Day: November 6, 2019

‘Obsolescence’ means . . .

Select ONE answer:

1. the decline in the value of fixed assets as a result of them becoming outdated by technological improvement and invention.
2. the decline in the book value of fixed assets as a result of them being depreciated using the straight-line method of depreciation.
3. the decline in the book value of fixed assets as a result of them being depreciated using the reducing balance method of depreciation.
4. none of the above.

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 1

1. The depreciation charge shown in the profit and loss account is an estimate of the decline in the value of fixed assets that takes place for all sorts of reasons. Obsolescence is one of those reasons but it is not the only one. For example, wear and tear and use are two other possible reasons.

 

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