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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
Answer in One Sentence only:
What is a ‘Scrap Value’ of an asset?
State whether the following statement is True or False with reasons:
Depreciation is charged on fixed assets.
Give the formula to find out the amount and rate of depreciation under straight line method of depreciation.
What is the annuity method?
Furniture was purchased for ₹ 1,00,000 on 1.7.2016. It is expected to last for 5 years. Estimated scrap at the end of five years is ₹ 10,000. Find out the rate of depreciation under the straight-line method.
On 1st October 2014, a truck was purchased for ₹ 8,00,000 by Laxmi Transports Ltd. Depreciation was provided @ 15% p.a. under diminishing balance method. On 31st March 2017, the above truck was sold for ₹ 5,00,000. Accounts are closed on 31st March every year. Find out the profit or loss made on the sale of the truck.
Mr. ‘X’ purchased Furniture on 1st October 2015 at ₹ 2,80,000 and spent ₹ 20,000 on its installation. He provides depreciation at 6% under the straight-line method on 31st March 2016. Calculate the amount of depreciation.
Sameer & Company, Mumbai purchased a Machine worth ₹ 2,00,000 on 1st April 2016. On 1st July 2017, the company purchased an additional Machine for ₹ 40,000.
On 31st March 2019, the company sold the Machine purchased on 1st July 2017 for ₹ 35,000. The company writes off depreciation at the rate of 10% on the original cost and the books of accounts are closed every year on 31st March.
Show the Machinery Account and Depreciation Account for the first three years ending 31st March 2016-17, 2017-18 and 2018-19
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 charges of 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.
Which depreciation method helps a firm accumulate funds for replacing an asset after its useful life?
