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Nilanjan Bhowmick AIR 3, CSIR NET (Earth Science)
- UGC NET
- Commerce
Explain me these two methods
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Pooja Nema
under sinking fund method when you purchase asset rs 100000 estimated life 5 yrs depreciation on it every year calculated and that amount of dep invested in depreciation fund along with invested outside in govt securities and income recieve from it reinvest in fund so that after 5 years you sold that asset and use fund to buy new asset that will no effect to your working capital and financial position
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Pooja Nema
under annuity method suppose you purchase assets of 100000 interest calculated there on and same amount of asset you invested outside and earn some interest so it would recover losses of using it and depreciation is calculated from annuity table
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In annuity method amount equal to cost of asset is invested in investment and earn interest on yearly basis In sinking fund method the amount equal to depreciation is invested in government securities and interest earned is invested