Question

Which method of depreciation tends to equalize the burden on Profit and Loss Account in respect of depreciation and repairs put together?

• A. Straight line method.
• B. Diminishing balance method.
• C. Depletion method.
• D. Depreciation fund method.

Answer 1

Answer: (D)

Depreciation fund method.

Option D is the correct one.

Depreciation fund. A fund set up by a company to provide money to buy new fixed assets. Every year, the fund invests an amount of money equal to an existing asset's depreciation allowance in gilt-edged securities, giving the company money that can be used to buy new assets.