Which of the following is/are the method(s) of calculating depreciation…
2021
Which of the following is/are the method(s) of calculating depreciation amount? I. Straight line method II. Written down value method
- A.
Only I
- B.
Only II
- C.
Both I and II
- D.
Neither I nor II
Attempted by 3 students.
Show answer & explanation
Correct answer: C
Depreciation is the systematic allocation of a tangible fixed asset's depreciable cost over its useful life, reflecting wear, tear, usage, and obsolescence. Accounting practice recognizes several established techniques for computing the periodic depreciation charge; the two classical and most commonly tested methods are the straight line method and the written down value (reducing balance) method.
Method | Basis of computation |
|---|---|
Straight line method | Charges an equal amount every year: (Original cost − Residual value) ÷ Useful life |
Written down value method | Charges a fixed percentage on the asset's opening (reducing) book value each year, so the yearly charge declines over time |
The question lists these two techniques as statements I and II and asks which are valid methods of computing the depreciation amount. Both statements describe real, standard depreciation methods used in accounting and taxation practice — straight line depreciation and the diminishing/written down value approach — so both statement I and statement II qualify as valid methods.
As an independent check: under the straight line method the yearly charge stays constant because it is computed once from cost, residual value, and useful life; under the written down value method the yearly charge falls each year because it is a fixed rate applied to a shrinking book value. Both computations are internally consistent and both are taught and applied as legitimate depreciation methods, confirming that the complete answer is that both methods are valid.