Important Definations Chapter Depreciation - I.Com Second Year

Important Definations Chapter Depreciation - I.Com Second Year

1. Define the term depreciation.

Ans: The value of asset gradually reduces on account of use. Such reduction in value is known as depreciation.

2. Define term depletion.

Ans: The process of writing off the intangible assets like patents copyrights and goodwill is called depletion.

3. Define amortization.

Ans: The term amortization is useful for describing the process of writing down the long term investment in intangible assets such as Leasehold, patents copyrights, goodwill etc.

4. Define accumulated depreciation.

Ans: The total allocated cost already charged as expenses in different accounting period is called accumulated depreciation.

5. Q.5. Define scrap/residual value.

Ans: Scrap value means the price at which an asset will be sold at the end of its working life.

6. What is fixed installment method.

Ans: Under this method depression of an asset will be equal in each accounting year.

7. What is diminishing balance method.

Ans: Under this method depreciation is calculated on the book value of an asset.

8. What is general reserve.

Ans: A general reserve created for the purpose of providing for any contingency that may arise.

9. What is obsolescence.

Ans: The decrease in the value of an asset due to new inventions, change in habit Ans taste of people, improvements is known as obsolescence.

10. What is wear and tear.

  Ans:  The change in the shape of an asset due to use in business is known as wear and tear.