Question

Which method of depreciation is suitable when expenditure on repairs and maintenance increases as the machine grows old?

• A. Reducing Balance Method
• B. Straight Line Method
• C. Machine Hour Rate Method
• D. Sinking Fund Method.

Answer 1

The correct option is A Reducing Balance Method

Under this Reducing balance method, depreciation will be calculated at a certain percentage each year on the balance of the asset which is brought forward from the previous year. Every year the installment of depreciation will reduce as the beginning balance of the asset in each year will reduce. It is usually adopted for plant and machinery.

Hence, this method is suitable when expenditure on repairs and maintainence increases as machine grows old.