Depreciation is admissible on which of the following asset?
A. Animal
B. Tea plant
C. Goodwill of business
D. Patent
Answer: Option D
Solution (By Examveda Team)
Depreciation is the process of allocating the cost of an asset over its useful life due to wear and tear, passage of time, or obsolescence.In accounting, the term depreciation is often used in a wider sense, which also includes writing off the value of intangible assets (commonly called amortization).
Patent is an intangible asset with a limited legal life, and its value decreases over time. Therefore, its cost is systematically allocated over its useful life, making depreciation admissible.
Animal is a biological asset and is not depreciated in the traditional sense.
Tea plant, though a bearer plant, is not typically considered in such MCQs under depreciation in the conventional approach.
Goodwill is an intangible asset with an indefinite life and is not depreciated; instead, it is tested for impairment.
Hence, the correct answer is Patent.
This Question Belongs to Commerce >> Accounting
The correct answer is: D. Patent
Explanation:
Depreciation (more precisely, amortisation for intangible assets) is allowed on intangible assets with a finite useful life.
A. Animal ❌
Animals are generally not treated as depreciable assets (except in specific business contexts like livestock accounting).
B. Tea plant ❌
Tea plants are treated as biological/agricultural assets; depreciation is not typically applied in the usual accounting sense.
C. Goodwill of business ❌
Goodwill is an intangible asset but usually has an indefinite life, so it is not depreciated (instead, it is tested for impairment).
D. Patent ✅
A patent has a definite useful life, so its cost is systematically written off over time → hence depreciation (amortisation) is admissible.
Key Concept:
Tangible assets → Depreciation
Intangible assets (finite life) → Amortisation
Intangible assets (indefinite life) → No depreciation, only impairment