The main purpose of depreciation accounting is to _____________.

charge the cost of asset

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allocate the cost of the asset over its estimated useful life

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provide for replacement of the asset on the expiry of is useful life

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value the assets on the closing date of the year

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Solution

The correct option is B allocate the cost of the asset over its estimated useful life
It is necessary to distribute the cost of a fixed asset, less the scrap or salvage value after the useful life of the asset is over, in such a way so as to allocate it as equitably as possible to the periods during which the benefits are received from the use of fixed assets. This system of procedure is called depreciation accounting.

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Similar questions

___is a method of depreciation, in which the cost of the asset is spread uniformly over the life years by writing off a fixed amount every year, where as in ___ method of depreciation, a fixed rate of depreciation is charged on the book value of the asset over its useful life.

Q. Depreciation Accounting has been defined by the ________ as " a system of accounting which aims to distribute the cost or other basic value of tangible capital assets less salvage (if any) over the estimated useful life of the unit (which may be a group of assets) in a systematic and rational manner. It is a process of allocation and not of valuation".

Q. Which of the following statements is/are false?
I. The term 'depreciation', 'depletion' and 'amortization' have same meaning
II. Provision for depreciation A/c is debited when provision for depreciation is created.
III. The main purpose of charging the Profit and Loss A/c with the amount of depreciated is to spread the cost of an asset over its useful life.

Q. Which of the following statements is/are false?
(I) The term 'depreciation', 'depletion' and 'amortization' convey the same meaning.
(II) Provision For Depreciation A/c debited when Provision For Depreciation A/c is created.
(III) The main purpose of charging the Profit & Loss A/c with the amount of depreciation is to spread the cost of an asset over its useful life for the purpose of income determination.
The correct option is -

Q. Which of the following statements is/are false?
I. The term 'depreciation', 'depletion' and 'amortization' convey the same meaning.
II. Provision for depreciation a/c is debited when provision for depreciation a/c is created.
III. The main purpose of charging the profits and loss a/c with the amount of depreciation is to spread the cost of an asset over useful life for the purpose of income determination.

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