Accountancy Quiz - Depreciation, Provisions and Reserves
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Preview questions
1. What is the primary purpose of depreciation?
To increase asset value · To allocate the cost of an asset over its useful life · To reduce liabilities · To enhance cash flow
2. Which method of depreciation calculates depreciation based on the asset's usage?
Straight Line Method · Reducing Balance Method · Units of Production Method · Sum of Years' Digits Method
3. Which of the following is NOT a characteristic of provisions?
Recognized as a liability · Based on past events · Exact amount is known · Uncertain timing or amount
4. What is the treatment of depreciation in the financial statements?
Added to asset value · Shown as an expense · Ignored in profit calculation · Transferred to reserves
5. Which of the following is an example of a reserve?
Provision for bad debts · Depreciation fund · General reserve · Accrued expenses
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