Question

Reducing balance method of depreciation is ____________.

• A. where amount of depreciation does not change from year to year
• B. where amount of depreciation increases every year
• C. where the amount of depreciation decreases every year
• D. none of the above

Answer 1

The correct option is C where the amount of depreciation decreases every year

Where the amount of depreciation decreases every year.

In written down value method, the depreciation is provided at a predetermined percentage, on the balance cost of asset after deducting the depreciation previously charged. It means under this method, the amount of depreciation changes every year.

For e.g. Cost of asset Rs. 100000

Rate of depreciation 10%

The amount of depreciation for 3 years is calculated as shown below:

Year	Balance cost of asset Rs.	Depreciation	Written down Value (Rs.)
1	100000	10000	90000
2	90000	9000	81000
3	81000	8100	72900