“Calculate prorated depreciation” means calculating depreciation only for the portion of a period (month, quarter, or year) that an asset was actually in use — not for the full period.
💡 In simple terms:
Prorated depreciation = partial depreciation based on time the asset was active.
If an asset was acquired or disposed in the middle of a month (or year), you don’t depreciate it for the entire period — only for the time it was available for use.
🧮 Example:
Let’s say:
- Depreciation = 1,200 per year
- Method = Straight line
- That’s 100 per month (1,200 ÷ 12)
- Asset acquired on April 15
If you use prorated depreciation, and your policy is to calculate from the mid-month, you’ll only depreciate half of April:
👉 April depreciation = 100 × 0.5 = 50
Then from May onward, it’ll take full monthly depreciation (100 per month).
Without proration, it would incorrectly calculate 100 for April, as if the asset was in use the entire month.
⚙️ In D365 F&O:
In Fixed assets parameters or Depreciation profile setup, you can select:
- Prorate acquisition date
- Prorate disposal date
- Prorate convention (full month, half month, actual days, etc.)
When you run depreciation, D365 calculates it proportionally based on the date the asset was acquired or disposed.
✅ Summary:
| Term | Meaning |
|---|---|
| Depreciation | Reduction in asset value over time |
| Prorated depreciation | Depreciation calculated only for the time the asset was in use |
| Purpose | Fair and accurate expense allocation when asset not used the full period |
Source : Chatgpt