Which of the following statements is correct regarding Depreciation?
I. Depreciation is termed as loss of value of fixed assets due to wear and tear during its useful life.
II. Depreciation does not take into account unexpected or sudden destruction.

Correct option is B

The correct answer is (b) Both I and II.
· Statement I is correct: Depreciation refers to the gradual loss of value of a fixed asset due to regular wear and tear over its useful life. It is an accounting method used to allocate the cost of a tangible asset over its useful life.
· Statement II is correct: Depreciation does not account for unexpected or sudden destruction of an asset, such as damage due to accidents or natural disasters. Such sudden losses are typically considered under different accounting terms like impairment or extraordinary losses.
Information Booster:
· Depreciation Methods: Common methods of calculating depreciation include the straight-line method (where depreciation is charged evenly over the asset’s useful life) and the declining balance method (where a higher depreciation is charged in the early years).
· Impairment: If an asset is destroyed or impaired unexpectedly, it results in an impairment loss, not depreciation.