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Question
The amount of depreciation goes on decreasing in every year under the _________ method.
The amount of depreciation goes on decreasing in every year under the _________ method.
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Solution
The correct option is B Written down value
Under written down value method of depreciation, the depreciation is charged on the written down value of the asset every year. In such case, depreciation amount changes every year and get reduces as written down value decreases every year.
Below is the example:
Original Cost of Asset: Rs.10000Less: Depreciation @10% Year I Rs. 1000 ---------------------Written down value Rs.9000Less: Depreciation @10% Year II Rs.900 ---------------------Written down value Rs.8100Less : Depreciation @10% Year III Rs.810
Under written down value method of depreciation, the depreciation is charged on the written down value of the asset every year. In such case, depreciation amount changes every year and get reduces as written down value decreases every year.
Below is the example:
Original Cost of Asset: Rs.10000
Less: Depreciation @10% Year I Rs. 1000
---------------------
Written down value Rs.9000
Less: Depreciation @10% Year II Rs.900
---------------------
Written down value Rs.8100
Less : Depreciation @10% Year III Rs.810
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