Is depreciation charged to reduce profits or to reduce the value of asset during a financial year?

Is depreciation charged to reduce profits or to reduce the value of asset during a financial year?
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1 Answer

Answer :

It is charged to reduce value of asset.
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Related questions

Why depreciation is charged to an asset?

Description : Why depreciation is charged to an asset?

Last Answer : As per Accounting Standards, it is a good practice to show the capital expense every period i.e. period wise. Thus, profits will be evenly shared in each period.

Why is depreciation charged even in the year of loss?

Description : Why is depreciation charged even in the year of loss?

Last Answer : Depreciation process does not depend on Profit/Loss, it is mandatory to charge depreciation as expense on Asset is distributed

Why is depreciation charged by business, which makes losses?

Description : Why is depreciation charged by business, which makes losses?

Last Answer : If I hide Depreciation for showing higher profits even if organization is in loss, I may end up paying Tax too. Which will in fact reduce my margin for profit. It will be better to show depreciation and claim tax benefit.

Give journal entry for adjusting profit made due to change in method of depreciation.

Description : Give journal entry for adjusting profit made due to change in method of depreciation.

Last Answer : It can only be achieved by reducing rate of Dep retrospectively.

What is retrospective change in depreciation method?

Description : What is retrospective change in depreciation method?

Last Answer : It means change in accounting policy such that it was present from starting.

What is prospective change in depreciation method?

Description : What is prospective change in depreciation method?

Last Answer : Prospective Change means the effect of accounting estimate and new policy is from current date and in future entry.

Give equation for calculating depreciation under reducing balance method.

Description : Give equation for calculating depreciation under reducing balance method.

Last Answer : Dep per annum= (NBV- Salvage)*rate;

Give equation for calculating depreciation under straight-line method.

Description : Give equation for calculating depreciation under straight-line method.

Last Answer : Dep per annum= cost-salvage/useful life;

How does physical wear and tear result in depreciation?

Description : How does physical wear and tear result in depreciation?

Last Answer : Physical Wear/Tear tend to worn out the Asset decreasing its productivity over period. Thus, market value decrease for the asset.

What are the features of depreciation?

Description : What are the features of depreciation?

Last Answer : 3.1 Net Book value will decrease for asset. 3.2 Includes loss of value due to usage, obsolescence. 3.3 Continuing Process. 3.4 Must be deducted before calculation taxable profits, as this is an ... then taxable profit is 50000 - 10000 = 40000 INR. 3.5 Does not include any actual cash flows.

What are the different causes of depreciation?

Description : What are the different causes of depreciation?

Last Answer : Wear and Tear; as over a period if asset is utilized it will be damaged and repair may be needed.

What is depreciation?

Description : What is depreciation?

Last Answer : Defined as reduction in value/cost of asset in systematic Manner

What do you mean by exhaustion of an asset?

Description : What do you mean by exhaustion of an asset?

Last Answer : When useful life for asset is zero or Asset is fully depreciated.

What is scrap value?

Description : What is scrap value?

Last Answer : Also known as residual/salvage value. The value means below which depreciation cannot be applied or in simpler terms assets useful life is over.

Why fixed instalment method is also called as straight-line method?

Description : Why fixed instalment method is also called as straight-line method?

Last Answer : As name suggests the depreciation amount is same each period so it is called fixed installation/straight line.

What do you mean by obsolescence?

Description : What do you mean by obsolescence?

Last Answer : When new model for asset procured/installed earlier is released the previous asset market value decreases. This is Obsolescence.

In which case depletion of assets takes place?

Description : In which case depletion of assets takes place?

Last Answer : Just like depreciation, depletion is accounting concept popularly utilized for tangible objects like Mineral Gas, Timber etc. where wear/tear for asset is not there. In these cases the followinf formula is used:

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Description : In declining balance method of depreciation calculation, the (A) Value of the asset decreases linearly with time (B) Annual cost of depreciation is same every year (C) Annual depreciation is the fixed percentage of the property value at the beginning of the particular year (D) None of these

Last Answer : (C) Annual depreciation is the fixed percentage of the property value at the beginning of the particular year

If the block of asset ceases to exist on the last day of the previous year, depreciation admissible for block of assets will be: a) Nil b) 50% of the value of the block of assets on the first day of the previous year c) The total value of the block of the assets on the first day of the previous year d) 50% of the value of the block of assets on last day of the previous year

