Question

In which one of the following methods of charging depreciation shall be balance never be reduced to zero?

• A. Fixed instalment method
• B. Depreciation fund method
• C. Diminishing balance method
• D. Depletion unit method

Answer 1

The correct option is C Diminishing balance method

Under diminishing balance method, depreciation calculated at a fixed percentage on the original cost (in the first year) and on the Written down value (in subsequent years) of fixed depreciable asset is written off during each accounting period over the expected useful life of the asset. Under this method, the rate of depreciation remains constant year after year whereas the amount of depreciation goes on decreasing but never reduced to zero.