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CSEET · Fundamentals of Accounting · Depreciation and Amortization

Which statement about the diminishing balance method is consistent with AS 10?

The diminishing balance method gives a decreasing depreciation charge over the asset's useful life, because the rate is applied to a reducing book value each year. A constant charge belongs to straight-line and an output-based charge to units of production.

  1. AIt results in a decreasing charge over the useful lifeCorrect
  2. BIt results in a constant charge over the useful life
  3. CIt results in a charge that always rises each year
  4. DIt results in a charge based only on units produced

Explanation

AS 10 says the diminishing balance method results in a decreasing charge over the useful life. A constant charge describes straight-line (if residual value is unchanged), and a charge based on output describes units of production.

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