Question

The term "___________" refers to loss of usefulness arising from external factors like technological changes, improvement in production process, legal changes or restriction changes in market demand etc.

• A. Depreciation
• B. Depletion
• C. Amortization
• D. Obsolescence

Answer 1

The correct option is D Obsolescence

Obsolescence is a notable reduction in the utility of an inventory item or fixed asset. The determination of obsolescence typically results in a write-down of the inventory item or asset to reflect its reduced value. Obsolescence can arise when there are less expensive alternatives in the marketplace, or when customer preferences change and many more external factors leads to obsolescence.