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Depreciation Provisions and Reserves Test - 9

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Depreciation Provisions and Reserves Test - 9
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  • Question 1
    1 / -0

    A machinery was purchased for Rs.180000 on 1st January, 2006. Depreciation was charged annually @ 10% on written down value method. 1/4th of this machinery was sold on 1St July, 2008 for Rs.36000.Calculate profit on sale of machinery

    Solution

    1/1/2006                                 purchase                              1,80,000

    31/12/2006                     Less: Depreciation                          18,000

                                                  Balance                                 1,62,000

    31/12/2007                      Less: Depreciation                          16,200

                                                   Balance                                 1,45,800

                                                                                          --------------------

    1/1/2008                     1/4th of the above balance                   36450

    1/7/2008                     Less: 6 months depreciation                   1822.5

                                        Balance                                                34627.5

                                        Sale                                                      36000

                                        Profit                                                     1372.5

  • Question 2
    1 / -0

    A machinery was purchased for Rs.180000 on1 st January, 2010. Depreciation was charged annually@ 10% on written down value method. 1/4th of this machinery was sold on 1St July, 2012 for Rs.36000.Calculate balance of machinery account on 31st December 2012

    Solution

    1/1/2010                     Purchase                          1,80,000

    31/12/2010          Less: Depreciation                     18,000

                                      Balance                             1,62,000

    31/12/2011           Less: Depreciation                    16200

                                     Balance                             1,45,800

                                Less: 1/4th Sold                        36450

                                     Balance                             1,09,350

    31/12/2012          Less: Depreciation                    10935

                                     Balance                              98415

  • Question 3
    1 / -0

    On October 01, 2009, a Truck was purchased for Rs.800000 by Laxmi Transport Ltd. Depreciation were provided at 15% p.a. on the diminishing balance basis on this truck. On December 31, 2012 this Truck was sold for Rs.500000. Accounts are closed on 31st March every year. Calculate profit on sale of Truck

    Solution

    1/10/2009                                Purchase                                   8,00,000

    31/3/2010                       Less: Depreciation                                60,000

                                                   Balance                                     7,40,000

    31/3/2011                       Less: Depreciation                            1,11,000

                                                  Balance                                     6,29,000

    31/3/2012                       Less: Depreciation                              94,350

                                                  Balance                                     5,34,650

    31/12/2012                     Less: Depreciation                               60,148

                                                  Balance                                      4,74,502

                                                  Sale                                            5,00,000

                                                  Profit                                              25498

  • Question 4
    1 / -0

    Calculate provision for doubtful debt from the following information Sundry debtor- Rs.95200, Further bad debts (new) Rs.11200, provision fro doubtful debt to be maintained is 10 %

    Solution

    Sundry Debtors              = 95,200

    Less: Further bad debts = 11,200

    Balance                          = 84,000

    Provision for doubtful debts = 84000 * 10/100

                                               = 8400

  • Question 5
    1 / -0

    The trial balance show the following information Creditors, bad debt-Rs.800 and sundry debtors-Rs.35000 What amount will be debited to Profit and loss account?

    Solution

    Only Bad debts is a nominal account which is a loss incurred in the normal course of the business. Creditors and sundry debtors are shown in the Balance sheet. Hence bad debts is shown in the profit and loss account.

  • Question 6
    1 / -0

    Depreciation is Charged on :

    Solution

    Current assets are assets which keep changing within a year of the business and are not charged with depreciation. Fixed tangible assets stay in the business for a longer period of time and the value of these assets keep reducing year after year becaue of the continuous usage of the assets. Hence depreciation is charged on the fixed tangible assets.

  • Question 7
    1 / -0

    At the end of the year, Depreciation Account is transferred to :

    Solution

    Depreciation is a loss incurred by the business. It is a loss in the value of the asset. It is a nominal account. Hence it is charged to he profit and loss account of the business.

  • Question 8
    1 / -0

    Provision is created by debiting :

    Solution

    Provision is a charge on the profits of the business. A portion of the profits are set aside to meet certain losses and expenses that may arise in the future. Hence a provision account is created by debiting the profit and loss account.

  • Question 9
    1 / -0

    The cause of Depreciation is :

    a. Obsolosence

    b. Usage of Asset

    c. Wear and tear

    Solution

    Depreciation is a loss in the value of the aseet. The value of the asset keeps reducing because of the wear and tear and usage of the asset. When an asset is used for a long period of time it cannot be sold for the same value for which it was purchased. The value keeps reducing year on year due to the above reasons.

  • Question 10
    1 / -0

    Depreciation is a process of :

    Solution

    Depreciation is a process of allocation of the cost of the asset to the period of its life.

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