According to Accounting Standard-6, depreciation is to be provided on the basis of _____________.

Historical cost of the asset

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Market price of the asset

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Replacement cost of asset

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Any of the above

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Solution

The correct option is A Historical cost of the asset
According to Accounting standard-6, depreciation is to be provided on the basis of the historical cost of the asset.
The historical cost of a depreciable asset represents its money outlay, or it's equivalent in connection with its acquisition, installation and commissioning as well as for additions to or improvement thereof.
The historical cost of a depreciable asset may undergo subsequent changes arising as a result of an increase or decrease in long term liability on account of exchange fluctuations, price adjustments, changes in duties or similar factors.

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