Tag: disposal of asset and any addition or extension to the existing asset

Questions Related to disposal of asset and any addition or extension to the existing asset

During sale of Asset the accumulated Depreciation in Provision Account is transferred to _______.

accountancy depreciation accounting asset disposal account disposal of asset disposal of asset and any addition or extension to the existing asset

  1. Liabilities Account

  2. Asset Account

  3. Expense A/c

  4. Income A/c

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Correct Option: B
Explanation:

Option B is correct. . When depreciation charged is not deducted from assets it is recorded in a separate account named provision for depreciation account. The asset account appears in its book at its original value. At the time of sale of asset, accumulated depreciation from this account is transferred to asset account. 

While charging depreciation during sale of asset, ________ is Credited.

accountancy depreciation accounting asset disposal account disposal of asset disposal of asset and any addition or extension to the existing asset

  1. Asset A/c

  2. Depreciation A/c

  3. Profit and loss A/c

  4. None

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Correct Option: A
Explanation:

As per the golden rules of accounting for nominal account all expenses and losses are debited and all income and gains are credited and for rael account, what comes in debit and what goes out is credit.

In the light of above rule, journal entry for providing depreciation and charging it to profit and losss A/c is -
1. Depreciation A/c     Dr.
        To Asset A/c 
(Being depreciation chargedd to asset)
2. Profit and loss A/c  Dr.
         To Depreciation A/c 
(Being depreciation expense transferred to P&L A/c).

Any addition or extension to asset must be ________ its useful life of that asset.

accountancy depreciation accounting asset disposal account disposal of asset disposal of asset and any addition or extension to the existing asset

  1. Depreciated

  2. Appreciated

  3. Ignored

  4. Separated

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Correct Option: A
Explanation:

Option A is the Correct one.

Depreciation is must on every Fixed assets and on its addition or extension 
for that there are three basic condition.
1.The Assets must be Fixed Tangible Assets
2.The Assets must be used for Business Purpose

3.The must have limited life
Note :- Land has not limited or specific life therefore we can't calculate depreciation on Land.

The amount of depreciation charged on machinery is debited to ________ account.

accountancy depreciation accounting asset disposal account disposal of asset disposal of asset and any addition or extension to the existing asset

  1. Depreciation

  2. Machinery

  3. Provision of Depreciation

  4. Fixed Asset

Show answer
Correct Option: A
Explanation:

Depreciation is charged on a certain percentage on each of the asset every year. Depreciation is an indirect cost for which the following entry will be passed:


Depreciation A/c                            Dr.
     To Asset A/c 

Later on, depreciation a/c will be transferred to profit & loss a/c. 

The Profit on Sale of an asset is debited to ________ Account.

accountancy depreciation accounting asset disposal account disposal of asset disposal of asset and any addition or extension to the existing asset

  1. Profit and Loss

  2. Reserve

  3. Asset

  4. Balance Sheet

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Correct Option: C
Explanation:

On sale of any asset, there must be some profit/loss as the amount realized on sale may be more or less compared to the written down value. If the sale proceed is more than the written down value, there will be a profit and if the sale proceed is less than the written down value, there will be a loss. 


Profit on sale of asset is debited to asset and credited to profit & loss a/c. 

Revaluation of assets is carried out through _________.

accountancy depreciation accounting asset disposal account disposal of asset disposal of asset and any addition or extension to the existing asset

  1. profit and loss A/c

  2. profit and loss adjustment A/c

  3. profit and loss appropriation A/c

  4. general reserve A/c

Show answer
Correct Option: A
Explanation:

b'whenever a partner exits a partnership, the books of accounts of such a firm have to be settled. the outgoing partner or his legal representative have to be paid their dues. so that revaluation of assets is carried out through profit and loss account.'

Loss on disposal of assets is credited to _____________.

accountancy depreciation accounting asset disposal account disposal of asset disposal of asset and any addition or extension to the existing asset

  1. Depreciation a/c

  2. Assets a/c

  3. Loss on sale of assets a/c

  4. Profit and loss a/c

Show answer
Correct Option: B
Explanation:

The disposal of assets involves eliminating assets from the accounting records. This is needed to completely remove all traces of an assets from the balance sheet. An asset disposal may require the recording of a gain or loss on the transaction in the reporting period when the disposal occurs. The journal entry recorded as Debit cash for the  amount received , debit all accumulated depreciation, debit  the loss on sale of asset account, and credit the fixed asset.

A purchased a machine for Rs. $200,000$ and incurred Rs. $5000$ on its installation and commissioning. After $3$ yrs it is sold for Rs. $100,000$ resulting into a loss of Rs. $44,850$. The book value of the machine on the date of sale is ___________.

accountancy depreciation accounting asset disposal account disposal of asset disposal of asset and any addition or extension to the existing asset

  1. Rs. $200000$

  2. Rs. $205000$

  3. Rs. $144850$

  4. Rs. $139850$

Show answer
Correct Option: C
Explanation:

Book value of the asset on the date of sale = Selling cost of asset + Loss on sale of assets

Book value of the asset on the date of sale = Rs. 1,00,000 + Rs. 44,850 = Rs. Rs. 1,44,850

If a concern proposes to discontinue its business from March 2015 and decides to dispose of all its assets within a period of $4$ months, the Balance Sheet as on March 31, 2015 should indicate the assets at their ______.

accountancy depreciation accounting asset disposal account disposal of asset disposal of asset and any addition or extension to the existing asset

  1. Historical cost

  2. Net realizable value

  3. Cost less depreciation

  4. Cost price or market value, whichever is lower

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Correct Option: B

B Ltd acquired a machine on 1st January, 2010 at a cost of Rs. $14,000$ and spent Rs. $1,000$ on its installation. The firm writes off depreciation at $10$% p.a. of the original cost every year. The books are closed on 31st December every year. After 3 years machine sold for Rs. $13,000$. Profit/Loss on sale = ?

accountancy depreciation accounting asset disposal account disposal of asset disposal of asset and any addition or extension to the existing asset

  1. Profit - Rs. $2,500$

  2. Loss - Rs. $2,500$

  3. Profit - Rs. $2,200$

  4. Loss - Rs. $2,200$

Show answer
Correct Option: A