Mastering Accountancy Basics
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Questions and Answers

Which of the following best describes the purpose of creating provisions and reserves?

  • To spread the cost of an expense over multiple accounting periods
  • To charge the entire cost of an expense in the year it is incurred
  • To ensure the correct amount of profit or loss is ascertained (correct)
  • To match revenue and expenses for a given period

    • What is the main subject matter of this chapter?

  • Charging depreciation (correct)
  • Creating provisions and reserves
  • Matching revenue and expenses
  • Amortisation and depletion

    • Why is it necessary to charge depreciation?

  • To charge the entire cost of an expense in the year it is incurred
  • To ensure the correct amount of profit or loss is ascertained (correct)
  • To match revenue and expenses for a given period
  • To spread the cost of an expense over multiple accounting periods

    • Which method can be used to compute depreciation?

    <p>Straight line and written down value methods</p> Signup and view all the answers

    What is the purpose of spreading the cost of an expense over multiple accounting periods?

    <p>To spread the benefits of the cost over the periods in which it provides benefits</p> Signup and view all the answers

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