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- Name – Quiz 39 – Depreciation – (Answers)
- Topic – Depreciation
- Answers with Explanation
Q1. Depreciation is a cash expense.
Ans. The given statement is False. Depreciation is a non-cash expense because there is no actual outflow of cash. The transaction is only in the books of accounts.
Q2. Depreciation is a capital expenditure.
Ans. The given statement is False. Depreciation is revenue in nature and it is debited to the profit and loss account.
Q3. Which of the following asset is not depreciated?
Ans. Land is a non-depreciable asset since it does not have a fixed useful life.
Q4. Provision for depreciation is a _____ account.
Ans. It is a valuation account. Such an account is paired with an asset or liability, it offsets the value of the paired account. Also known as a ‘Contra’ account.
Q5. In the _____ method, a fixed amount of depreciation is charged annually.
Ans. In the straight-line method, a percentage of the original cost is written off every year. As a result, the amount of depreciation is uniform every year.
Q6. On which of the following is depreciation charged?
Ans. None of them is the correct answer as the other ones are intangible assets and may only be amortized.
Q7. While charging depreciation, we distribute the cost over _____.
Ans. Useful life refers to an accounting estimate of the number of years it is likely to remain in service for the purpose of cost-effective revenue generation.
Q8. Asset = 10,000, Depreciation = 40%, Asset Value after 1 Year = _____.
Ans. Depreciation = 40% (4,000), Opening Balance of Asset = 10,000. Value of Asset after 1 Year = 10,000 – 4,000 = 6,000.
Q9. _____ is another name for straight line method of depreciation.
Ans. ‘Original cost method‘ is another name used for the straight-line method.
Q10. ‘Depreciation A/C’ is _____ to record the journal entry for depreciation.
Ans. Depreciation A/C – Debit, Assets A/C – Credit.
Q11. _____ is usually not to depreciate.
Ans. Depreciation is not charged on land in normal circumstances because the useful life of land can not be determined. You need to know how many years would an asset last to charge depreciation on that.
Q12. Which of the following is depreciated?
Ans. Tools and equipment are tangible fixed assets therefore they are depreciated.
Q13. Depreciation is charged on all tangible assets.
Ans. The given statement is False. Depreciation is charged on all ‘tangible fixed assets’. Even current assets can be tangible for e.g. cash.
Q14. Depreciation is shown on _____.
Ans. Depreciation is charged on the income statement as an expense.
Q15. _____ depreciation means sum of all depreciation charged till date.
Ans. The sum of all depreciation recorded to date is called accumulated depreciation.
Q16. Diminishing value method is also called _____ method.
Ans. It is also known as the Reducing Balance Method or Written-down Value Method.
Q17. Which of the following is not a method of depreciation?
Ans. Impairment method is not a method of depreciation.
Q18. Main reasons for charging depreciation are normal usage and _____.
Ans. Depreciation is charged due to normal usage, wear and tear, unfavourable conditions, etc. The main reasons for this list are the first two.
Q19. Depreciation is for tangible fixed assets whereas _____ is for intangible assets.
Ans. Depreciation reduces the value of tangible fixed assets, while amortization reduces the value of intangible assets.
Q20. Depreciation is _____ in the value of a tangible fixed asset.
Ans. Depreciation is a reduction in the value of fixed assets caused by normal usage, wear and tear, new technology, and unfavourable market conditions.