“35” Short Questions and Answers-Plant
Assets and Depreciation
Plant assets have specific sizes and forms and are not intended to be
sold to customers and are used in a company’s operations.
Today we’ll learn “35 Short Questions and Answers- Plant Assets
and Depreciation.” If you read it with a proper concentration from top to
bottom, you’ll get a basic idea of Plant Assets and Depreciation.
It will also increase your knowledge of accounting and help you perform
well on any competitive exam.
So let’s get started.
Question-01: What do plant assets mean?
Answer: Plant assets are tangible resources that are not intended for
sale to customers and are used in company operations.
Question-02: What is a fixed asset?
Answer: Fixed assets refer to the long-term investment in all types of
visible and invisible assets of an organization that helps increase profits
by conducting day-to-day activities.
Question-03: What is a tangible asset?
Answer: Tangible assets refer to the assets that actually exists or that
can be touched. E.g., land building, furniture, etc.
Question-04: What is an intangible asset?
Answer: Intangible assets refer to the assets that do not exist or cannot
be touched. For example, Goodwill, patents, copyrights, etc.
Question-05: What is a natural resource?
Answer: Natural resources are those properties which are given by
nature and which are reduced in quantity as a result of extraction. E.g.,
gas, oil, mine, etc.
Question-06: What is a patent?
Answer: A patent is an overall right to use an invention.
Question-07: What does copyright mean?
Answer: Copyright is an exclusive grant from the federal government
that allows an artistic or published work to be reproduced and sold by
the owner.
Question-08: What’s the cost of research and development (R&D)?
Answer: The expenditures that may result in patents, copyrights, new
processes, or new products are research and development (R&D) costs.
Question-09: What does goodwill mean?
Answer: Goodwill is the value of all the beneficial attributes associated
with an organization that is not attributable to any other specific asset.
Question-10: What’s a license?
Answer: A license is a contractual arrangement under which a
franchisor grants the franchisee the right to sell certain goods, to perform
specific services, or to use certain marks or trade names, normally within
a designated geographical area.
Question-11: What is Asset turnover?
Answer: Asset turnover is a measure of how effectively a business uses
its assets to generate sales.
Question-12: What is the formula to calculate asset turnover?
Answer: Asset Turnover= Net sales/Average Total Assets.
Question-13: What is depreciation?
Answer: Depreciation is the process of rational and systematic
allocation of the cost of a plant asset over its useful (service) life.
Question-14: The English word “Depreciation” comes from which word?
Answer: English word “Depreciation” comes from the Latin word
“Depretium”.
Question-15: What does depletion mean?
Answer: Depletion is the allocation of a natural resource’s cost to
expend over the useful life of the resource in a rational and systematic
way.
Question-16: What does amortization mean?
Answer: Amortization is the systematic and rational allocation of the
cost of an intangible asset to expenditure over its useful life.
Question-17: What are the features of depreciation?
Answer: The main features of depreciation are as follows:
Depreciation is a
Revenue expenditure
Non-visible expense
Non-cash expense
Estimated expense etc.
Question-18: What are the causes of charging depreciation?
Answer: The causes of charging depreciation are-
Internal Causes:
Wear and Tear
Exhaustion
Passage of time
External Causes:
Effusion of time
Obsolescence
Accidental loss
Question-19: What are the objectives of charging depreciation?
Answer: The objective of charging depreciation are as follows:
Determine of actual profit or loss
Determining actual financial position
Replacement of fixed assets
Maintenance of capital
Ascertainment of the actual cost of production
Determination of accurate value of assets
Detection of tax liabilities
Question-20: What is the effect of not charging depreciation?
Answer: The effects of not charging depreciation are as follows:
Problem in the determination of actual profit and loss.
Problem of determining the actual financial picture.
Problem of replacement of fixed assets.
Problem of maintenance of capital.
Problem of ascertainment of the actual cost of production.
Question-21: Which factors to be considered while determining
depreciation?
Answer: The following factors to be considered while determining
depreciation.
Total cost of assets
Salvage value
Depreciable value
Estimated useful life
Question-22: How many depreciation methods are there?
Answer:
On the basis of Time:
Straight line method
Declining balance method
Sum of years digit method
On basis of Uses:
Machine-hours method
Production output method
Other methods:
Annuity method
Sinking fund method
Revaluation method
Question-23: What is the method of accelerated-depreciation?
Answer: The accelerated-depreciation method is a method that in the
early years generates higher depreciation costs than in later years.
Question-24: What is the declining-Balance method of depreciation?
Answer: The method of declining-balance is a method that applies a
constant rate to the asset’s declining book value and produces a
decreasing annual depreciation expense over the asset’s useful life.
Question-25: What is the straight-line depreciation method?
Answer: The straight-line method is a method of depreciation in which
periodic depreciation for each year of the useful life of the asset is the
same.
Question-26: What is the Units-of-activity method of depreciation?
Answer: The unit-of-activity method is a method of depreciation in which
the useful life of an asset is expressed in terms of the total units of
production or use anticipated.
Question-27: What is the cost price of the asset?
Answer: The cost price of the asset refers to the value of an asset and
the cost of making that asset usable.
Question-28: What is the salvage value of an asset?
Answer: The salvage value of an asset refers to the estimated value of
an asset at the end of its lifespan.
Question-29: What is the depreciable value of an asset?
Answer: The depreciable value of an asset refers to the value obtained
by deducting the salvage value of the assets from the cost price of the
assets.
Question-30: What is a useful life of an asset?
Answer: An asset’s useful life is an estimate of an asset’s expected
productive life, also called service life.
Question-31: According to which Principle Company records the plant
assets at cost price?
Answer: According to the historical cost principle company records the
plant assets at cost price.
Question-32: What is the formula for the Straight Line method of
calculating annual depreciation?
Answer: Annual Depreciation= (Cost-Salvage Value)/Useful Life.
Question-33: How does the Straight Line method calculate the
depreciation rate?
Answer: Depreciation Rate= 100%/Useful Life
Question-34: What is the formula for the units of activity method of
calculating annual depreciation?
Answer: The formula for the units of activity method of calculating
annual depreciation is as follows:
Depreciable Cost per Unit=Depreciable Cost/Total units of activity
Annual Depreciation Expense = Depreciable Cost per Unit X Units of
activity during the year
Question-35: What is the formula for the declining balance method of
calculating annual depreciation?
Answer: Annual Depreciation Expense=Book Value at beginning of year
X Declining balance rate.
I hope you have a basic idea about the plant assets and their
depreciation at the end of the article.
Read these “35” Short Questions and Answers- Plant Assets and
Depreciation on a regular basis and enhance your accounting skills.
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