[Solved] Which of the following method of valuation is most suitable (2024)

Explanation:

Various method of valuation:

(1) Depreciation method of valuation:

(i) In this method, the structure is divided into four-part for calculating depreciation; wall, roofs, floor, Door and windows

(2) Value-based on cost:

(i) In this method, the actual cost of the construction is found out and valuation is done after considering depreciation and considering the type of construction and design of the construction.

(3) Valuation based on profit:

(i) Under this sub-head, valuation of cinemas, theatres, hotels, banks, big shop etc. located at suitable places is done where profit is of capitalized value.

(ii) The capitalized value is calculated by multiplying year’s purchase with net profit.

(iii) The net profit is worked out after deducting all possible outgoings and expenditures from the gross income.

(iv) In such cases the cost will be too high as compared with the cost of construction actually incurred.

(4) Value by development method:

(i) This method is also used for working out the value of a building.

(ii) In certain cases, some additions, alterations and improvements are carried out which increases the cost of the building.

(5) Rental method of valuation:

(i) In this method, the rent of the building is used as the base for calculating the value of the building.