Question

Which of the following is the main cause of depreciation?

• A. Fall in the market value of money
• B. Fall in the market value of an asset
• C. Physical wear and tear
• D. None of the above

Answer 1

Answer: (B)

Fall in the market value of an asset

When asset losses its efficiency, its value goes down and depreciation arises. This is true in the case of tangible assets like plant and machinery, building, furniture, tools and equipment used in the factory. Market value and accident of an asset are other causes of depreciation that decrease the value of assets.