Depreciation Provisions and Reserves Test

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Depreciation Provisions and Reserves Test - 20

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Question 1
1 / -0

Reserves are the __________.

A
Appropriations of profit

B
Appropriations of loss

C
Recognition of loss

D
All of the above

Solution

Reserves are the amounts set aside out of profits. It is an appropriation of profits or accumulated profits to strengthen the financial position of the business. Reserves are not set aside to meet a liability or depreciation in the value of assets but is set aside to meet known or unknown contingency that may arise in future. For e.g., General Reserve, Reserve for Expansion etc.
Question 2
1 / -0

Reserve is created after the calculation of_______.

A
Net loss

B
Net profit

C
Gross profit

D
Capital

Solution

Reserves & surplus fund is created out of profits that are to be shared between the partners or share holders. Therefore fund created out of profit is a liability to the company and can be created only after the calculation of profit. Reserves & Surplus fund is created to meet future contingencies. If the contingency does not arise as expected this fund can be distributed among partners or distributed as dividends among shareholders. It can be used for issuing bonus shares. The decision how to make use of the funds will be done by the partners or in the case of a company in the AGM.
Question 3
1 / -0

____________ is created to provide for claims of the workers due to accident, etc.

A
General Reserve

B
Worksmen Compensation Fund

C
Investment Fund

D
None

Solution

Workmen Compensation is a type of insurance policy that safeguards an employee against any injury or death during the job time. The total cost of medical treatment and low wages are covered under Workmen Compensation Insurance Policy, in case the injury is caused during or due to employment. Workmen Compensation Fund is mandatory under the Workmen's Compensation Act, 1923 in India.
Question 4
1 / -0

___________ is Created to stabilise or maintain dividend rate.

A
Dividend Equalisation Reserve

B
Proposed Dividend

C
General Dividend

D
None

Solution

An amount retained from earnings to provide for distribution of a minimum dividend in subsequent business periods.
Dividend equalisation reserve is a revenue reserve that serves as a buffer between a certain dividend level and profit available. Sums are transferrred to this reserve account in good years, and withdrawn from in poor years to maintain the dividend rate.
Question 5
1 / -0

Any amount representing the following shall not be treated as "free reserves" ____________.

A
Revaluation of assets

B
National gains

C
Unrealised gains

D
All of the above

Solution

Any change in carrying amount of an asset or of a liability recognized in equity, including surplus in the profit and loss account on measurement of the assets or the liability at the fair value, shall not be treated as free reserve .
Question 6
1 / -0

Net Block ( Book Value ) = Gross Block (cost) - __________.

A
Depreciation Till date

B
Value till date

C
Expenses till date

D
None of the Above

Solution

Option A is correct One.
Gross Block Means - Total Value of Asset ( Its Original Purchase price+any cap ex)
Net Block Means - Original Value Of Asset( As Above) - Till Date Charged Depreciation
Normally "Accumulated depreciation account " is maintained which is credited by the depreciation charged each year on the asset of the company , Once you debit current period depreciation , such depreciation shall be transferred to Accumulated Depreciation Account.
Question 7
1 / -0

________can take place either at the end of life of asset or during its useful life.

A
Purchase of asset

B
Disposal of asset

C
Collection of asset

D
None of the Above.

Solution

Asset disposal is the removal of a company's long term asset from the company's accounting records. It is an important concept because it primarily relates to company's capital assets. A depreciable asset can be disposed off or sold either at the end of its useful life or during its useful life. Disposal of asset may be during its useful life due to obsolescence or other factors.
Question 8
1 / -0

___________ is designed to provide a complete and clear view of all the transactions involved in the sale of asset under one account head.

A
Asset sale A/c

B
Asset Clear A/c

C
Asset Disposal A/c

D
None

Solution

Asset Disposal A/c.
Asset Disposal A/c is designed to provide a complete and clear view of all the transaction involved in gthe sale of asset unfer one acount head. The original cost of asset being sold is debited to the asset disposal account and accumulated depreciation amount appearing in provision for depreciation account relating to that asset till the date of disposal is credited to the asset disposal account. The net amount realised from the sale of the asset is also crerdited to this account. The balance of asset disposal account shows profit or loss which is transferred to profit and loss account. The advantage of this method is that it gives full picture of all the transactions related to asset disposal at one place.
Question 9
1 / -0

Components of Asset Disposal Account __________________.

A
Original cost of assets

B
Depreciation accumulated

C
Sale Price

D
Resulting Profit or loss on Asset

E
All of Above

Solution

Here the format of disposal account which show thw components of asset disposal account
Question 10
1 / -0

While charging depreciation during sale of asset, ________ is Credited.

A
Asset A/c

B
Depreciation A/c

C
Profit and loss A/c

D
None

Solution

As per the golden rules of accounting for nominal account all expenses and losses are debited and all income and gains are credited and for rael account, what comes in debit and what goes out is credit.
In the light of above rule, journal entry for providing depreciation and charging it to profit and losss A/c is -
1. Depreciation A/c Dr.
To Asset A/c
(Being depreciation chargedd to asset)
2. Profit and loss A/c Dr.
To Depreciation A/c
(Being depreciation expense transferred to P&L A/c).

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Re-Attempt Weekly Quiz Competition

Depreciation Provisions and Reserves Test - 20

Result

Depreciation Provisions and Reserves Test - 20

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Rank

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SHARING IS CARING

Question 1

Appropriations of profit

Appropriations of loss

Recognition of loss

All of the above

Solution

Question 2

Net loss

Net profit

Gross profit

Capital

Solution

Question 3

General Reserve

Worksmen Compensation Fund

Investment Fund

None

Solution

Question 4

Dividend Equalisation Reserve

Proposed Dividend

General Dividend

None

Solution

Question 5

Revaluation of assets

National gains

Unrealised gains

All of the above

Solution

Question 6

Depreciation Till date

Value till date

Expenses till date

None of the Above

Solution

Question 7

Purchase of asset

Disposal of asset

Collection of asset

None of the Above.

Solution

Question 8

Asset sale A/c

Asset Clear A/c

Asset Disposal A/c

None

Solution

Question 9

Original cost of assets

Depreciation accumulated

Sale Price

Resulting Profit or loss on Asset

All of Above

Solution

Question 10

Asset A/c

Depreciation A/c

Profit and loss A/c

None

Solution

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