Multiple choice

Which of the following statements is true?

  1. Depreciation provision is of the discretion of the management

  2. Depreciation is a charge against profit

  3. Depreciation is provided only when there is profit

  4. Depreciation is an appropriation of profit
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Depreciation is NOT a discretionary item - it's a mandatory charge against profit that must be provided regardless of whether the business makes profit or loss. It's not an appropriation of profit (like dividends), which only happens when there's profit. Even in loss years, depreciation must still be charged.

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