Which of the following is true with respect to providing depreciation under diminishing balance method?
Correct answer: C. The amount of depreciation decreases while the rate of depreciation remains the same
- A. The amount of depreciation keeps increasing every year while the rate of depreciation keeps decreasing
- B. The amount of depreciation and the rate of depreciation decrease every year
- C. The amount of depreciation decreases while the rate of depreciation remains the same
- D. The amount of depreciation and the rate of depreciation increases every year
Explanation
Under the diminishing balance method, a constant percentage is applied to the asset's declining book value. Thus the depreciation amount decreases each year, while the rate remains unchanged.
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About Accounting Principles
Accounting principles explain the rules used to record, classify and report business transactions. Coverage includes the accounting equation, double-entry system, accrual and cash bases, matching and prudence concepts, consistency, going concern, business entity, and the difference between capital and revenue items.
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