Question

Interest debited to asset account in which method of depreciation?

• A. Annuity method
• B. Depreciation fund method
• C. Insurance policy method
• D. Revaluation method

Answer 1

Answer: (A)

Annuity method

Option A is correct. The Annuity method of depreciation is a process used to calculate depreciation on an asset by calculating its rate of return as if it was an investment. The annuity method assumes that the sum spent on buying an asset is an investment that should be expected to yield interest. As such, the interest is charged on the diminishing balance of the asset, It is then debited to asset account.