Tag: meaning and characteristics of provisions

Questions Related to meaning and characteristics of provisions

An alternative term used for accumulated depreciation expenses?

book keeping and accountancy reserve and fund accounting treatment for depreciation meaning and characteristics of provisions provision for depreciation account

  1. Provision for depreciation

  2. Cumulative depreciation

  3. Targeted depreciation

  4. Depletion

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Correct Option: A
Explanation:

Provision for depreciation is an alternative term used for accumulated depreciation expenses. Depreciation expense is recognized on the income statement as a non-cash expense that reduces the company's net income.

The book value of an asset is obtained by deducting depreciation from its:

book keeping and accountancy reserve and fund accounting treatment for depreciation meaning and characteristics of provisions provision for depreciation account

  1. Market value

  2. Scrap value

  3. Market + Cost price

  4. Cost

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Correct Option: D

What is the accumulated depreciation?

book keeping and accountancy reserve and fund accounting treatment for depreciation meaning and characteristics of provisions provision for depreciation account

  1. Sum of all depreciation expenses of a fixed asset

  2. Depreciation expenses

  3. Cost of depletion of assets

  4. Future value of fixed asset

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Correct Option: A
Explanation:

Accumulated depreciation is the total amount of a plant asset's cost that has been allocated to depreciation expense (or to manufacturing overhead) since the asset was put into service.

On a worksheet, the adjusting entry to account for depreciation of equipment consists of __________.

book keeping and accountancy reserve and fund accounting treatment for depreciation meaning and characteristics of provisions provision for depreciation account

  1. debit to Depreciation Expense and a credit to Equipment

  2. debit to Depreciation Expense and a credit to Accumulated Depreciation

  3. debit to Equipment and a credit to Accumulated Depreciation

  4. debit to Accumulated Depreciation and a credit to Equipment

Show answer
Correct Option: B
Explanation:

The basic journal entry for depreciation is to debit the Depreciation Expense account (which appears in the income statement) and credit the Accumulated Depreciation account (which appears in the balance sheet as a contra account that reduces the amount of fixed assets).

Providing depreciation is compulsory as it reflects ________.

book keeping and accountancy reserve and fund accounting treatment for depreciation meaning and characteristics of provisions provision for depreciation account

  1. true financial position

  2. makes provision so that in future the replacement asset could be purchased

  3. both a & b

  4. none of the above

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Correct Option: C

The estimated value of an asset after the expiry of its useful life is called as _______________.

book keeping and accountancy reserve and fund accounting treatment for depreciation meaning and characteristics of provisions provision for depreciation account

  1. Written Down value

  2. Residual Value (Right Answer)

  3. Accumulated depreciation

  4. Sales value

Show answer
Correct Option: C
Explanation:

An asset can reach full depreciation when its useful life expires or if an impairment charge is incurred against the original cost, though this is less common.  The balance sheet will still reflect the original cost of the asset and the equivalent amount of accumulated depreciation.

Which  of the following is the normal balance of an accumulated depreciation account?

book keeping and accountancy reserve and fund accounting treatment for depreciation meaning and characteristics of provisions provision for depreciation account

  1. Debit balance

  2. Credit balance

  3. Nil balance

  4. (A) or (B)

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Correct Option: B
Explanation:

Credit balance is the normal balance of an accumulated depreciation account.Accumulated depreciation has a credit balance, because it aggregates the amount of depreciation expense charged against a fixed asset.

Provision for Discount on Debtors is_______________.

book keeping and accountancy reserve and fund accounting treatment for depreciation meaning and characteristics of provisions provision for depreciation account

  1. Debited to Sundry Debtors Account

  2. Credited to Sundry Debtors Account

  3. Debited to Bad Debts Account

  4. Debited to Profit & Loss Account

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Correct Option: D
Explanation:

Provision for discount on debtors is debited to profit and loss account. Provision for depreciation Discount is allowed when our debtors settle our accounts promptly. The amount of discount is an expected loss and has to be recorded in advance. 

The balance in the accumulated provision for depreciation account of a company as at the beginning of the year was Rs. 2,00,000 when the original cost of the assets amounted to Rs. 10,00,000. The company charges 10% depreciation on a straight line basis for all the assets including those which have been either purchased or sold during the year. One such asset costing Rs. 5,00,000 with accumulated depreciation as at the beginning of the year of Rs. 80,00,000 was deposited off during the year.
The balance of the accumulated depreciation account at the end of the year considering the current year's depreciation charge would be 

book keeping and accountancy reserve and fund accounting treatment for depreciation meaning and characteristics of provisions provision for depreciation account

  1. Rs. 2,20,000

  2. Rs. 1,70,000

  3. Rs. 1,20,000

  4. Rs. 2,50,000

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Correct Option: B

The balance in the accumulated provision for depreciation account of a company as at the beginning of the year was Rs. 2,00,000 when the original cost of the assets amounted to Rs. 10,00,000. The company charges 10% depreciation on a straight line basis for all the assets including those which have been either purchased or sold during the year. One such asset costing Rs. 5,00,000 with accumulated depreciation as at the beginning of the year of Rs. 80,00,000 was deposited off during the year.
Depreciation for the year is __________.

book keeping and accountancy reserve and fund accounting treatment for depreciation meaning and characteristics of provisions provision for depreciation account

  1. Rs. 40,000

  2. Rs. 50,000

  3. Rs. 60,000

  4. Rs. 1,00,000

Show answer
Correct Option: D
Explanation:
Depreciation for the year = Asset at beginning of the year x depreciation rate 
                                            = 10,00,000 x 10/100
                                            = RS-1,00,000.