Question

In which of the following methods, the asset account appears at its original cost throughout its life?

• A. Annuity method.
• B. Depreciation fund method.
• C. Sum of years' digits method.
• D. Machine hour rate method.

Answer 1

The correct option is B Depreciation fund method.

There are various method of charging the depreciation on fixed assets:

1) Straight Line Method

2) Written down value method

3) Depreciation fund method

In the first two method, the assets are shown in the balance sheet as net block i.e. cost of assets minus the depreciation.

In case of depreciation fund method, depreciation charged every year is transferred to depreciation fund account. In this method, assets are shown in the balance sheet at its original cost throughout its useful life. Depreciation fund is created against these.