Description : If the block of asset ceases to exist on the last day of the previous year, depreciation admissible for block of assets will be: a) Nil b) 50% of the value of the block of assets on the first day ... of the previous year d) 50% of the value of the block of assets on last day of the previous year

Last Answer : a) Nil

Opening WDV off the block of assets was Rs 15 lakh. During the year, asset was acquired under this block on 15 June 2017 amounting to rupees 10 lakh. One of the assets falling within the block was sold for rupees 5.5 lakh on 14 January 2018. Rate of depreciation of block is 10%. Calculate the amount of depreciation available during the previous year for the block. e. rupees 1.95 lakh f. rupees 2.5 lakh g. rupees 2.25 lakh h. Rs 1.45 lakh

Description : Opening WDV off the block of assets was Rs 15 lakh. During the year, asset was acquired under this block on 15 June 2017 amounting to rupees 10 lakh. One of the assets falling within the block was sold for rupees 5.5 ... . rupees 1.95 lakh f. rupees 2.5 lakh g. rupees 2.25 lakh h. Rs 1.45 lakh

Last Answer : e. rupees 1.95 lakh

Opening WDV off the block of assets was Rs 15 lakh. During the year, asset was acquired under this block on 15 January 2018 amounting to rupees 10 lakh. One of the assets falling within the block was sold for rupees 5.5 lakh on 14 January 2018. Rate of depreciation of block is 10%. Calculate the amount of depreciation available during the previous year. a. rupees 1.95 lakh b. rupees 2.5 lakh c. rupees 2.25 lakh d. Rs 1.45 lakh

Description : Opening WDV off the block of assets was Rs 15 lakh. During the year, asset was acquired under this block on 15 January 2018 amounting to rupees 10 lakh. One of the assets falling within the block was sold for rupees 5.5 ... rupees 1.95 lakh b. rupees 2.5 lakh c. rupees 2.25 lakh d. Rs 1.45 lakh

Last Answer : d. Rs 1.45 lakh

Depreciation when the asset is used for less than 180 days during the year of acquisition shall be at Block rate of: a) 50% b) 100% c) 20% d) 15%

Description : Depreciation when the asset is used for less than 180 days during the year of acquisition shall be at Block rate of: a) 50% b) 100% c) 20% d) 15%

Last Answer : a) 50%

Opening WDV of the block of assets was Rs.15 lakh. During the year, asset was acquired under this block on 15th June2017 amounting to Rs. 10 Lakh. Rate of depreciation of the block is 15%. Calculate the amount of depreciation available during the P.Y. a) Rs. 3.5 Lakh b) Rs. 3.75 lakh c) Rs. 3.00 lakh d) Rs.2.25 Lakh

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NDP does not include (a) Payments made for income taxes ; (b) Depreciation allowances ; (c) Undistributed profits; (d) The value added from intermediate goods.

Description : NDP does not include (a) Payments made for income taxes ; (b) Depreciation allowances ; (c) Undistributed profits; (d) The value added from intermediate goods.

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By the amount of depreciation the value of asset __________ 

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If the asset acquired outside India by a non-resident is brought by him to India & used for business, then in that case what shall be the cost of addition? a) Value of the asset at the time of bringing the asset to India less depreciation b) Actual cost of asset less actual depreciation c) Actual cost of asset less notional depreciation d) Any of the above

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Description : The difference between GNP and NNP equals - (1) corporate profits (2) personal taxes (3) transfer payments (4) depreciation

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Cash inflows from a project include: A. tax shield of depreciation B. after tax operating profits C. raising of funds D. Both (a) and (b)

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Under the Income Tax Act 1961, Depreciation on machinery is charged on : a) Purchase Price of the machinery b) Market Price of the Machine c) Written Down value d) A or B which is less

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What is the major difference between 'Depreciation on Asset' and 'Impairment of Asset' ?

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Depreciation need not be provided if the asset is not in use.

Description : Depreciation need not be provided if the asset is not in use.

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There is no need to provide depreciation if the asset is maintained with care.

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Last Answer : State whether the following statement are True or False with reason : There is no need to provide depreciation if the asset is maintained with care.

(i) The method of charging depreciation under which depreciation is calculated on the original cost of an asset.

