​The depreciation of assets is computed on their :

Correct option is A

Correct Answer: (a) Book Value

Explanation:

·         Depreciation is calculated on the book value (written down value) of an asset as recorded in the books of accounts.

·         Book value represents the cost of the asset minus accumulated depreciation.

·         Market value fluctuates and is not used for accounting purposes.

Information Booster:

·         Straight Line Method (SLM): Depreciation is calculated on the original cost.

·         Written Down Value (WDV) Method: Depreciation is calculated on the book value after reducing previous depreciation.

·         Depreciation reflects the wear and tear or obsolescence of an asset.

·         It helps in matching cost with revenue for a given accounting period.

·         Shown as an expense in the Profit & Loss Account.