Depreciation Provisions and Reserves Test

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Depreciation Provisions and Reserves Test - 27

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Weekly Quiz Competition

Question 1
1 / -0

The term "__________" is used for the process of measuring and recording the exhaustion of natural resources.

A
Depreciation

B
Depletion

C
Amortization

D
Obsolescence

Solution

Depletion is similar to depreciation in that it is a cost recovery system for accounting and tax reporting. Depletion is the exhaustion of natural resources as a result of their removal. examples are oil, minerals, and timber etc.
Question 2
1 / -0

In accounting record, fixed assets are recorded at __________.

A
Historical cost

B
Normated cost

C
Replacement cost

D
Salvage value

Solution

A historical cost is a measure of value used in accounting in which the price of an asset on the balance sheet is based on its nominal or original cost when acquired by the company. The historical cost is used for assets under generally accepted accounting principles (GAAP) .
Question 3
1 / -0

The part of the depreciable cost of an asset which is yet to be written off is known as ____________.

A
Residual Value

B
Written Down Value

C
Closing Value

D
None of the Above

Solution

Assets are depreciated every year by making an entry in the books of account by debit to depreciation account and giving a credit to the respective asset account. Thereby, the value of asset decrease every year.

After charging the depreciation, the balance value is called as written down value which need to be carried forward to the next year.

The part which is yet to be written off is known as written down value.
Question 4
1 / -0

____________ is one of the objective of providing depreciation.

A
Ascertainment of true cost of production

B
Sustain financial liquidity of the business

C
Abatement of tax liability

D
Check outflow of funds

Solution

Depreciation is an accounting method of allocating the cost of a tangible assets over its useful life. One of the objective of providing depreciation is: Ascertainment of true cost of production. Correct cost of production cannot be ascertained if the depreciation is not charged to the fixed assets. Thus, it is necessary to include amount of depreciation in the calculation of cost of each product.
Question 5
1 / -0

The annual depreciation charge is debited to ___________.

A
Concerned Assets

B
Gross Block a/c

C
Depreciation a/c

D
Profit and Loss a/c

Solution

Total depreciation charged against assets transfer to profit and loss account. Journal entry :-
Profit and loss account debit xxx To Depreciation account credit xxx
Question 6
1 / -0

___________ method is normally recommended for amortization of intangible assets.

A
SYD

B
SLM

C
WDV

D
DDB

Solution

An intangible asset is a non-physical asset that has useful life of greater than one year. If an intangible asset has a finite useful life, you should amortize it over that useful life. Intangible assets are usually not considered to have any residual value, so the full amount of the asset is typically amortized. SLM is normally recommended for amortisation of intangible assets.
Question 7
1 / -0

Under diminishing balance method, annual depreciation ___________.

A
Increases every year

B
Decreases every year

C
Is constant every year

D
None of the above

Solution

Under diminishing balance method, the amount of depreciation is calculated as a fixed percentage of the reducing or diminishing value of the asset standing in the books at the beginning of the year, so as to bring down the book value of the asset to its residual value. The amount of depreciation goes on decreasing every year.
Question 8
1 / -0

____________ deals with Depreciation Accounting.

A
AS-$$6$$

B
AS-$$7$$

C
AS-$$8$$

D
AS-$$2$$

Solution

Accounting standard (AS) 6, Depreciation accounting, was issued by the ICAI in November 1982. In accounting term, depreciation is defined as the reduction of recorded cost of fixed asset in a systematic manner until the value of the asset become zero or negligible.
Question 9
1 / -0

Book value of an asset is obtained by ___________.

A
deducting total depreciation from total acquisition cost

B
deducting current depreciation from total acquisition cost

C
dividing total acquisition cost by estimated useful-life

D
deducting total depreciation and scrap value from total acquisition cost

Solution

Book value of the asset is the value at which the asset is carried on a balance sheet and calculated by taking the cost of an asset minus the accumulated depreciation. Book value is also the net asset value of a company, calculated as total assets minus intangible assets (patents, goodwill) and liabilities.
Question 10
1 / -0

_________ is not a method of depreciation.

A
Straight line method

B
Replacement method

C
Reducing balance

D
Revaluation

Solution

There are several methods of depreciation but only two that are widely recognised by IRS:
1. Straight line method
2.Reducing balance method
3. Double Declining balance method
4. Considerations
5. Revaluation etc.

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Re-Attempt Weekly Quiz Competition

Depreciation Provisions and Reserves Test - 27

Result

Depreciation Provisions and Reserves Test - 27

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Rank

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SHARING IS CARING

Question 1

Depreciation

Depletion

Amortization

Obsolescence

Solution

Question 2

Historical cost

Normated cost

Replacement cost

Salvage value

Solution

Question 3

Residual Value

Written Down Value

Closing Value

None of the Above

Solution

Question 4

Ascertainment of true cost of production

Sustain financial liquidity of the business

Abatement of tax liability

Check outflow of funds

Solution

Question 5

Concerned Assets

Gross Block a/c

Depreciation a/c

Profit and Loss a/c

Solution

Question 6

SYD

SLM

WDV

DDB

Solution

Question 7

Increases every year

Decreases every year

Is constant every year

None of the above

Solution

Question 8

AS-$$6$$

AS-$$7$$

AS-$$8$$

AS-$$2$$

Solution

Question 9

deducting total depreciation from total acquisition cost

deducting current depreciation from total acquisition cost

dividing total acquisition cost by estimated useful-life

deducting total depreciation and scrap value from total acquisition cost

Solution

Question 10

Straight line method

Replacement method

Reducing balance

Revaluation

Solution

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