Question

Depreciation reserve fund is needed for: *
(a)Inventory stock
(b)Advertisement
(c)Replacement Investment
(d)None of above.​

Answer 1

Answer:

Depreciation reserve is a business fund in which the probable replacement cost of equipment is accumulated each year over the life of the asset. It can be replaced readily when it becomes obsolete and totally depreciated. It is the total depreciation charged against all productive assets as stated on the balance sheet.

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Answer 2

Answer:

(c) Replacement Investment

Explanation:

• Fixed assets are consumed or utilised during the creation of final commodities, as we all know. As a result of depreciation, these assets must be replaced from time to time.
• Furthermore, replacing fixed assets necessitates the availability of finances to do so.
• The provision of funding for this purpose is set on an annual basis. A depreciation reserve fund is what this provision is called.
• The replacement fund is created when the depreciation reserve fund is established. As a result, as investment rises, the overall or gross investment in the economy tends to rise as well.
• As a result, the level of output rises. As a result, the level of revenue and employment rises. As a result, the economy's total growth accelerates.

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