FAPS Recap - Depreciation

Non-current assets lose value (depreciate) over time as a result of what?

• Passage of time

• Wear and tear

• Economic reasons

• Depletion

What is the purpose of depreciation?

• To increase the value of assets over time

• To spread the cost of a non-current asset over its life

• To eliminate taxes

• To keep a track of how many times time an asset has been used

What are the two methods of calculating depreciation?

• Cash flow method

• Revenue recognition method

• Diminishing/Reducing Balance method

• Straight Line method

Which accounts are used to record depreciation?

• Depreciation charges account

• Accounts Payable

• Accumulated depreciation

• Sales Revenue

Is the depreciation charge shown in the SPL or SFP?

• SPL as an expense

• SFP as an asset

Is the cost of the asset shown in the SPL or the SFP?

• SPL

• SFP

Is accumulated depreciation shown in the SPL or SFP?

• SPL

• SFP

Which international standard includes the rules for depreciation?

• IAS14

• IAS32

• IAS16

• IAS19

Depreciation is only applicable to physical assets like machinery and buildings, not intangible assets like patents or copyrights.

• True

• False

When an asset is disposed of, the depreciation expense for the asset must continue to be recorded until the end of its useful life.

• True

• False