Consider the following data relating to the financial year 2021-2022 and answer the following questions based on this data.

What is the value of capital consumption allowance?

₹16,000

The correct answer is Option 1: ₹16,000

Capital Consumption Allowance (CCA) is also called Depreciation. It refers to the amount of capital (like machinery, buildings, tools) that wears out or becomes obsolete during the production process in a year.

So when we move from Gross to Net, we subtract this depreciation.

NNP_MP = GNP_MP - Depreciation

or Depreciation= GNP_MP - NNP_MP

GNP_MP is ₹1,06,000 and NNP_MP is ₹90,000.

The difference between the two is the value of capital consumption allowance, i.e., depreciation. The value is ₹1, 06,000 – ₹90,000 = ₹16,000.