Depreciation Provisions and Reserves Test

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Depreciation Provisions and Reserves Test - 21

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Question 1
1 / -0

Any addition or extension to asset must be ________ its useful life of that asset.

A
Depreciated

B
Appreciated

C
Ignored

D
Separated

Solution

Option A is the Correct one.
Depreciation is must on every Fixed assets and on its addition or extension
for that there are three basic condition.
1.The Assets must be Fixed Tangible Assets
2.The Assets must be used for Business Purpose
3.The must have limited life
Note :- Land has not limited or specific life therefore we can't calculate depreciation on Land.
Question 2
1 / -0

Whenever any provision is created __________ is debited.

A
Profit and loss A/c

B
Trading A/c

C
Cash A/c

D
None of the above

Solution

Provisions are created for anticipated losses or towards the expenses which are due and payable.
All provisions are created out of profits hence while creating the provision account, profit & loss account is debited.
Question 3
1 / -0

___________ is used to writing off capital losses or issue of bonus shares in case of a company.

A
Revenue Reserve

B
Capital reserve

C
Both

D
None of the Above
Solution
Capital Reserve is the part of the profit or surplus, maintained as an account in the Balance Sheet that can be used only for special purposes. It is made out of capital profits earned due to the sale of fixed assets at a price greater than its cost or profit on the reissue of forfeited shares. So Capital reserve is created when there is capital profit i.e. profit on sale of assets or upward revaluation of assets.
Following are the uses of capital reserve :
To meet future capital losses
To issue as fully paid bonus shares
To strengthen the financial position of the business.
Question 4
1 / -0

Under Straight line method depreciation is charged on the basis of ___________.

A
Original Cost

B
Cash Cost

C
Both

D
None

Solution

Under straight line method of depreciation, a fixed and equal amount of deprecation, calculated at a fixed percentage on the original cost of a fixed depreciable asset is written off during each accounting period over the expected useful life of asset.
Question 5
1 / -0

Revenue reserves are also known as ___________.

A
Free Reserves

B
Non Free Reserves

C
Owners reserves

D
None

Solution

Revenue reserves are those reserves which are created out of profits available for distribution by way of dividend. Revenue reserve refers to the amount which are free for distribution by way of dividend. Revenue reserves are also nown as free reserves as they can be freely distributed.
Question 6
1 / -0

Straight line method and written down value method are generally used for calculating ____________ amount in practice.

A
Depreciation

B
Appreciation

C
Historical cost

D
None of the Above

Solution

There are two most commonly used method of depreciation i.e., Straight line method and Written down value method.
Under straight line method of depreciation, a fixed and equal amount of depreciation, calculated at a fixed percentage on the original cost of a fixed depreciable asset is written off during each accounting period over the expected useful life of the asset.
Under the written down value method, depreiation calculated at a fixed percentage on the original cost (in the first year) and on the written down value, (in subsequent years) of a fixed depreciable asset is written off during each accounting period over the expected useful life of the asset. Under this method, the rate of depreciation remains constant year after year ehereas the amlount of depreciation goes on decreasing.
Question 7
1 / -0

The annual amount of depreciation charged every year _______ under written down value method.

A
Highest in earlier years and gets decline in later years

B
Highest in earlier years and gets increases in later years

C
lowest in earlier years and gets decline in later years

D
Lowest in earlier years and gets increases in later years

Solution

Under written down value of method, depreciation calculated at a fixed percentage on the original cost in the first year and on the written down value, in subsequent years of a fixed depreciable asset. Under this method, the rate of depreciation remains constant year after year whereas the amount of depreciation goes on decreasing.
Question 8
1 / -0

____________are available for Distribution of Dividends.

A
Capital Reserve

B
Revenue Reserve

C
Both

D
None

Solution

Revenue reserves are those reserves which are created out of profits available for distribution by way of dividend. Revenue reserve refers to the amount which are free for distribution by way of dividend.
Question 9
1 / -0

The annual amount of depreciation charged every year remains _______ under straight line method

A
Fixed

B
Changing

C
Zero

D
None

Solution

Under straight line method of depreciation, a fixed and equal amount of deprecation, calculated at a fixed percentage on the original cost of a fixed depreciable asset is written off during each accounting period over the expected useful life of asset.
Question 10
1 / -0

Under Written down value method the basis of charging depreciation is __________.

A
Net book value

B
Original cost

C
Net Realisable Value

D
None

Solution

Under written down value of method, depreciation calculated at a fixed percentage on the original cost in the first year and on the written down value, in subsequent years of a fixed depreciable asset. Under this method, the rate of depreciation remains constant year after year whereas the amount of depreciation goes on decreasing.

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Re-Attempt Weekly Quiz Competition

Depreciation Provisions and Reserves Test - 21

Result

Depreciation Provisions and Reserves Test - 21

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SHARING IS CARING

Question 1

Depreciated

Appreciated

Ignored

Separated

Solution

Question 2

Profit and loss A/c

Trading A/c

Cash A/c

None of the above

Solution

Question 3

Revenue Reserve

Capital reserve

Both

None of the Above

Solution

Question 4

Original Cost

Cash Cost

Both

None

Solution

Question 5

Free Reserves

Non Free Reserves

Owners reserves

None

Solution

Question 6

Depreciation

Appreciation

Historical cost

None of the Above

Solution

Question 7

Highest in earlier years and gets decline in later years

Highest in earlier years and gets increases in later years

lowest in earlier years and gets decline in later years

Lowest in earlier years and gets increases in later years

Solution

Question 8

Capital Reserve

Revenue Reserve

Both

None

Solution

Question 9

Fixed

Changing

Zero

None

Solution

Question 10

Net book value

Original cost

Net Realisable Value

None

Solution

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