Question

Select the depreciation method identified by income tax department.

• A. Diminishing balance method
• B. Annuity method
• C. Sinking fund method
• D. None of the above

Answer 1

Answer: (A)

Diminishing balance method

Under diminishing balance method of depreciation, the charge against asset / depreciation expense reduces with the passage of time. Taxes of a business are calculated on the basis of net profit. Net profit is affected by the depreciation expense.

'Written down value' method of depreciation is one of the methods used for calculation of allowable expenses and eventually total taxable income.