Depreciation Provisions and Reserves Test

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Depreciation Provisions and Reserves Test - 48

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Question 1
1 / -0

Dinesh Garments purchased a machine for Rs. 50,000 and spent Rs. 6,000 on its erection. On the date of purchase, it was estimated that the effective life of the machine will be ten years and after ten years its scrap value will be Rs. 6000. The amount of depreciation for second year on straight-line basis is:

A
Rs. 5,000

B
Rs. 6,000

C
Rs. 5,600

D
Rs. 6,200

Solution

Depreciation as per straight line $$ =$$ {Cost - Residual value}/{Useful life}
$$= 56000-6000/10 = 5000$$
Question 2
1 / -0

Which of the following is/are cause for providing depreciation?

A
Physical wear and tear resulting from use

B
Physical deterioration resulting from atmospheric exposure

C
Passage of time

D
All of the above

Solution

Physical wear and tear resulting from use: It is the cause of charging depreciation for the assets which lose their value from the constant use such as fixed assets such as building; plant, machinery etc. get worn out and torn out due to the regular use.
Question 3
1 / -0

Which of the following is/are the important characteristic of depreciation?

A
Depreciation is a process of allocation of future cost.

B
Depreciation is caused due to physical factors and functional factors

C
Total depreciation can exceed its depreciable value or original cost

D
All of the above

Solution

Depreciation is caused mainly from wear and tear when the asset is in use and from erosion, rust, rot and decay when it is exposed to wind, rain, sun and other elements of nature.
Question 4
1 / -0

Amortization applies to ________________.

A
Current Assets

B
Wasting Assets

C
Intangible Assets

D
Non - Current Assets

Solution

Amortization of intangibles is the process of expensing the cost of an intangible asset over the projected life of the asset. Intangible assets, such as patents and trademarks, are amortized into an expense account. Tangible assets are posted to expenses through depreciation.
Question 5
1 / -0

Depreciation is the fall in the ____________ of a fixed asset through physical wear and tear due to use or passage of time or from any other cause.

A
Quality

B
Value

C
Either (A) or (B)

D
None of the above

Solution

Physical wear and tear resulting from use: It is the cause of charging depreciation for the assets which lose their value from the constant use such as fixed assets such as building; plant, machinery etc. get worn out and torn out due to the regular use.
Question 6
1 / -0

Which of the following is/are not the important characteristic of depreciation?

A
Total depreciation can exceed its depreciable value or original cost

B
Depreciation is calculated in respect of fixed assets only

C
Depreciation is always computed in a systematic and rational manner

D
All of the above

Solution

Depreciation is thus the decrease in the value of assets and the method used to reallocate, or "write down" the cost of a tangible asset (such as equipment) over its useful life span.
Question 7
1 / -0

Fundamental objective of depreciation is/are ____________________.

A
To maintain the nominal capital invested in fixed assets

B
To allocate the expired portion of the cost of fixed assets over a number of accounting periods.

C
Both (A) & (B)

D
None of the above

Solution

Depreciation is an accounting method of allocating the cost of a Investing/Trading .For tax purposes, businesses can deduct the cost of the tangible assets they in year one or write the value of the asset off over the assets 10-year life..Most business owners prefer to expense only a portion of the cost.
Question 8
1 / -0

Depreciation Accounting has been defined by the ________ as " a system of accounting which aims to distribute the cost or other basic value of tangible capital assets less salvage (if any) over the estimated useful life of the unit (which may be a group of assets) in a systematic and rational manner. It is a process of allocation and not of valuation".

A
The Institute of Chartered Accountants of England

B
The Institute of Chartered Accountants of India

C
American Institute of Certified Public Accountants

D
The Institute of Chartered Accountants of Pakistan

Solution

Accounting Standards Codification 360-10-35-4 defines depreciation .depreciation expense ceases in as much as the full cost of the asset has been recorded to expense. Committee of the American Institute of Certified Public Accountants .
Question 9
1 / -0

The main objective of providing depreciation is __________________.

A
To calculate true profit

B
To calculate financial position

C
To reduce tax burden

D
To reduce profit

Solution

Objectives or Need for Providing Depreciation:
(a) To ascertain true profits:
(b) To show the assets at their proper values:
(c) To create funds for replacement of assets:
(d) To keep the capital in tact
(e) Statutory Need ,Provision of depreciation is a statutory need.
(f) To present true financial position.
Question 10
1 / -0

A decrease in value of fixed asset due to age, wear and tear ___________.

A
Appreciation

B
Written down value

C
Depreciation

D
Accumulated depreciation
Solution
Depreciation is a non-cash expense that reduces the value of an asset over time. Assets depreciate for below mentioned reasons:
- Wear and tear
- Obsolescence
- Keeping idle for prolonged
- Depletion

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Re-Attempt Weekly Quiz Competition

Depreciation Provisions and Reserves Test - 48

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Depreciation Provisions and Reserves Test - 48

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SHARING IS CARING

Question 1

Rs. 5,000

Rs. 6,000

Rs. 5,600

Rs. 6,200

Solution

Question 2

Physical wear and tear resulting from use

Physical deterioration resulting from atmospheric exposure

Passage of time

All of the above

Solution

Question 3

Depreciation is a process of allocation of future cost.

Depreciation is caused due to physical factors and functional factors

Total depreciation can exceed its depreciable value or original cost

All of the above

Solution

Question 4

Current Assets

Wasting Assets

Intangible Assets

Non - Current Assets

Solution

Question 5

Quality

Value

Either (A) or (B)

None of the above

Solution

Question 6

Total depreciation can exceed its depreciable value or original cost

Depreciation is calculated in respect of fixed assets only

Depreciation is always computed in a systematic and rational manner

All of the above

Solution

Question 7

To maintain the nominal capital invested in fixed assets

To allocate the expired portion of the cost of fixed assets over a number of accounting periods.

Both (A) & (B)

None of the above

Solution

Question 8

The Institute of Chartered Accountants of England

The Institute of Chartered Accountants of India

American Institute of Certified Public Accountants

The Institute of Chartered Accountants of Pakistan

Solution

Question 9

To calculate true profit

To calculate financial position

To reduce tax burden

To reduce profit

Solution

Objectives or Need for Providing Depreciation:

Question 10

Appreciation

Written down value

Depreciation

Accumulated depreciation

Solution

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