Which investment is obtained by subtracting depreciation from gross investment?
Answer and explanation
Correct answer: Net investment
The standard relationship is Net Investment = Gross Investment − Depreciation. Gross investment includes replacement of capital that has been consumed as well as additions to the capital stock. Deducting depreciation removes the replacement portion and leaves the net addition to productive capital. Replacement investment is only the amount used to offset depreciation, so it is not the answer.
Frequently asked questions
What is the correct answer to this question?
Net investment
Why is this the correct answer?
The standard relationship is Net Investment = Gross Investment − Depreciation. Gross investment includes replacement of capital that has been consumed as well as additions to the capital stock. Deducting depreciation removes the replacement portion and leaves the net addition to productive capital. Replacement investment is only the amount used to offset depreciation, so it is not the answer.
Which subject and chapter does this question cover?
This is a Class 11 Accountancy question. Chapter: Depreciation, Provisions, and Reserves.
