____________ is one of the objective of providing depreciation.

Ascertainment of true cost of production

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Sustain financial liquidity of the business

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Abatement of tax liability

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Check outflow of funds

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Solution

The correct option is A Ascertainment of true cost of production
Depreciation is an accounting method of allocating the cost of a tangible assets over its useful life. One of the objective of providing depreciation is: Ascertainment of true cost of production. Correct cost of production cannot be ascertained if the depreciation is not charged to the fixed assets. Thus, it is necessary to include amount of depreciation in the calculation of cost of each product.

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Similar questions

Q. State whether the following Statements are True or False

1. There is need to provide depreciation if it is maintained with care.
2. Depreciation cannot be provided in case of loss in a financial year.
3. A Specific reserve can be created for any purpose.
4. Capital Reserves are not freely distributed as profits.
5. Under the written down value method depreciation is calculated on the original cost of an asset.
6. Depreciation is the process of valuation of asset.
7. Depreciation is a non-cash expense.
8. Secret reserves are disclosed in Balance Sheet.
9. General reserves is created to meet contingency liability.
10. Depreciation is charged only on fixed asset.

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