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प्रश्न
State the advantages of straight-line method of depreciation.
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उत्तर
Following are the advantages of straight-line method of depreciation:
- Simple and easy to understand:
Computation of depreciation under this method is very simple and is easy to understand. - Equality of depreciation burden:
Under this method, equal amount of depreciation is debited to the profit and loss account each year. Hence, the burden of depreciation on the profit of each year is equal. - Assets can be completely written off:
Under this method, the book value of an asset can be reduced to zero if there is no scrap value or to the scrap value at the end of its useful life. Thus the asset account can be completely written off. - Suitable for the assets having fixed working life:
This method is appropriate for the fixed assets having a certain fixed period of working life. In such cases, the estimation of useful life is easy and in turn it helps in easy determination of rate of depreciation.
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संबंधित प्रश्न
Write the word/term/phrase which can substitute the following statement:
The method of depreciation in which the rate of depreciation is fixed but the amount of depreciation reduces every year.
Select the most appropriate answer from the alternatives given below and rewrite the sentence:
The amount spent on installation of new machinery is a ______ expenditure.
Select the most appropriate answer from the alternatives given below and rewrite the sentence:
The amount that a fixed asset is expected to realise on its disposal is known as ______
State whether the following statement is True or False with reasons:
Wages paid for installation of Machinery are debited to Wages A/c.
Complete the following sentence:
______ is the value which an asset realises at the end of its useful life.
For which of the following assets, the depletion method is adopted for writing off cost of the asset?
On 1st April 2015, Farid of Nasik purchased a Motor Car for ₹ 55,000. The scrap value of the Motor Car was estimated at ₹ 10,000 and its estimated life is 10 years. The Registration charge for the Motor Car was ₹ 5,000.
Show Motor Car Account for first four years, assuming that the books of accounts are closed on 31st March every year.
M/s Omkar Enterprise Jalgaon acquired a Printing Machine for ₹75,000 on 1 Oct 2015 and spent ₹5,000 on its transport and installation. Another Machine for ₹45,000 was purchased on 1st Jan 2017. Depreciation is charged at the rate of 20% on the Written Down Value Method, on 31st March every year.
Prepare Printing Machine Account for the first four years.
The Annuity Method is most suitable when:
A firm buys a machine that wears out faster in early years but provides greater efficiency initially. Which depreciation method would most accurately reflect this pattern?
