Y10 Accounting - C12 Depreciation and Disposal of NC Assets

What is depreciation?

• A monetary expense

• An estimate loss in value of a non-current asset

• A fixed cost of an asset

• A method of asset disposal

Which principle states that the cost of a non-current asset is spread over its usage?

• Matching principle

• Consistency principle

• Revaluation principle

• Prudence principle

What is the main advantage of the straight-line method of depreciation?

• It provides higher depreciation in early years

• It ignores the asset's useful life

• It requires complex calculations

• It is easy to calculate

Which method of depreciation reduces the amount charged each year?

• Reducing balance method

• Fixed installment method

• Revaluation method

• Straight line method

What is a disadvantage of the reducing balance method?

• Depreciation must be recalculated each year

• It provides equal benefits each year

• It is easy to calculate

• It matches cost with revenue

What is the purpose of the revaluation method?

• To revalue assets at the end of each financial year

• To ignore the asset's residual value

• To calculate depreciation based on fixed rates

• To estimate the useful life of an asset

What is recorded in the income statement regarding depreciation?

• Depreciation for the year

• Cash flow from assets

• Total asset value

• Net book value

Which of the following is NOT a cause of depreciation?

• Physical deterioration

• Passage of time

• Increased asset value

• Economic reasons

What is the formula for annual depreciation using the straight-line method?

• Total depreciation / Number of years

• Cost of asset x Depreciation rate

• Cost of asset - Residual value

• Cost of asset / Number of expected years of use

What happens to the asset account when a non-current asset is sold?

• It is credited with the original cost price

• It remains unchanged

• It is debited with the proceeds of sale

• It is debited with the total depreciation