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Question : An annual allowance for wear and tear of a capital good is known as______.

Option 1: gross investment

Option 2: devaluation

Option 3: depreciation

Option 4: disinvestment


Team Careers360 20th Jan, 2024
Answer (1)
Team Careers360 24th Jan, 2024

Correct Answer: depreciation


Solution : The correct answer is depreciation .

The annual allowance for wear and tear of a capital good is commonly referred to as "depreciation". Depreciation is a systematic allocation of the cost of a capital asset over its useful life, reflecting the gradual reduction in the asset's value. It is an accounting method used to match the cost of an asset with the revenue it generates over time. Depreciation is deducted from the asset's initial cost over its useful life, helping to spread the cost of an asset across multiple accounting periods.

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