GK
ACCOUNTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Flow
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Reserve Theory
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Accounting Theory
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Opportunity Cost Theory
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Detailed explanation-1: -Amount of depreciation is calculated with the help of sinking fund tables and hence depreciation fund method is also known as sinking fund method.
Detailed explanation-2: -Key Takeaways. The sinking fund method is a depreciation technique used to finance the replacement of an asset at the end of its useful life. As depreciation is incurred, a matching amount of cash is invested, usually in government-backed securities.
Detailed explanation-3: -What is the Opportunity Cost of Capital? The opportunity cost of capital is the incremental return on investment that a business foregoes when it elects to use funds for an internal project, rather than investing cash in a marketable security.
Detailed explanation-4: -The opportunity cost of capital = = Rate of Return on Most Profitable Investment − − Rate of Return on Investment Chosen to Pursue.