Answers to True Or False Questions On Depreciation Of Fixed Assets

ACCOUNTING FOR DEPRECIATION AND FIXED ASSETS

True

False

1.

Depreciation is a non-cash item

X

2.

Depreciation is calculated generally on the market value of fixed assets

X

3.

Depreciation should be provided only where the company can show some profit in a financial year

X

4.

Higher depreciation will affect Cash profit of the business

X

5.

Depreciation accounting is a process of allocation and not of valuation

X

6.

Depreciation is charged on all assets

X

7.

Depreciation cannot be provided in case of loss in a financial year

X

8.

The company did not provide any depreciation on its factory machinery as its market value is much higher than the cost of purchase

X

9.

Providing depreciation ensures sufficient cash for asset replacement

X

10.

The expression-depreciation at 10% and 10% per annum carry the same meaning

X

11.

The concept of depreciation does not occupies a significant place in the determination of income and in the measurement of service potential of assets

X

12.

Fixed assets are stated in the balance sheet at their written down value

X

13.

Depreciation charge is necessary to calculate the true cost of production

X

14.

Depreciation is an amortized expenditure

X

15.

Depreciation should be calculated on market value if it is higher than the cost

X

16.

Reducing balance method of depreciation is followed to have a uniform charge for depreciation and repairs and maintenance together

X

17.

Revaluation method is the method of depreciation used to depreciate assets like loose tools, crates, steel container,

X

18.

When a fixed asset is sold for a loss the amount is transferred to the Profit and Loss account by a credit in disposal of fixed asset account

X

19.

Depreciation is the part of the cost of the fixed asset consumed during the period of use by the firm

X

20.

The cost of repairs is included in the calculation of depreciation of a fixed asset

X

21.

The balance of the Provision for Depreciation Account is shown on the Trial Balance as debit

X

22.

In reducing balance method, depreciation rate is applied on the book value of the asset

X

23.

Replacement method is a method of depreciation

X

24.

Fixed assets are normally recorded in the accounting record at cost

X

25.

The proceeds from the sale of a fixed asset would be credited is credited to sales accounts

X

26.

The straight line method is the providing of  depreciation  where the amount of depreciation is reduced from year to year

X