Ans1). The method of depreciation in which depreciation is charged at a fixed percentage on the original cost of a fixed asset every year and as a result the amount of depreciation charged every year remains constant is called fixed installment method.
(2).What is Reducing Balance Method of depreciation?
Ans2).The method of depreciation under which depreciation is charged at a fixed percentage on the written down value of fixed asset as shown at the beginning of each year, is called the Reducing Balance Method of Depreciation.
(3).Why depreciation is charged?
Ans3).Depreciation is charged every year to ascertain the true profit or loss to show the fixed asset at its true value in the Balance Sheet,and to provide for its replacement.
(4).What do u mean by scrap value of asset?
Ans4).The net amount which is expected to be realised on the final disposal of a fixed asset is called ‘scrap value”
(5).Depreciation is provided on fixed as well as current assets? false
Ans5).(a).current assets are realised in a short period so depreciation is not provided(b)depreciation is provided on fixed assets these are useful for a longer duration and further their values are reduced on account of various factors like wear and tear,passage of time,new inventions,accidents etc.
(6).It is not necessary to depreciate a fixed asset if it is not in use ?
Ans 6).Apart from wear and tear,there are other factors like passage of time, new invention,accidents etc.which may bring down the value of a fixed asset,therefore even if fixed asset are not in use deperication is charged
(7).profit cannot be computed properly unless depreciation is provided?
Ans 7).True.
Since depreciation represents fall in the value of a fixed asset,it reduces its value .it is revenue expenditure ,must be considered as such for the calculation of the ultimate profit or loss on the sale of fixed asset or of the business
(B)Practical part
