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Question

If the total charge of depreciation and maintenance is considered as the method which would provide a uniform charge is?

A
Annuity method
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B
Straight line method
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C
Diminishing balance method
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D
Insurance policy method
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Solution

The correct option is C Straight line method

Straight line method of depreciation charges uniform or equal amount of depreciation every year on the fixed assets. Under this method, the original cost less residual value of the asset is distributed over the estimated useful life of the asset.

Thus, at the end of the useful life of the asset , the value of the asset becomes Nil in the books of accounts.


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