Tag: book keeping and accountancy

Questions Related to book keeping and accountancy

 The original cost of the asset is Rs. 2,50,000. The useful life of the asset is 10 years and net residual value is estimated to be Rs. 50,000. Now, the amount of depreciation to be charged every year will be _________.

book keeping and accountancy accounting for depreciation factors for determining depreciation factors of depreciation need for depreciation and the factors affecting the amount of depreciation

  1. Rs.21000

  2. Rs.20000

  3. Rs.25000

  4. Rs.19000

Show answer
Correct Option: B
Explanation:

Formula for calculating depreciation is :

Depreciation = (Cost of asset - Scrap value)/ Useful life of asset
Depreciation = Rs. (250000 - 50000)/ 10 years
Depreciation = Rs. 20000

The amount realised at the end of working life of an asset is known as ____________ .

book keeping and accountancy accounting for depreciation factors for determining depreciation factors of depreciation need for depreciation and the factors affecting the amount of depreciation

  1. Residual value

  2. Market price

  3. Original cost

  4. Written down value

Show answer
Correct Option: A
Explanation:

In accounting, the residual value is an estimated amount that a company can acquire when they dispose off an asset at the end of its useful life

The books value of an asset is obtained by deducting depreciation from its __________.

book keeping and accountancy accounting for depreciation factors for determining depreciation factors of depreciation need for depreciation and the factors affecting the amount of depreciation

  1. Market value

  2. Market + Cost price

  3. Cost

  4. Scrap value

Show answer
Correct Option: C
Explanation:

Book value is the value of a security or asset as entered in the firm's books. Book value is the value of an asset according to its balance sheet balances. An asset's initial book value is its acquisition cost. Every year depreciation is deducted from that value. 

So the book value of an asset is obtained by deducting depreciation from its cost price. 

The amount of depreciation  goes on decreasing in every year under the _____method.

book keeping and accountancy accounting for depreciation factors for determining depreciation factors of depreciation need for depreciation and the factors affecting the amount of depreciation

  1. Fixed installment

  2. Straight line

  3. Revaluation

  4. Written down value

Show answer
Correct Option: D
Explanation:

Under the written down value method, depreciation calculated at a fixed percentage on the original cost (in the first year) and on the written down value, (in subsequent years) of fixed depreciable asset is written off during each accounting period over the expected useful life of asset. Under this method, the rate of deprecition remains constant year after year whereas the amount of depreciation goes on decreasing.

In the provision method of depreciation the asset always appears at:

book keeping and accountancy accounting for depreciation factors for determining depreciation factors of depreciation need for depreciation and the factors affecting the amount of depreciation

  1. Cost price

  2. Market Price

  3. Scrap Value

  4. None of the above

Show answer
Correct Option: A
Explanation:

Under provision for depreciation method of recording depreciation, depreciation is credited to the provision for depreciation account and as a result, the respective asset accout appears at its original cost.

Give journal entries:
For deducting depreciation amount from the cost of the asset.

book keeping and accountancy accounting for depreciation factors for determining depreciation factors of depreciation need for depreciation and the factors affecting the amount of depreciation

  1. Depreciation A/c Dr.

    To Asset A/c

  2. Profit & Loss A/c Dr.

    To Depreciation A/cP

  3. Asset A/c Dr.

    To Depreciation A/c

  4. DepreciationA/c Dr.

    To Profit & Loss A/c

Show answer
Correct Option: A
Explanation:

Depreciation is the permanent and continuous decrease in the book value of a depreciable fixed asset due to use, effluxion of time, obsolescence, expiration of legal rights or any other cause.

Depreciation is a non cash expense. As per the golden rules of accounting, all expenses are related to nominal A/c and assets are related to Real A/c.
Therefore, journal entry for deducting depreciation amount from the cost of the asset is :
 Depreciation A/c     Dr.
        To Asset A/c

Other name of straight line basis of depreciation is ___________________.

book keeping and accountancy accounting for depreciation factors for determining depreciation factors of depreciation need for depreciation and the factors affecting the amount of depreciation

  1. Reducing depreciation

  2. Diminishing balance method

  3. Written down value method

  4. None of the above

Show answer
Correct Option: D
Explanation:

Straight line method of depreciation - Under straight line method method, a fixed and equal amount of depreciation, calculated at a fixed percentage on the original cost of a fixed depreciable asset is written off during each accounting period over the expected useful life of the asset.

Straight line method of depreciation can allso be called as fixed installment method of depreciation.

Under written down value method the annual amount of depreciation is______.

book keeping and accountancy accounting for depreciation factors for determining depreciation factors of depreciation need for depreciation and the factors affecting the amount of depreciation

  1. Always same

  2. Goes on decling

  3. Keep on increasing

  4. None of the Above

Show answer
Correct Option: B
Explanation:

Under the written down value method, depreciation calculated at a fixed percentage on the original cost (in the first year) and on the written down value, (in subsequent years) of fixed depreciable asset is written off during each accounting period over the expected useful life of asset. Under this method, the rate of deprecition remains constant year after year whereas the amount of depreciation goes on decreasing.

Where the provision for depreciation account appears in Balance sheet?

book keeping and accountancy accounting for depreciation factors for determining depreciation factors of depreciation need for depreciation and the factors affecting the amount of depreciation

  1. Liabilities side

  2. Asset side

  3. Trading account

  4. Profit & loss account

Show answer
Correct Option: A
Explanation:

Under provision for depreciation method of recording depreciation, Fixed asset is shown at its original cost on the asset side in balance sheet and depreciation till date is accumulated in provision for depreciatiion account which is shown on liabilities side in balance sheet.

Under straight line method of depreciation is charged on the basis of _________ .

book keeping and accountancy accounting for depreciation factors for determining depreciation factors of depreciation need for depreciation and the factors affecting the amount of depreciation

  1. Market value

  2. Book value

  3. Original cost

  4. None of the Above

Show answer
Correct Option: C
Explanation:

Under the staright line method of depreciation, a fixed and equal amount of depreciation, calculated at a fixed percentage on the original cost of a fixed depreciable asset is written off during each aaccounting period over the expectd useful life of the asset.