Tuesday, July 21, 2020
Monday, July 20, 2020
Short questions on Depreciation
2016 Book Keeping (5 x 2 Marks)
Short questions on Depreciation
1. Why Depreciation is not charged on
Land?
Ans: For
calculating depreciation, the life of the asset is required. Since Land is
assumed have an unlimited useful life, there is no question of Depreciation on
the Land.
The other
assets which are not required to depreciate are:
A.
Collectibles
like Art, Coins or Memorabilia
B.
Investments
like Stocks or Bonds
C.
Any
asset put into use for less than one year.
2. Is Depreciation is the result of
fluctuations in the value of Assets?
Ans: No. Fluctuations
in the value of Asset is concerned with the Market value of Assets, where as
Depreciation is concerned with the Historical cost (i.e., cost of acquiring
Fixed Asset)
3. Should be Depreciation be provided
even if there is loss in any financial year?
Ans: Yes. Depreciation is charge against Profit,
not an appropriation of the Profit. Depreciation should be provided
compulsorily irrespective of the fact, whether the company is in profit or loss.
4. Should Depreciation be provided on
a fixed asset of which the market value is higher than the book value?
Ans: Yes.
Depreciation should be provided whether the Assets have higher market
value or not.
5. Should Depreciation be charged on a machine
even if it has not been used in a financial year?
Ans: Yes.
Depreciation has nothing to do with whether the asset in use or not. It
related to the value of an asset, but not whether used or not.
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