Depreciation charged under diminishing methoda)Increase every yearb)Decrease every yearc)Increase in one year and decrease another yeard)Same every yearCorrect answer is option 'B'. Can you explain this answer?

Question

Answer

Depreciation charged by diminishing value method will decrease every as the asset will be decrease in its value every year due to obslence and wear and tear etc.... so correct answer is b

Answer

Under diminishing method depreciation decrease every year because depression is charged on after reducing the last depreciation which reduced the value of asset so that depreciation decrease every year.

Answer

Depreciation charged by diminishing value method will decrease every year as the asset will decrease in its value every year due to obslence and wear and tear etc. So correct answer is b

Answer

The answer is b coz with the passage of tym n depreciation provided on machine reduce the value of assets due to which less dep is charged n it decrease every year

Answer

Depreciation charged under diminishing method refers to the reduction in the value of an asset over its useful life. The diminishing method, also known as the reducing balance method or the declining balance method, is a commonly used method to calculate depreciation.

Under the diminishing method, the depreciation expense decreases every year, which is why the correct answer is option 'B' - Decrease every year.

Here is an explanation of why depreciation charged under diminishing method decreases every year:

1. Calculation of depreciation:
- In the diminishing method, the depreciation expense is calculated as a fixed percentage of the asset's carrying value or net book value.
- The carrying value is the initial cost of the asset minus its accumulated depreciation.
- The fixed percentage used for depreciation calculation is higher in the earlier years and decreases gradually over time.

2. Higher depreciation in the earlier years:
- Because the fixed percentage is higher in the earlier years, the depreciation expense is higher, resulting in greater reduction of the asset's value.
- This higher depreciation expense in the beginning is justified by the fact that assets tend to lose their value more rapidly in the initial years of their useful life.

3. Gradual reduction in depreciation:
- As the asset ages, its value decreases and the depreciation expense is calculated on a decreasing carrying value.
- Since the fixed percentage used for depreciation calculation remains the same, the depreciation expense decreases every year.
- This decrease in the depreciation expense reflects the decreasing rate of value loss as the asset gets older.

4. Example:
- Let's consider an asset with an initial cost of $10,000 and a useful life of 5 years.
- If the fixed percentage for depreciation calculation is 20%, the depreciation expense for the first year would be $2,000 (20% of $10,000).
- In the second year, the depreciation expense would be $1,600 (20% of $8,000, the carrying value after the first year).
- This reduction in the depreciation expense continues in subsequent years until the asset's value is fully depreciated.

In conclusion, depreciation charged under the diminishing method decreases every year because the fixed percentage used for depreciation calculation is higher in the earlier years and decreases gradually over time. This method reflects the decreasing rate of value loss as the asset ages.

Similar Commerce Doubts

The balance of machinery on baishak 1st 2077 was rs. 224000. It was purchased on baishak 1st 2075. Depreciation was charged 20%p.a. under diminishing balance method. On chaitra 31,2077 the machine was sold for rs. 180000. a. Cost of Machine.?

A trader purchased machinery of rs10,000 in Jan 2004 Depreciation is charged 25% diminishing balance at the end of the third year it was sold for rs 1000 profit or loss on the sale of machine?

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