Goods like food and clothing, and services like recreation that are consumed when purchased by their ultimate consumers are called consumption goods or consumer goods. This also includes services which are consumed but for convenience we may refer to them are as consumer goods.

There are other goods that are of durable character which are used in the production process. These are tools, implements and machines. While they make production of other commodities feasible, they themselves don't get transformed in the production process. They are also final goods yet they are not final goods to be ultimately consumed. They are the crucial backbone of any production process, in aiding and enabling the production to take place. These goods form a  part of capital, one of the crucial factors of production in which a productive enterprise has invested, and they continue to enable the production process to go on for continuous cycles of production. There are capital goods and they gradually undergo wear and tear, and thus are repaired or gradually replaced over time. The stock of capital that an economy possesses is thus preserved, maintained and renewed partially or wholly overtime.

A firm buys a machine for ₹55 lakhs. The expected life of  the machine is ten years. The annual depreciation of the machine is :

₹5.5 lakhs

The correct answer is option (2) : ₹5.5 lakhs

To calculate annual depreciation, you can use the straight-line depreciation method, which is given by the formula :

Annual Depreciation = $\frac{\text{Cost of Asset} - \text{Residual Value} }{\text{Useful Life}}$

In this case :

• Cost of Asset ( machine ) = 55 lakhs
• Residual Value (assumed to be zero, as it's not provided) = 0
• Useful Life = 10 years

Annual Depreciation = $\frac{55 lakhs - 0}{10 years}$

= 5.5 lakhs /year annual

So, the correct answer is option 2. 5.5 lakhs.