cash flow statement.