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Question

The cost incurred while compensating for the wear and tear of fixed assets is called .

A
amortisation
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B
depreciation
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C
expense
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D
loss
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Solution

The correct option is B depreciation
Fixed assets such as buildings and machineries depreciate due to wear and tear and obsolescence. Over a period of time, these assets require maintenance to run smoothly. The cost incurred to maintain their functioning is known as depreciation.

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