1.
Accounting Standards as well as the Companies Act, 2013 requires depreciation to be charged on a ______.
A
Component basis
B
Notional basis
C
Fictitious basis
D
Supernumerary basis
E
Aggregate basis
View Answer
Correct Answer: A — Component basis
Explanation:
The correct answer is Component basis. Under this method, the cost of a large asset (e.g., machinery) is allocated to its different components and each component is depreciated separately, since components may have different useful lives. Charging depreciation at a single rate on the whole asset would distort its value. This method is prescribed by both Accounting Standards and the Companies Act, 2013.