An asset is purchased for ₹14 lakh and ₹1 lakh was spent on the installation of the asset, with a useful life of 10 years. What is the difference between the amount of depreciation charged in the second year as per the straight-line method and the sum of years digits method?
₹95,454.55
In the straight-line method, depreciation is calculated by dividing the cost of the asset by its useful life, resulting in equal depreciation for each year. In the sum of years digits method, depreciation is higher in the earlier years, as it is based on a decreasing fraction of the asset's cost. The difference in depreciation in the second year between the two methods is ₹95,454.55, calculated by finding the difference in the depreciation amounts under both methods.
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