Depreciation Provisions and Reserves Test

Result

Depreciation Provisions and Reserves Test - 2

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Weekly Quiz Competition

Question 1
1 / -0

Under straight line method depreciation is calculated on _____value of asset

A
Market

B
Original

C
Written down

D
Cost less scrap

Solution

Under Straight line method, depreciation is calculated by dividing the difference between an asset's cost and its expected salvage value by the number of years it is expected to be used.
Question 2
1 / -0

Which reserve are created for specific purpose

A
Specific Reserve

B
Dividend equalization fun

C
Dividend equalization fund

D
Capital Reserves

Solution

Specific reserves are created to meet specific purposes and contingencies. They can be utilised only for that purpose. Example: Dividend equalisation reserve, Capital redemption reserve.
Question 3
1 / -0

Every fixed asset loses its value due to wear and tear. This decline in the value of asset is known as

A
Devaluation

B
Depreciation

C
Amortization

D
Provisions

Solution

Depreciation is reduction in the value of an asset over time due to its use or aging
Question 4
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
Specific reserve

C
Capital Reserve

D
Revenue 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 5
1 / -0

Which of the following is the limitation of the Written down value ?

A
Income Tax Act accept this method for tax purposes;

B
This method is suitable for fixed assets, which lasts for long

C
As a large portion of cost is written-off in earlier years, loss due to obsolescence gets reduced;

D
The value of the asset can never be zero

Solution

Because depreciation is calculated on written down value. Every time depreciation amount shall be reduced but will never be exact zero.
Question 6
1 / -0

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

A
Accrual concept

B
Prudence concept

C
Consistency Concept

D
Matching 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 7
1 / -0

An increase in the value of fixed asset is referred to as:

A
Market capitalization

B
Purchase of Asset

C
Reserve depreciation

D
Appreciation

Solution

Appreciation is an increase in the value of an asset over time. The increase can occur for a number of reasons, including increased demand or weakening supply, or as a result of changes in inflation or interest rates. This is the opposite of depreciation, which is a decrease over time.
Question 8
1 / -0

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

A
Purchase price of a machine

B
Import duty

C
Refundable tax

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 9
1 / -0

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

A
Historical cost

B
Residual value

C
Salvage value

D
Useful life

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.

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Re-Attempt Weekly Quiz Competition

Depreciation Provisions and Reserves Test - 2

Result

Depreciation Provisions and Reserves Test - 2

Score

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Rank

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SHARING IS CARING

Question 1

Market

Original

Written down

Cost less scrap

Solution

Question 2

Specific Reserve

Dividend equalization fun

Dividend equalization fund

Capital Reserves

Solution

Question 3

Devaluation

Depreciation

Amortization

Provisions

Solution

Question 4

General reserve

Specific reserve

Capital Reserve

Revenue Reserve

Solution

Question 5

Income Tax Act accept this method for tax purposes;

This method is suitable for fixed assets, which lasts for long

As a large portion of cost is written-off in earlier years, loss due to obsolescence gets reduced;

The value of the asset can never be zero

Solution

Question 6

Accrual concept

Prudence concept

Consistency Concept

Matching concept

Solution

Question 7

Market capitalization

Purchase of Asset

Reserve depreciation

Appreciation

Solution

Question 8

Purchase price of a machine

Import duty

Refundable tax

None

Solution

Question 9

Historical cost

Residual value

Salvage value

Useful life

Solution

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