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प्रश्न
What is the annuity method?
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उत्तर
- Under this method, not only the original cost of the asset but also the amount of interest on the investment is taken into account while computing depreciation.
- The idea of considering interest is that if the investment is made in any other asset instead of the relevant fixed asset, it would have earned a certain rate of interest.
- To calculate the amount of depreciation, the annuity factor is used. The annuity factor can be found out from the annuity table or by using a formula.
- Amount of depreciation is computed as follows:
Amount of depreciation = Annuity factor × Original cost of the asset
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संबंधित प्रश्न
Answer in One Sentence only:
Why depreciation is charged even in the year of loss?
Write the word/term/phrase which can substitute the following statement:
The type of asset on which depreciation is charged.
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.
State whether the following statement is True or False with reasons:
Depreciation is charged on Current Assets only.
State the limitations of straight-line method of depreciation.
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.
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.
The Annuity Method is most suitable when:
A company uses a method that results in high depreciation expense initially and lower in later years. This pattern benefits them because:
The Sum-of-the-Years’-Digits Method results in:
