CSEET · Fundamentals of Accounting · Depreciation and Amortization
According to AS 10 (Property, Plant and Equipment), depreciation is best described as:
Depreciation is the systematic allocation of the depreciable amount of an asset over its useful life. It spreads cost over the periods that benefit from the asset. It is not a market value fall, a replacement reserve, or a repair expense.
- AThe systematic allocation of the depreciable amount of an asset over its useful lifeCorrect
- BThe fall in the market price of an asset during the year
- CA reserve created to replace the asset at the end of its life
- DThe cost of repairs needed to keep the asset in working order
Explanation
AS 10 defines depreciation as the systematic allocation of the depreciable amount of an asset over its useful life. It is an allocation of cost, not a measure of market value changes. A reserve for replacement is a different concept, as it sets aside profits and does not allocate cost.
Did you get it right without looking?
One question tells you little. A timed set on Depreciation and Amortization shows your real accuracy, how long you take and where you lose marks.
More Depreciation and Amortization questions
- Which of the following best describes depreciation as defined in the accounting standard on Property, Plant and Equipment?
- Kapoor Ltd bought furniture on 1 April 2023 for Rs 2,40,000 with no residual value and a 10-year life, depreciating it on the straight line …
- Mehta Pvt Ltd uses a machine in its factory to manufacture goods. During the year, depreciation of Rs 60,000 was calculated on this plant, a…
- According to AS 10, which basis should an enterprise use to select a depreciation method?
- A machine that has been taken out of active use and is held for disposal is no longer being used in production. As per the treatment in AS 1…
- A company proposes to charge depreciation on a machine in proportion to the revenue earned from goods it produces each year. Under AS 10, th…