Question

The amount of depreciation charged to Profit and Loss Account varies every year under _________.

• A. Fixed installment method
• B. Annuity method
• C. Diminishing balance method
• D. Insurance policy method

Answer 1

The correct option is C Diminishing balance method

Depreciation is provided on fixed assets on account of wear and tear of the asset by using them.

Depreciation is provided on assets based on the useful life of the assets. Various methods are used to provide the depreciation which included the straight-line method and the written down value method.

Under the diminishing balance method, depreciation charged to the profit & loss account every year will differ as the value on which depreciation is calculated will also reduce every year.