Question

If the rate of depreciation is the same then the amount of depreciation under written down value method will be:

• A. Equal in all years
• B. Equal in first year but higher in subsequent years.
• C. Equal in the first year but lower in subsequent years.
• D. Lower in the first year but equal in subsequent years.

Answer 1

The correct option is B Equal in first year but higher in subsequent years.

Fixed Installment Method or Equal Installment Method or Straight Line Method or Fixed Percentage on Original Cost Method: In this method a fixed or equal amount of depreciation written off as depreciation at the end of each year, during the life time of the asset.

Written-down value can be calculated by a method of depreciation that is sometimes called the diminishing balance method. This accounting technique reduces the value of an asset by a set percentage each year. When selling the asset, the book value is used to help determine the minimum value for which it will be sold.