Assertion (A): Depreciation is accounted for every year even if no real expenditure on replacement is incurred in that year.
Reason (R): Depreciation does not take into account the sudden destruction of capital by natural calamities.
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → Both (A) and (R) are true but (R) is not the correct explanation of (A).
Assertion (A): Depreciation is accounted for every year even if no real expenditure on replacement is incurred in that year. — True. Depreciation is recorded every year, even in a year with no replacement spending.
Reason (R): Depreciation does not take into account the sudden destruction of capital by natural calamities. — True. Depreciation covers expected wear and tear, not sudden destruction by calamities.
Why R does not explain A?
R says what depreciation leaves out. It says nothing about why depreciation is recorded in years when no money is spent on replacement.
The real reason for A: depreciation is an accounting concept, an annual allowance for wear and tear. The cost of a capital good is spread over its useful life, so a share is counted each year.
NCERT (2026-27): “2.1 Some Basic Concepts of Macroeconomics … Depreciation is thus an annual allowance for wear and tear of a capital good. In other words it is the cost of the good divided by number of years of its useful life. …” “2.1 Some Basic Concepts of Macroeconomics … Notice here that depreciation is an accounting concept. No real expenditure may have actually been incurred each year yet depreciation is annually accounted for. …” “2.1 Some Basic Concepts of Macroeconomics … Depreciation does not take into account unexpected or sudden destruction or disuse of capital as can happen with accidents, natural calamities or other such extraneous circumstances.” |