Tag: AQA

GAAP says …

Select ONE answer:

1. specifies that the straight line method of depreciation must always be used.
2. specifies that the reducing balance method of depreciation must always be used.
3. allows either the straight line method or the reducing balance method of depreciation to be used provided that only one of them is used in any particular accounting period.
4. does not specify that any particular method of depreciation must be used at any time.

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 4

1. Not correct
2. Not correct
3. Not correct
4. It may be appropriate to use different methods of depreciation for different fixed assets. For example, the reducing balance method may be chosen for cars, as they decline most in value in the early years of their life, and the straight-line method chosen for plant and equipment which is used at a constant rate and which declines in value in proportion to usage. There are also many other methods of depreciation which could be used. Although GAAP does not specify that any particular method of depreciation must be used at any time, once one method is chosen for a particular fixed asset (or category of fixed asset), it should be consistently used for that asset / category.

 

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

‘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 the decline in the value of fixed assets as a result of them becoming outdated by technological improvement and invention.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:

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

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.

 

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

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:

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

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.

 

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

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.