Depreciation partial addition or deletion refers to the situation where an asset is acquired or disposed of partway through a fiscal year, resulting in an incomplete year of depreciation. In such cases, the depreciation for the partial year is calculated based on the number of days that the asset was owned during the fiscal year.

For example, if a company purchases a machine on July 1st and expects it to have a useful life of 10 years, but its fiscal year ends on December 31st, the company will have owned the machine for only six months in the first fiscal year. To calculate the depreciation expense for the first fiscal year, the company would use the following formula:

(Cost of the asset – Residual value) x (number of days owned in the fiscal year / total number of days in the fiscal year) x (1 / useful life of the asset)

Assuming the cost of the machine is ₹50,000, its residual value is ₹5,000, and the fiscal year has 365 days, the depreciation expense for the first year would be:

(₹50,000 – ₹5,000) x (184 / 365) x (1 / 10) = ₹2,479.45

This amount represents the depreciation expense for the six months that the machine was owned in the first fiscal year. The company would then use the straight-line method to calculate the depreciation expense for subsequent years, assuming the asset has a remaining useful life of 9.5 years.

Another example, suppose a company has a pool of assets that has been depreciated at a rate of 10% per year for the past three years. If the company purchases a new asset with a useful life of five years and a depreciation rate of 20% per year, the weighted average depreciation rate for the pool of assets would be:

((3 years x 10%) + (5 years x 20%)) / 8 years = 16.25%

This new depreciation rate would then be applied to the remaining book value of the pool of assets to determine the annual depreciation expense.

Similarly, when an asset is retired or sold, it is necessary to adjust the remaining book value of the pool of assets and recalculate the depreciation expense accordingly. This is typically done by removing the asset’s cost and accumulated depreciation from the fixed asset register and adjusting the remaining book value and depreciation rate for the pool of assets.

Depreciation partial addition/deletion can be a complex process, and it is important for companies to carefully document and track all changes to their fixed asset registers to ensure accurate financial reporting. Companies may choose to use specialized software or work with accounting professionals to manage these processes and ensure compliance with accounting regulations.