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Depreciation Provisions and Reserves Test - 23

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Depreciation Provisions and Reserves Test - 23
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Weekly Quiz Competition
  • Question 1
    1 / -0
    _________ is created for the possible loss which may arise by non payment of debts by debtors.
    Solution
    A provision for doubtful debts is created to cover the loss of possible bad debts by means of a predetermined percentage of net debtors (i.e.., debtors less bad debts) with a view to bring in a certain element of certainty in the amount of bad debts charged for each accounting period.
  • Question 2
    1 / -0
    Accumulated Deprecation is _________  nature account.
    Solution
    Accumulated depreciation a/c is an asset account with a credit balance ( also known as contra asset a/c ) ., this means that it appears on the balance sheet as a reduction from the gross amount of fixed assets reported. So acumulated dep. a/c is a real a/c.
  • Question 3
    1 / -0
    Depreciation is _________ nature Account.
    Solution
    Depreciation is the permanent and continuous decrease in the book value of a depreciable fixed asset due to use, effluxion of time, obsolescence expiration of legal rights or any other cause. Depreciation does not result in cash out flow. It is a non cash expenditure. As per the accounting rules, all incomes and gains and expenses and profits are included in nominal account.
  • Question 4
    1 / -0
    Depreciation is always charged on ______ Assets.
  • Question 5
    1 / -0
    The method of depreciation under which depreciation is calculated on original cost of an asset is known as ____________ .
    Solution
    Option D is correct. The straight-line method is also known as the Original Cost method and Fixed Installment Method. Under the straight-line method, Depreciation is calculated on the original cost of an asset. That's why it is also known as the original cost method and every year a fixed amount of depreciation is charged from the asset. So it is known as the fixed instalment method. 
  • Question 6
    1 / -0
    The method of depreciation in which the amount of depreciation is not constant every year is _____________ .
    Solution
    Under written down value 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 is written off during each accounting period over the expected useful life of asset. Under this method, the rate of depreciation remains constant year after year whereas the amount of depreciation goes on decreasing. Written down value method is also known as reducing balance method and diminishing balance method.
  • Question 7
    1 / -0
    In Straight Line Method of depreciation, the amount of depreciation remain ___________ every year.
    Solution
    Under Fixed Installment system, depreciation is charged on the basis of its original cost reducing by the scrap value and dividing the balance value on the estimated life of the asset. In such system, depreciation will remain constant every year. 
    Below is the example:

    Depreciation= Original Cost- Scrap Value 
                               Estimated Life of asset
                         = Rs.100000 - Rs.20000
                            ----------------------------------
                                          5 years
    Depreciation per year will be Rs.16000
  • Question 8
    1 / -0
    Which method is followed to have a uniform charge for depreciation and repairs and maintenance together :
    Solution
    Here the 1st option is right answer. The written down value method and uniform charge for depreciation use the same formula while calculating the depreciation.
  • Question 9
    1 / -0
    A provision is a/an ___________.
  • Question 10
    1 / -0
    Under ________ system, amount of depreciation changes every year.
    Solution
    Under reducing balance method of depreciation, the depreciation is charged on the written down value of the asset every year. In such case, depreciation amount changes every year and get reduces as written down value decreases every year. 

    Below is the example:

    Original Cost of Asset:                                   Rs.10000
    Less: Depreciation @10%   Year I                  Rs. 1000
                                                                           ---------------------
    Written down value                                       Rs.9000
    Less: Depreciation @10% Year II                  Rs.900
                                                                          ---------------------
    Written down value                                      Rs.8100
    Less : Depreciation @10% Year III                Rs.810
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