Day: November 3, 2019

Depreciation is . . .

Select ONE answer:

1. a way of setting aside money to provide for the eventual replacement of fixed assets.
2. a way of writing off the cost of fixed assets over their estimated revenue- generating period.
3. the writing off of the cost of fixed assets evenly over their’ estimated useful economic lives.
4. the writing off of the cost of fixed assets over their estimated useful economic lives in ever decreasing amounts.

Show your workings to arrive at your answer, and explain and justify your reasons:

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This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 2

1. Charging depreciation, of itself, does not necessarily mean that funds are set aside to provide for the eventual replacement of fixed assets.
2. Correct
3. The cost of fixed assets may be written off in ways other than evenly over their estimated useful economic lives.
4. The cost of fixed assets may be written off in ways other than in ever decreasing amounts over their estimated useful economic lives.

 

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