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Question
Depreciation of fixed capital assets refers to :
(a) Normal wear and tear
(b) Foreseen obsolescence
(c) Normal wear and tear and foreseen obsolescence
(d) Unforeseen obsolescence.
Solution
The correct option is (c). Depreciation is the loss of value of fixed assets in use because of normal wear and tear, normal rate of accidental damages and expected or foreseen obsolescence. It is also called consumption of fixed capital.
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