Depreciation Provisions and Reserves Test

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Depreciation Provisions and Reserves Test - 30

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Weekly Quiz Competition

Question 1
1 / -0

Gross book value of a group of asset is Rs. $$120,000$$ and total accumulated depreciation of Rs. $$24,000$$ and current depreciation of Rs. $$2000$$. The net book value of the asset is ___________.

A
$$94,000$$

B
$$96,000$$

C
$$98,000$$

D
$$1,00,000$$

Solution

Net book value of the asset = Gross book value - Total accumulated depreciation - Current depreciation
Net book value of the asset = Rs. 1,20,000 - Rs. 24,000 - Rs. 2,000 = Rs. 94,000
Question 2
1 / -0

Loss on disposal of assets is credited to _____________.

A
Depreciation a/c

B
Assets a/c

C
Loss on sale of assets a/c

D
Profit and loss a/c

Solution

The disposal of assets involves eliminating assets from the accounting records. This is needed to completely remove all traces of an assets from the balance sheet. An asset disposal may require the recording of a gain or loss on the transaction in the reporting period when the disposal occurs. The journal entry recorded as Debit cash for the amount received , debit all accumulated depreciation, debit the loss on sale of asset account, and credit the fixed asset.
Question 3
1 / -0

Over provision of liabilities result into creation of ________.

A
Secret Reserves

B
General Reserves

C
Capital Reserve

D
None of the above
Solution
Secret reserve is a reserve, the existence and/ or the amount of which is not disclosed in the balance sheet. It is also called as "Hidden Reserves or Internal Reserves."
Secret reserves are created by :
Excessive depreciation on the asset.
Excessive overvaluation of liability
Showing a contingent liability of an actual liability or as provision.
Charging capital expenditure to revenue or crediting revenue receipts to an asset.
Question 4
1 / -0

A firm purchased a new office equipment for Rs. $$18,000$$. The estimated life of the equipment is $$4$$ years at the end of which the estimated scrap value is likely to be RS. $$3000$$. If the firm follows the sum of years digit method of depreciation find the depreciation for the second year

A
Rs. $$4500$$

B
Rs. $$9000$$

C
Rs. $$7500$$

D
Rs. $$6000$$
Question 5
1 / -0

Reserve is created for__________.

A
known liabilities

B
unknown liabilities

C
for legal compliance

D
none of the above

Solution

They are the portion of profits set aside to strengthen the financial position of a business. Generally, reserves are created to meet unknown future obligations which may arise due to miscellaneous business reasons.
Question 6
1 / -0

Profit and loss on Depreciation fund investment fund A/c is transferred to ______

A
Profit and loss A/c

B
General reserve A/c

C
Trading A/c

D
Capital reserve A/c
Question 7
1 / -0

Which of these statements is true about depreciation.

A
It is a non-deductible expense

B
It is an appropriation of profit

C
It is a non - cash expense

D
It is a process of valuation

Solution

Depreciation is a decrease in the value of the fixed assets due to wear and tear, obsolescence and passage of time.
Depreciation is charged only on the fixed Tangible Assets.
Depreciation is not a cash expense as there is no amount of cash outflow in depreciation, it is just a decrease in the value of the asset.
Question 8
1 / -0

Provision is created for ________.

A
known liabilities

B
unknown liabilities

C
strengthening financial position

D
distribution of dividend

Solution

A provision is an amount set aside from a company's profit to cover an expected liability or a decrease in the value of an asset,even though the specific amount might be unknown. A provision is not a form of saving instead, it is a recognition of an upcoming liability.
Question 9
1 / -0

In the case of wasting Assets, the amount of charge determined on the basis of exhaustion of the assets is know as __________.

A
Depreciation.

B
Depletion.

C
Amortization.

D
Shrinkage.

Solution

Depreciation is used for fixed assets where for wasting assets, the amount of charge determined on the basis of exhaustion of the assets is know as Depletion.
Question 10
1 / -0

Capital reserve is_______.

A
created out of revenue profits

B
created out of capital profits

C
used for meeting revenue losses

D
used for manipulating profit and loss

Solution

Reserves which are created out of capital profit are known as capital reserve. Generally these reserves are not available for distribution as dividend among shareholders. Example of such reserves are - Profit prior to incorporation, Profit on forfeiture of shares, etc. In short, all capital profits are regarded as capital reserves.

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Re-Attempt Weekly Quiz Competition

Depreciation Provisions and Reserves Test - 30

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Depreciation Provisions and Reserves Test - 30

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SHARING IS CARING

Question 1

$$94,000$$

$$96,000$$

$$98,000$$

$$1,00,000$$

Solution

Question 2

Depreciation a/c

Assets a/c

Loss on sale of assets a/c

Profit and loss a/c

Solution

Question 3

Secret Reserves

General Reserves

Capital Reserve

None of the above

Solution

Question 4

Rs. $$4500$$

Rs. $$9000$$

Rs. $$7500$$

Rs. $$6000$$

Question 5

known liabilities

unknown liabilities

for legal compliance

none of the above

Solution

Question 6

Profit and loss A/c

General reserve A/c

Trading A/c

Capital reserve A/c

Question 7

It is a non-deductible expense

It is an appropriation of profit

It is a non - cash expense

It is a process of valuation

Solution

Question 8

known liabilities

unknown liabilities

strengthening financial position

distribution of dividend

Solution

Question 9

Depreciation.

Depletion.

Amortization.

Shrinkage.

Solution

Question 10

created out of revenue profits

created out of capital profits

used for meeting revenue losses

used for manipulating profit and loss

Solution

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