Which of the following methods of depreciation is prescribed by the Income Tax Act, 1961?
Written-down value method
The correct answer is option 2. The Income Tax Act, 1961 prescribes the Written-down value (WDV) method for calculating depreciation. Under this method, depreciation is calculated on the written-down value of the asset at the beginning of each year, and the depreciation amount decreases over time. The other methods listed are not specified by the Income Tax Act for tax purposes.
Important Questions from Depreciation, Reserve & Provision
A state of deterioration, damage done to a building or other property during tenancy can be referred to as:
________ method is especially suited to mines, oil wells, quarries, sandpits and similar assets of a wasting character.
______ system of depreciation is followed in case of those assets which are of small values or where the life of the asset cannot be ascertained with certainty.
If a machine (having a scrap value of Rs.1,000) is purchased for Rs.10,000 and it has an effective life of 10 years of 1000 hours each, what will be the amount of depreciation per hour?
The original cost of an asset is Rs.1,00,000 with an estimated scrap value of Rs.16,000 at the end of its useful life of 5 years. The depreciation on the asset for its whole life is Rs.84,000, what will be the amount to be charged to the Profit & Loss A/c, if the Sinking Fund table shows that Re.0.180975 if invested yearly @5% p.a. produces Re.1 at the end of 5 years?
