Question

Under diminishing balance method, annual depreciation ___________.

• A. Increases every year
• B. Decreases every year
• C. Is constant every year
• D. None of the above

Answer 1

The correct option is B Decreases every year

Under diminishing balance method, the amount of depreciation is calculated as a fixed percentage of the reducing or diminishing value of the asset standing in the books at the beginning of the year, so as to bring down the book value of the asset to its residual value. The amount of depreciation goes on decreasing every year.