A used car was bought for ₹200,000 and sold two years later for ₹140,000. If depreciation is applied at 10% per annum using the Straight Line Method (SLM), what is the resulting profit or loss from the sale?

Explanation

The car’s value depreciates by 10% annually on a straight-line basis. Over two years, total depreciation is 20% of the purchase price, i.e., ₹40,000. Thus, the book value after two years is ₹200,000 - ₹40,000 = ₹160,000. Since the car was sold for ₹140,000, which is ₹20,000 less than the book value, the transaction resulted in a loss of ₹20,000.