Question

State with reasons whether following statements are True or False:
Reducing Balance Method of Depreciation is followed to have a uniform charge for depreciation and repairs and maintenance together.

Answer 1

This statement is true
The written down value or the diminishing balance method of depreciation is based on the following assumptions:

The service potential of an asset gradually reduces with the passage of time.

As an asset becomes old the cost of repairs and maintenance related to that asset gradually increases.

The written down value method of depreciation can be applied for an asset requiring more repairs in later years and whose working life cannot be reasonably estimated. For example Plant and Machinery, Buildings etc.