“35” Short Questions and Answers-Plant

Assets and Depreciation

Plant assets have specific sizes and forms and are not intended to be
sold to customers and are used in a company’s operations.
Today we’ll learn “35 Short Questions and Answers- Plant Assets
and Depreciation.” If you read it with a proper concentration from top to
bottom, you’ll get a basic idea of Plant Assets and Depreciation.
It will also increase your knowledge of accounting and help you perform
well on any competitive exam.
So let’s get started.
Question-01: What do plant assets mean?
Answer: Plant assets are tangible resources that are not intended for
sale to customers and are used in company operations.
Question-02: What is a fixed asset?
Answer: Fixed assets refer to the long-term investment in all types of
visible and invisible assets of an organization that helps increase profits
by conducting day-to-day activities.
Question-03: What is a tangible asset?
Answer: Tangible assets refer to the assets that actually exists or that
can be touched. E.g., land building, furniture, etc.
Question-04: What is an intangible asset?
Answer: Intangible assets refer to the assets that do not exist or cannot
be touched. For example, Goodwill, patents, copyrights, etc.
Question-05: What is a natural resource?
Answer: Natural resources are those properties which are given by
nature and which are reduced in quantity as a result of extraction. E.g.,
gas, oil, mine, etc.
Question-06: What is a patent?
Answer: A patent is an overall right to use an invention.
Question-07: What does copyright mean?
Answer: Copyright is an exclusive grant from the federal government
that allows an artistic or published work to be reproduced and sold by
the owner.
Question-08: What’s the cost of research and development (R&D)?
Answer: The expenditures that may result in patents, copyrights, new
processes, or new products are research and development (R&D) costs.
Question-09: What does goodwill mean?
Answer: Goodwill is the value of all the beneficial attributes associated
with an organization that is not attributable to any other specific asset.
Question-10: What’s a license?
Answer: A license is a contractual arrangement under which a
franchisor grants the franchisee the right to sell certain goods, to perform
specific services, or to use certain marks or trade names, normally within
a designated geographical area.
Question-11: What is Asset turnover?
Answer: Asset turnover is a measure of how effectively a business uses
its assets to generate sales.
Question-12: What is the formula to calculate asset turnover?
Answer: Asset Turnover= Net sales/Average Total Assets.
Question-13: What is depreciation?
Answer: Depreciation is the process of rational and systematic
allocation of the cost of a plant asset over its useful (service) life.
Question-14: The English word “Depreciation” comes from which word?
Answer: English word “Depreciation” comes from the Latin word
“Depretium”.
Question-15: What does depletion mean?
Answer: Depletion is the allocation of a natural resource’s cost to
expend over the useful life of the resource in a rational and systematic
way.
Question-16: What does amortization mean?
Answer: Amortization is the systematic and rational allocation of the
cost of an intangible asset to expenditure over its useful life.
Question-17: What are the features of depreciation?
Answer: The main features of depreciation are as follows:
Depreciation is a
 Revenue expenditure
 Non-visible expense
 Non-cash expense
 Estimated expense etc.
Question-18: What are the causes of charging depreciation?
Answer: The causes of charging depreciation are-
 Internal Causes:
 Wear and Tear
 Exhaustion
 Passage of time
External Causes:
 Effusion of time
 Obsolescence
 Accidental loss
Question-19: What are the objectives of charging depreciation?
Answer: The objective of charging depreciation are as follows:
 Determine of actual profit or loss
 Determining actual financial position
 Replacement of fixed assets
 Maintenance of capital
 Ascertainment of the actual cost of production
 Determination of accurate value of assets
 Detection of tax liabilities
Question-20: What is the effect of not charging depreciation?
Answer: The effects of not charging depreciation are as follows:
 Problem in the determination of actual profit and loss.
 Problem of determining the actual financial picture.
 Problem of replacement of fixed assets.
 Problem of maintenance of capital.
 Problem of ascertainment of the actual cost of production.
Question-21: Which factors to be considered while determining
depreciation?
Answer: The following factors to be considered while determining
depreciation.
 Total cost of assets
 Salvage value
 Depreciable value
 Estimated useful life
Question-22: How many depreciation methods are there?
Answer:
On the basis of Time:
 Straight line method
 Declining balance method
 Sum of years digit method
On basis of Uses:
 Machine-hours method
 Production output method
Other methods:
 Annuity method
 Sinking fund method
 Revaluation method
Question-23: What is the method of accelerated-depreciation?
Answer: The accelerated-depreciation method is a method that in the
early years generates higher depreciation costs than in later years.
Question-24: What is the declining-Balance method of depreciation?
Answer: The method of declining-balance is a method that applies a
constant rate to the asset’s declining book value and produces a
decreasing annual depreciation expense over the asset’s useful life.
Question-25: What is the straight-line depreciation method?
Answer: The straight-line method is a method of depreciation in which
periodic depreciation for each year of the useful life of the asset is the
same.
Question-26: What is the Units-of-activity method of depreciation?
Answer: The unit-of-activity method is a method of depreciation in which
the useful life of an asset is expressed in terms of the total units of
production or use anticipated.
Question-27: What is the cost price of the asset?
Answer: The cost price of the asset refers to the value of an asset and
the cost of making that asset usable.
Question-28: What is the salvage value of an asset?
Answer: The salvage value of an asset refers to the estimated value of
an asset at the end of its lifespan.
Question-29: What is the depreciable value of an asset?
Answer: The depreciable value of an asset refers to the value obtained
by deducting the salvage value of the assets from the cost price of the
assets.
Question-30: What is a useful life of an asset?
Answer: An asset’s useful life is an estimate of an asset’s expected
productive life, also called service life.
Question-31: According to which Principle Company records the plant
assets at cost price?
Answer: According to the historical cost principle company records the
plant assets at cost price.
Question-32: What is the formula for the Straight Line method of
calculating annual depreciation?
Answer: Annual Depreciation= (Cost-Salvage Value)/Useful Life.
Question-33: How does the Straight Line method calculate the
depreciation rate?
Answer: Depreciation Rate= 100%/Useful Life
Question-34: What is the formula for the units of activity method of
calculating annual depreciation?
Answer: The formula for the units of activity method of calculating
annual depreciation is as follows:
Depreciable Cost per Unit=Depreciable Cost/Total units of activity

Annual Depreciation Expense = Depreciable Cost per Unit X Units of

activity during the year

Question-35: What is the formula for the declining balance method of

calculating annual depreciation?
Answer: Annual Depreciation Expense=Book Value at beginning of year
X Declining balance rate.
I hope you have a basic idea about the plant assets and their
depreciation at the end of the article.
Read these “35” Short Questions and Answers- Plant Assets and
Depreciation on a regular basis and enhance your accounting skills.
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