Month: November 2019

The depreciation charge shown in the profit and loss account . . .

Select ONE answer:

1. is a revenue expense.
2. is capital expenditure.
3. can be either capital expenditure or a revenue expense, depending on the nature of the fixed asset being depreciated.
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. If the depreciation charge was capital expenditure it would be shown as an increase in fixed assets in the balance sheet – not as an expense in the profit and loss account.

 

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The purpose of charging depreciation as an expense in the profit and loss account is . . .

Select ONE answer:

1. to allocate the cost of acquiring fixed assets over the accounting periods expected to benefit from their use.
2. to ensure that funds will be available for the eventual replacement of fixed assets.
   to reduce the figure shown in the balance sheet for fixed assets from the cost of
3. those fixed assets to their estimated market value.
4. to comply with the prudence concept.

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

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

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

The answer is 1

1. Correct
2. Charging depreciation, of itself, does not necessarily mean that funds will be available for the eventual replacement of fixed assets.
3. Cost less depreciation is unlikely to equal market value.
4. It is the accruals concept, not the prudence concept, which underlies the charging of depreciation as an expense in the profit and loss account.

 

This work is licensed under a Creative Commons Attribution 4.0 International License.

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:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

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.

 

This work is licensed under a Creative Commons Attribution 4.0 International License.