Question

The economic factors causing depreciation is/are:

• A. Time factor
• B. Obsolescence and inadequacy
• C. Wear and tear
• D. Money valuation

Answer 1

Answer: (B)

Obsolescence and inadequacy

There are four cause due to which depreciation takes place:

1. Physical Deterioration
2. Economic Factors
3. Time Factors
4. Depletion

Economic factors arises due to obsolescence and inadequacy. Obsolescence means the process of becoming obsolete and out of date. New model and new technology may make the asset obsolete even though it is in good physical condition. Inadequacy refers to the stoppage of asset’s usage because of growth and changes in the size of the firm

Hence, Option (B) is the correct answer.