ACCOUNTING FOR

DEPRECIATION AND FIXE

D ASSETS
1.

Depreciation is a non-cash item

2.

Depreciation is calculated generally on the

market value of fixed assets

3.

Depreciation should be provided only where the

company can show some profit in a financial year

4.

Higher depreciation will affect Cash profit of the

business

5.

Depreciation accounting is a process of allocation

and not of valuation

6.

Depreciation is charged on all assets

7.

Depreciation cannot be provided in case of loss in

a financial year

8.

The company did not provide any depreciation on

its factory machinery as its market value is much
higher than the cost of purchase

9.

Providing depreciation ensures sufficient cash for

asset replacement

10.

The expression-depreciation at 10% and 10% per

annum carry the same meaning

11.

The concept of depreciation does not occupies a

significant place in the determination of income
and in the measurement of service potential of
assets

12.

Fixed assets are stated in the balance sheet at

their written down value

13.

Depreciation charge is necessary to calculate the

true cost of production

14.

Depreciation is an amortized expenditure

15.

Depreciation should be calculated on market

value if it is higher than the cost

16.

Reducing balance method of depreciation is

followed to have a uniform charge for
depreciation and repairs and maintenance
together

Revaluation method is the method of depreciation

used to depreciate assets like loose tools, crates,
steel container,

When a fixed asset is sold for a loss the amount is

transferred to the Profit and Loss account by a
credit in disposal of fixed asset account

17.

18.

19.

Depreciation is the part of the cost of the fixed

asset consumed during the period of use by the
firm

20.

The cost of repairs is included in the calculation of

depreciation of a fixed asset

21.

The balance of the Provision for Depreciation

Account is shown on the Trial Balance as debit

22.

In reducing balance method, depreciation rate is

applied on the book value of the asset

23.

Replacement method is a method of depreciation

24.

Fixed assets are normally recorded in the

accounting record at cost

25.

The proceeds from the sale of a fixed asset would

be credited is credited to sales accounts

26.

The straight line method is the providing

of depreciation where the amount of depreciation
is reduced from year to year

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