Question

Match the pairs

	Column A		Column B
i.	Original cost of property minus the depreciation amount up to the previous year.	a.	Salvage value
ii.	Due to fear of war or riot property cannot fetch full market value.	b.	Distress value
iii.	The value of property building at the end of its utility period without being dismantled.	c.	Book value

1. i - a, ii - c, iii - b
2. i - c, ii - b, iii - a
3. i - b, ii - a, iii - c
4. i - a, ii - b, iii - c

Answer 1

Correct Answer - Option 2 : i - c, ii - b, iii - a

Some important definitions in valuation:

1. Market value: Value of a property in open market and it depends upon time.
2. Book value: It is the amount shown in the account book after allowing necessary depreciations.

• Book value = Original cost – Depreciation

3. Obsolescence: the value of any structure becomes less by it becoming out of date style, structural design etc termed as obsolescence.
4. Scrap value: It is the value of dismantled materials for a building when its life is over. Scrap value of a building may be about 10% of its total cost of construction.
5. Salvage value: It is the value at the end of the utility period without being dismantled. It may be zero, positive and negative.
6. Distress value: Some time due to fear of war or riot the value of a property cannot fetch full market value. Then this value of property is called distress value.