Question 1

Income tax authorities recognize this method ___

Accepted Answer

The Written Down Value (WDV) method is recognized by income tax authorities for calculating depreciation on assets for tax purposes.

Question 2

Amortization applies to

Accepted Answer

Amortization is the process of gradually writing off the initial cost of an intangible asset over its useful life.

Question 3

In depreciation calculation the life of an asset is:

Accepted Answer

The life of an asset in depreciation calculation is an estimate because it is based on judgment and experience, not a precise calculation. Different assets have varying useful lives, and these are often determined by considering factors such as wear and tear, technological obsolescence, and legal or regulatory limits.

Question 4

Depreciable amount plus residual value of a fixed asset:

Accepted Answer

The depreciable amount of a fixed asset is the cost of the asset minus its residual value. When you add the residual value back to the depreciable amount, you get the total cost of the fixed asset.

Question 5

Cost of fixed asset minus accumulated depreciation expenses of the fixed asset:

Accepted Answer

The book value of a fixed asset is calculated by subtracting the accumulated depreciation from the cost of the fixed asset. This reflects the net value of the asset as recorded in the accounting records.

Question 6

The estimate about useful life of a fixed asset:

Accepted Answer

The estimate of the useful life of a fixed asset can be changed if new information indicates that the original estimate was incorrect or circumstances have changed, reflecting a more accurate estimation of the period over which the asset will generate economic benefits.

Question 7

XYZ has imported a machine from abroad. Which of the following is not the element of a machine's cost?

Accepted Answer

Refundable Tax is not considered an element of a machine's cost because it is expected to be returned to the purchaser, thus not contributing to the final cost of acquiring the machine.

Question 8

Which of the following fixed asset is not depreciated in ordinary circumstances:

Accepted Answer

Land is not depreciated because it does not wear out, become obsolete, or get used up. Unlike buildings, machinery, and equipment, the value of land typically does not decrease over time, which is why it is not subject to depreciation in accounting practices.

Question 9

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

Accepted Answer

Historical cost is not an estimate, it is the actual cost of the asset when it was purchased.

Question 10

Depreciation means

Accepted Answer

Depreciation refers to the accounting process of allocating the cost of a tangible or physical asset over its useful life, leading to a reduction in the book value of the fixed asset. It does not mean depletion, amortization, or saving of cash, although amortization is a similar concept applied to intangible assets.

Question 11

Provision for Depreciation is

Accepted Answer

Provision for Depreciation is a charge against the profit. It represents the amount of an asset's cost that has been used up during the accounting period, reflecting the wear and tear, obsolescence, or decline in the value of the asset over its useful life. This charge helps in matching the cost of the asset with the revenue it generates over its useful life, in accordance with the matching principle of accounting.

Question 12

A machine is purchased at a cost of Rs. 5,00,000. Its useful life is 5 years with a scrap value of Rs. 50,000. It is sold for Rs. 40,000 at the end of 5 years. The profit or loss on the sale would be:

Accepted Answer

The answer of A machine is purchased at a cost...

Question 13

Depreciation of loose tools is provided by

Accepted Answer

The revaluation method is commonly used for depreciating loose tools, as it involves assessing the value of the tools at the end of each period and adjusting for any loss in value.

Question 14

Which of the following is not one of the five areas into which social accounting can be divided?

Accepted Answer

Environmental auditing is not one of the five areas into which social accounting can be divided.

Question 15

Human resource accounting attempts to place a value on:

Accepted Answer

Human resource accounting aims to quantify the value of a company's workforce, recognizing employees as valuable assets.

Question 16

Which of the following is not a reason that explains why more firms are reporting on social matters?

Accepted Answer

Increased efficiency is more related to operational and financial performance improvements rather than the reporting on social matters. Reporting on social matters is often driven by external pressures such as media scrutiny, government regulations, and consumer expectations, rather than internal efficiency improvements.

Question 17

The amount of depreciation charged on a machinery will be debited to:

Accepted Answer

Depreciation on machinery is recorded by debiting the Depreciation Account, which reflects the expense related to the use of the machinery over time. This decreases the value of the asset on the balance sheet and recognizes the expense on the income statement.

Question 18

Loss on sale of machinery will be:

Accepted Answer

The answer of Loss on sale of machinery will be:
...

Question 19

Which of the term is used to write off in reference to tangible fixed assets.

Accepted Answer

Depreciation is the accounting process of allocating the cost of tangible assets over their useful lives. It is used to account for declines in the value of fixed assets over time, reflecting wear and tear, obsolescence, or age.

Question 20

Reduction in the book value of an asset over a period of time is called

Accepted Answer

Depreciation is the accounting process of allocating the cost of a tangible asset over its useful life, representing the reduction in the book value of an asset due to wear and tear, age, or obsolescence.

Quiz 44: Depreciation and Reserves: Understanding the Accounting Concepts