Depreciation Provisions and Reserves Test

Result

Depreciation Provisions and Reserves Test - 5

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Weekly Quiz Competition

Question 1
1 / -0

Depreciation amount + Residual value of a fixed asset =

A
Depreciation expenses

B
Cost of the fixed asset

C
Accumulated depreciation

D
Future economic benefits of a fixed asset

Solution

Residual value of an asset is the scrap value of the asset at the end of its life. Depreciation amount is the total amount written off during the useful life of the asset . Adding both we get the Cost of the fixed asset.
Question 2
1 / -0

XYZ firm has imported a machine from abroad, which of the following is not the element of machine’s cost

A
Refundable tax

B
Import duty

C
Purchase price of a machine

D
None

Solution

Total cost of an asset = Purchase price + Freight + Installation cost. Refundable tax does not form part of the cost of an asset.
Question 3
1 / -0

Name the reserve which has been created out of profit which have been earned in the normal course from day to day activities of the business concern

A
General reserve

B
Revenue Reserve

C
Capital Reserve

D
Specific reserve

Solution

Revenue reserve is the reserve created out of the profits earned in the normal course of the business. These profits are available for distribution as dividend.
Question 4
1 / -0

To whom does the reserves belong to:

A
Proprietor

B
Seller

C
Debtor

D
Creditors

Solution

Reserves are created out of the profits of the business. Since the profits belong to the propreitor the accumulation of the profits in the form of reserves belong to the owner.
Question 5
1 / -0

Which of the following fixed asset is not depreciated in the ordinary circumstance?

A
Equipments

B
Land

C
Building

D
Plant and Machinery

Solution

In the ordinary course land has a value appreciation that is the value of the land increases year after year and hence normally depreciation is not charged on Land.
Question 6
1 / -0

In the calculation of depreciation, all of the following items are estimates except:

A
Historical cost

B
Residual value

C
Useful life

D
Salvage value

Solution

The useful life of the asset and the residual value of the asset can only be an estimate.......because the asset may become obselete before the estimated useful life and it may not fetch the estimated residual value. But the Cost of the asset is actual cost incurred in acquistion of the asset.
Question 7
1 / -0

Which of the following accounting concepts or principles require the calculation of depreciation of the fixed assets

A
Consistency Concept

B
Accrual concept

C
Matching concept

D
Prudence concept

Solution

Prudence means being careful........foreseeing that the value of the asset is going to reduce over the useful life of the asset depreciation is charged. It is based on the prudence concept.
Question 8
1 / -0

Provisions are different from reserves as they are

A
Appropriation of profit.

B
Charge against profit.

C
Both

D
None

Solution

Provision is a charge on the profits of the business created for a specific reason expecting a specific expenditure or loss. But reserves is the amount set aside out of the profits. Reserves may be for a specific purpose or may be for a general purpose.
Question 9
1 / -0

_______ reserve may or may not involve any receipts of cash

A
Capital

B
General

C
Specific

D
Revenue

Solution

Capital reserves are made out of capital profits. Capital profits may or may not involve cash receipts....ex: Premium on issue of shares or debentures involve cash receipts while profit on forfeiture of shares does not involve cash receipts.
Question 10
1 / -0

Reserves are important because they help in:

a. meeting the future contingencies

b. strengthening the financial position of the business

c. redemption of liabilities like debentures

d. expansion

A
Strengthening the general financial position of the business;

B
Meeting a future contingency

C
Redeeming a long-term liability like debentures, etc.

D
All of these

Solution

Reserves out of profits are required for various purposes. They help in meeting the unforeseen contingencies that may arise in the future, help in the expansion of the business. They may also be used to distribute dividends and pay off the liabilities like debentures.

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Re-Attempt Weekly Quiz Competition

Depreciation Provisions and Reserves Test - 5

Result

Depreciation Provisions and Reserves Test - 5

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Rank

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SHARING IS CARING

Question 1

Depreciation expenses

Cost of the fixed asset

Accumulated depreciation

Future economic benefits of a fixed asset

Solution

Question 2

Refundable tax

Import duty

Purchase price of a machine

None

Solution

Question 3

General reserve

Revenue Reserve

Capital Reserve

Specific reserve

Solution

Question 4

Proprietor

Seller

Debtor

Creditors

Solution

Question 5

Equipments

Land

Building

Plant and Machinery

Solution

Question 6

Historical cost

Residual value

Useful life

Salvage value

Solution

Question 7

Consistency Concept

Accrual concept

Matching concept

Prudence concept

Solution

Question 8

Appropriation of profit.

Charge against profit.

Both

None

Solution

Question 9

Capital

General

Specific

Revenue

Solution

Question 10

Strengthening the general financial position of the business;

Meeting a future contingency

Redeeming a long-term liability like debentures, etc.

All of these

Solution

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