IGCSE Accounting Paper-1: Specimen Questions with Answers 233 - 234 of 338

Question 233

MCQ▾

Find out the missing value of liabilities using the concept of accounting equation from the data given below: (Marks 1)

Short Answer▾

Name the depreciation method described by each of the following statements: (Marks 4)

Name the Depreciation Method Described
Description	Depreciation Method
A fixed percent of depreciation is charged every year on reduced balance of the asset
A fixed percentage of the original cost of asset is charged every year as depreciation
Rate of depreciation is based on estimated life of an asset in hours.
Depreciating wasting assets like mines, quarries etc. on the basis of obtained output

Name the Depreciation Method Described
Description	Depreciation Method
A fixed percent of depreciation is charged every year on reduced balance of the asset	Diminishing Balance Method
A fixed percentage of the original cost of asset is charged every year as depreciation	Straight Line Method
Rate of depreciation is based on estimated life of an asset in hours	Production hour Method
Depreciating wasting assets like mines, quarries etc. on the basis of physical units of obtained output	Production Unit Method

Explanation:

Under Diminishing Balance Method, a fixed percentage of depreciation is charged every year on reduced balance of the asset i.e.. the balance b/d of the asset each year. This is why every next year, the amount of depreciation also goes on decreasing.
Under Straight Line Method, this method, a fixed percentage of the cost of the asset is written off every year to reduce the value of the asset to zero or to its scrap value. The amount of depreciation remains constant for every year.
Under Production Hour Method, a fixed rate of depreciation per hour is calculated by dividing the value of the assets with the estimated life of the asset in production hours.
Under Production Unit Method, a fixed rate of depreciation per unit of output is calculated by dividing the value of the assets with the physical units of output. This method is mainly used for depreciating wasting assets like mines, quarries etc.