depreciation charged in company profit and loss account is usually based on: historical cost revelant cost...

depreciation charged in company profit and loss account is usually based on:

historical cost

revelant cost

opportunity cost

committed cost

Solutions

Expert Solution

The correct answer is historic al cost.

Explanation:

Historical cost - it is a cost at which assets are acquired or liabilities are incuured. Depreciation on asset is provided for every year on its original or historical cost.

Relevant Cost - these are the cost which are relevant for decision making for example in case of production inventory cost is relevant but insurance on factory building is not relevant since it is incurred irrespective of scale of production and at a same rate.

Opportunity cost - it is a cost of choosing other alternative for example if a person who is drawing a salary of $10000 a month decides to start a business $10000 is a opportunity cost for him since he choose to leave job which pays him $10000 to start a business.

Committed cost - it is a cost which will be incurred and canjit be avoided at all unlese compromised with entity's operation for example taxes, insurance, rent of a building etc.

ekkarill92 answered 1 year ago

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