What are the causes of depreciation?

3

(a)

Distinguish between straight line method and written down value method of calculating depreciation.

3

(a)

In case of a long term asset, repair and maintenance expenses are rise in later years than in earlier year Which method is suitable for charging depreciation is the management does not want to increase burden on profits and loss account of depreciation and repair.

3

(a)

What are the effects of depreciation on profit and loss and balance sheet?

3

(a)

How does the matching principle apply to depreciation?

3

(a)

There are two dentists Dr. Aggarwal and Dr. Mehta in your locality who are competitors. Both of them have recently bought an equipment for treatment of patients. Dr. Aggarwal has decided to write-off an equal amount of depreciation every year while Dr. Mehta wants to write-off a larger amount in earlier years. They do not know anything about the methods of depreciation. Who is wise in your opinion? Give reasons in support of your answer.

3

(a)

Give four examples each of 'provisions' and 'Reserves'.

3

(a)

Distinguish between 'Revenue Reserve' and 'Capital Reserve'.

3

(a)

Distinguish between 'General Reserve' and 'Specific Reserve'.

3

(a)