PRC-1 · Chapter 6 · Question 9 of 100
What is the primary rationale for charging depreciation on non-current assets?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) To match the cost of the asset against the revenue it helps generate over its useful economic life.
Explanation
Depreciation is an application of the matching concept. It systematically allocates the depreciable amount of the asset as an expense across the periods in which the asset provides economic benefits.
More Property, Plant and Equipment MCQs
- Q11An entity purchases a vehicle for Rs. 800,000. The business uses the reducing balance method at a rate of 20% per annum. What is the…
- Q12Which of the following statements accurately contrasts the straight-line and reducing balance methods of depreciation?
- Q13If an entity buys a machine with an expected total production capacity of 100,000 units, costs Rs. 550,000, and has a residual value of…
- Q14If an asset is temporarily idle and not used in production for several months, under which depreciation method will NO depreciation be…
- Q15A machine has a list price of Rs. 82,000. The supplier offers a 10% trade discount and a 5% settlement (cash) discount, both of which are…