Basics Of Accounting

To find the useful life of the car, we need to determine the rate of depreciation and then use it to calculate the total years required for depreciation. Given:

• Original cost of the car = ₹8,00,000
• Scrap value of the car = ₹3,00,000
• Book value at the end of 4th year = ₹6,00,000

First, calculate the annual depreciation:

Annual depreciation = (Initial cost - Book value after 4 years) / 4 = (₹8,00,000 - ₹6,00,000) / 4 = ₹50,000 per year

Using this rate, calculate the total years needed to reduce the value to the scrap value:

Useful life = (Initial cost - Scrap value) / Annual depreciation = (₹8,00,000 - ₹3,00,000) / ₹50,000 = 10 years

Thus, the useful life of the car is 10 years.

Step 1: Understanding the Concept:
This question tests the basic terminology of accounting, specifically related to the valuation of assets over time.
Step 2: Detailed Explanation:
Let's define the key terms:
- Original Value (or Cost): The amount paid to acquire an asset.
- Accumulated Depreciation: The total amount of depreciation expense that has been charged against an asset since it was put into service.
- Book Value: The value of an asset as it appears on the balance sheet. It is calculated as the original cost of the asset minus its accumulated depreciation. This exactly matches the definition in the question.
- Salvage Value (or Scrap Value): The estimated residual value of an asset at the end of its useful life. It's the amount the asset is expected to be sold for after it's fully depreciated.
- Lost Value: This is not a standard accounting term for asset valuation. The decline in value is captured by depreciation.
Step 3: Final Answer:
The original value of an asset minus the accumulated depreciation is the Book Value.

Step 1: Understanding the Concept:
This question tests the basic terminology of accounting, specifically related to the valuation of assets over time.
Step 2: Detailed Explanation:
Let's define the key terms:
- Original Value (or Cost): The amount paid to acquire an asset.
- Accumulated Depreciation: The total amount of depreciation expense that has been charged against an asset since it was put into service.
- Book Value: The value of an asset as it appears on the balance sheet. It is calculated as the original cost of the asset minus its accumulated depreciation. This exactly matches the definition in the question.
- Salvage Value (or Scrap Value): The estimated residual value of an asset at the end of its useful life. It's the amount the asset is expected to be sold for after it's fully depreciated.
- Lost Value: This is not a standard accounting term for asset valuation. The decline in value is captured by depreciation.
Step 3: Final Answer:
The original value of an asset minus the accumulated depreciation is the Book Value.

Step 1: Understanding the Concept:
This problem involves the straight-line (linear) method of depreciation. This method assumes that an asset loses an equal amount of value each year over its useful life. The scrap value is the remaining value after all depreciation has been accounted for.
Step 2: Key Formula or Approach:
The relationships under the linear method are: 1. Total Depreciation = Annual Depreciation Useful Life 2. Scrap Value = Original Cost - Total Depreciation
Step 3: Detailed Explanation:
Given values are: - Original Cost = Rupees 36,000 - Useful Life = 10 years - Annual Depreciation = Rupees 3,000
First, calculate the total depreciation over the asset's useful life: Next, calculate the scrap value by subtracting the total depreciation from the original cost: Step 4: Final Answer:
The scrap value of the sofa set is Rupees 6,000.