20 Important Depreciation Questions & Answers For Interview

Depreciation is one of the most important concepts in accounting, and it is frequently asked in job interviews—especially for roles in finance, taxation, and corporate accounting. Whether you are preparing through an Accounting Course, understanding depreciation thoroughly can give you a strong advantage.

If you're looking for the best accounting course online 2026, mastering these interview questions will help you stand out. This guide covers the top 20 depreciation questions and answers to help you prepare effectively.

1. What is Depreciation?

Depreciation is the systematic allocation of the cost of a tangible asset over its useful life. It reflects the wear and tear, usage, or obsolescence of the asset.

2. Why is Depreciation Important?

Depreciation ensures:

• Accurate profit calculation

• Proper asset valuation

• Tax benefits under income tax laws

3. What are the Main Causes of Depreciation?

• Wear and tear

• Obsolescence

• Passage of time

• Depletion (for natural resources)

4. What are the Methods of Depreciation?

Common methods include:

• Straight Line Method (SLM)

• Written Down Value (WDV) Method

• Units of Production Method

5. What is the Straight Line Method?

In this method, depreciation is charged equally every year over the useful life of the asset.

Formula:
Depreciation = (Cost – Residual Value) / Useful Life

6. What is the Written Down Value Method?

In WDV, depreciation is calculated on the reducing balance of the asset each year, leading to decreasing depreciation amounts over time.

7. What is Residual Value?

Residual value is the estimated value of an asset at the end of its useful life.

8. What is the useful life of an Asset?

It is the estimated period during which an asset is expected to be used by a business.

9. What is Accumulated Depreciation?

It is the total depreciation charged on an asset since its purchase.

10. How is Depreciation Recorded in Accounting?

Depreciation is recorded as:

• Debit: Depreciation Expense

• Credit: Accumulated Depreciation / Asset Account

11. Is Depreciation a Cash Expense?

No, depreciation is a non-cash expense. It reduces profit but does not involve an actual cash outflow.

12. What is the Difference Between SLM and WDV?

• SLM: Equal depreciation every year

• WDV: Higher depreciation in early years, lower in later years

13. What is Depreciation as per Income Tax?

Under the Income Tax Act, depreciation is calculated using the WDV method and is allowed as a deduction to reduce taxable income.

14. What is Block of Assets?

A block of assets is a group of assets with a similar nature and the same depreciation rate, used in income tax calculations.

15. What Happens if an Asset is Sold?

When an asset is sold:

• Profit or loss on sale is calculated

• In income tax, an adjustment is made in the block of assets

16. What is Additional Depreciation?

Additional depreciation is an extra benefit allowed on new machinery for certain businesses, mainly manufacturing.

17. Can Depreciation be Charged on Land?

No, land does not depreciate because it does not have a limited useful life.

18. What is Impairment of Assets?

Impairment occurs when the carrying value of an asset exceeds its recoverable amount.

19. What is the Impact of Depreciation on Financial Statements?

• Reduces profit in the Income Statement

• Reduces asset value in the Balance Sheet

20. What is the Difference Between Depreciation and Amortization?

• Depreciation: For tangible assets (machinery, building)

• Amortization: For intangible assets (goodwill, patents)

Why These Questions Matter for Your Career

If you're pursuing an accounting course for small business owners or a Tally accounting course India, these questions are not just theoretical—they are practical and frequently used in real-world accounting.

Employers today prefer candidates who understand:

• Practical accounting applications

• Tax implications

• Software usage like Tally and SAP

That’s why enrolling in the best accounting course online 2026 or a practical Accounting Course can significantly boost your job readiness.

Pro Tips for Interview Preparation

• Focus on concept clarity, not just definitions

• Practice real-life examples

• Learn depreciation calculations in Tally Prime

• Understand income tax provisions

Final Thoughts

Depreciation is a fundamental topic that every accounting professional must master. Whether you are preparing for interviews or upgrading your skills through an Income Tax Course or GST Course, these questions will help you build a strong foundation.