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Depreciation = cost of Asset (-)........./Estimatedlif of Asset

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How does asset depreciation affect my tax burden?

Description : How does asset depreciation affect my tax burden?

Last Answer : Asset Depreciation will decrease your tax amount owed. If you have assets that have decreased in value and qualify, you can file the loss on your taxes and be credited that amount toward your tax bill.

At the balance sheet date, the balance on the Accumulated Provision for Depreciation Account is A) Transferred to Depreciation Account B) Transferred to the Asset Account C) Transferred to Profit and Loss Account D) Simply deducted from the asset in the Balance Sheet

Description : At the balance sheet date, the balance on the Accumulated Provision for Depreciation Account is A) Transferred to Depreciation Account B) Transferred to the Asset Account C) Transferred to Profit and Loss Account D) Simply deducted from the asset in the Balance Sheet

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A financial contract that derives its value from another asset or an index of asset values is known as __________ A. Insurance Policy B. Security C. Derivative D. Share E. None of the above

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Sale of products from test run before production run is a) Deducted from actual cost b) Added to actual cost of assets c) Charged as pre-profits d) Charged as preliminary expenses

Description : Sale of products from test run before production run is a) Deducted from actual cost b) Added to actual cost of assets c) Charged as pre-profits d) Charged as preliminary expenses

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Depreciation is always charged on __________ assets. 

Description : Depreciation is always charged on __________ assets. 

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Under the Reducing Balance, method depreciation is charged on the original cost.

Description : Under the Reducing Balance, method depreciation is charged on the original cost.

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What is the rate of depreciation charged on Computer Software: a) 10% b) 60% c) 40% d) 15%

Description : What is the rate of depreciation charged on Computer Software: a) 10% b) 60% c) 40% d) 15%

Last Answer : b) 60%

Depreciation under ICDS-V shall be charged in accordance with : a) Income Tax Act 1961 b) Companies Act 2013 c) Notified Rate –CBEC d) Straight line over the useful life

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In the Capital market, the term arbitrage is used with reference to ______ A. Purchase of securities to cover the sale B. Sale of securities to reduce the loss on purchase C. Simultaneous purchase and sale of securities to make profits from price D. Variation in different markets E. None of the Above

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Last Answer : C. Simultaneous purchase and sale of securities to make profits from price Explanation: Arbitrage is the simultaneous purchase and sale of an asset to profit from a difference in the price. ... on different markets or in different forms. Arbitrage exists as a result of market inefficiencies.

The depreciation method which reduces the value of a machine by equal amount each year during the useful life is known as a) Estimated method b) constant percentage method c) compound interest method d) straight line method

Description : The depreciation method which reduces the value of a machine by equal amount each year during the useful life is known as a) Estimated method b) constant percentage method c) compound interest method d) straight line method

Last Answer : d) straight line method

The depreciation during the year 'n', in diminishing balance method of depreciation calculation, is calculated by multiplying a fixed percentage 'N' to the (A) Initial cost (B) Book value at the end of (n - 1)th year (C) Depreciation during the (n - 1)th year (D) Difference between initial cost and salvage value

Description : The depreciation during the year 'n', in diminishing balance method of depreciation calculation, is calculated by multiplying a fixed percentage 'N' to the (A) Initial cost (B) Book value at the end ... ) Depreciation during the (n - 1)th year (D) Difference between initial cost and salvage value

Last Answer : (B) Book value at the end of (n - 1)th year

A typical objective of an operational audit is for the auditor to a. Determine whether the financial statements fairly present the entity's operations. b. Evaluate the feasibility of attaining the entity's operational objectives. c. Make recommendation for improving performance. d. Report on the entity's relative success in maximizing profits

Description : A typical objective of an operational audit is for the auditor to a. Determine whether the financial statements fairly present the entity's operations. b. Evaluate the feasibility of ... recommendation for improving performance. d. Report on the entity's relative success in maximizing profits

Last Answer : Make recommendation for improving performance

In financial accounting of a chemical plant, which of the following relationship is invalid? (A) Assets = equities (B) Assets = liabilities + net worth (C) Total income = costs + profits (D) Assets = capital

Description : In financial accounting of a chemical plant, which of the following relationship is invalid? (A) Assets = equities (B) Assets = liabilities + net worth (C) Total income = costs + profits (D) Assets = capital

Last Answer : (D) Assets = capital