Depreciation Quiz: Test Your Knowledge of Methods and Concepts

Test your knowledge of double entry bookkeeping with our declining balance method of depreciation quiz. Declining balance depreciation is one method of calculating the depreciation expense on long term assets such as property, plant, and equipment. The method is sometimes referred to as the reducing balance method or the diminishing balance method of depreciation.

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• As a result, the amount of depreciation is uniform every year.
• Subtract the salvage amount from the asset cost and divide the balance by the number of periods in the asset’s practical life.
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• Take this quiz to understand more about depreciation accounting.
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Chartered accountant Michael Brown is the founder and CEO of Double Entry Bookkeeping. He has worked calculating withholding and deductions from paychecks as an accountant and consultant for more than 25 years and has built financial models for all types of industries. He has been the CFO or controller of both small and medium sized companies and has run small businesses of his own. He has been a manager and an auditor with Deloitte, a big 4 accountancy firm, and holds a degree from Loughborough University.

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Depreciation is revenue in nature and it is debited to the profit and loss account. Note – Please take our quiz ‘Quiz 39 – Depreciation – (Answers)‘ on this page before going through the below answers. Only the top 3% of our audience scored 10/10 in all of them.

• Do you know anything about depreciation accounting?
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• The given statement is False.
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The given statement is False. Depreciation is charged on all ‘tangible fixed assets’. Even current assets can be tangible for e.g. cash. Do you know anything about depreciation accounting? Do you believe you can pass the quiz?

Depreciation is a reduction in the value of fixed assets caused by normal usage, wear and tear, new technology, and unfavourable market conditions. Depreciation reduces the value of tangible fixed assets, while amortization reduces the value of intangible assets. But it’s not his degrees or certifications that make Harold such a great teacher. It’s his unique ability to explain accounting in clear, concise language that even people without business training can easily grasp. Whether you’re just learning or you want to refresh your skills, we think this guide will be a great assist on your bookkeeping journey.

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With your increased understanding, you’ll become a valued contributor with the confidence to participate in important financial discussions. With AccountingCoach PRO, you’ll have access to our exclusive cheat sheets, packed with definitions, terminology, formulas, and ratios. The Cheat Sheets provide you with all the most important study concepts for study, in one place. For some accounting concepts, just reading about them isn’t enough. So we created 8 Visual Tutorials to explain important accounting topics in a more intuitive away. Simply following along step-by-step.

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Under straight iine method, depreciation is calculated on

Depreciation is charged on the income statement as an expense. A depreciation method where you take more depreciation expense in earlier years and less in later years. Accounting isn’t just for accountants. Today, everyone needs to improve their financial literacy. For men and women who want to master accounting and take full control of their careers, AccountingCoach PRO is the clear choice. Earn our unique badges and points as you track your progress and complete a new take on ethics and independence various milestones.

If you have any difficulty answering the questions, learn more about this topic by reading our mini-lectures covering introductory to Depreciation. These videos include everything you need to know as a beginner starting out in bookkeeping. We walk you through all the necessary concepts like debits and credits, general ledger accounts, double-entry, adjusting entries, bank reconciliation, and more. Impairment method is not a method of depreciation. Useful life refers to an accounting estimate of the number of years it is likely to remain in service for the purpose of cost-effective revenue generation. None of them is the correct answer as the other ones are intangible assets and may only be amortized.

Depreciation is not charged on land in normal circumstances because the useful life of land can not be determined. You need to know how many years would an asset last to charge depreciation on that. Depreciation is a non-cash expense because there is no actual outflow of cash. The transaction is only in the books of accounts. Use AI to generate personalized quizzes and flashcards to suit your learning preferences.

Accelerated depreciation methods allow more depreciation early on compared to straight-line. Subtract the salvage value from the purchase price and divide by the useful life. Depreciation is charged due to normal usage, wear and tear, unfavourable conditions, etc.

Study Notes

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The main reasons for this list are the first two. ‘Original cost method‘ is another name used for the straight-line method. It is a valuation account. Such an account is paired with an asset or liability, it offsets the value of the paired account. Also known as a ‘Contra’ account.