Question

State whether the following statements are true or false:
1. Depreciation is a non-cash expense.
2. Depreciation is also charged on current assets.
3. Depreciation is decline in the market value of tangible fixed assets.
4. The main cause of depreciation is wear and tear caused by its usage.
5. Depreciation must be charged so as to ascertain true profit or loss of the
business.
6. Depletion term is used in case of intangible assets.
7. Depreciation provides fund for replacement.
8. When market value of an asset is higher than book value, depreciation is not
charged.
9. Depreciation is charged to reduce the value of asset to its market value.
10. If adequate maintenance expenditure is incurred, depreciation need not be
charged.

Answer 1

1. Depreciation is a non-cash expense-True

2. Depreciation is also charged on current assets-False

3. Depreciation is decline in the market value of tangible fixed assets-False

4. The main cause of depreciation is wear and tear caused by its usage-True

5. Depreciation must be charged so as to ascertain true profit or loss of the

business-True

6. Depletion term is used in case of intangible assets-False

7. Depreciation provides fund for replacement-True

8. When market value of an asset is higher than book value, depreciation is not  charged-False

9. Depreciation is charged to reduce the value of asset to its market value-False

10. If adequate maintenance expenditure is incurred, depreciation need not be  charged-False

Answer 2

explanation is given to every answer.

Explanation:

(1) True

It is a non cash expenses as the company need not to pay any cash for charging depreciation.

(2) False

Depreciation is not charged on current assets. It is to be charged of Fixed assets only.

(3) False

Depreciation is decline in the book value of tangible fixed assets not market value.

(4) True

The main cause is the wear and tear of fixed asset which is caused due the the usage of assets.

(5) True

In order to find correct profit depreciation should be charged.

(6) False

For the intangible assets amortization word can be used.

(7)  True

In case depreciation method is  sinking fund method, it provides fund for the replacement of asset.

(8) False

Depreciation is to be charged irrespective of the market or book value higher or lower.

(9) False

It is charged to reduce the book value of assets and not the market value.

(10) False

Depreciation is charge against the profit .