Understanding Depreciation Basics

What is depreciation?

• The increase in value of an asset over time

• The decrease in value of an asset over time

• The process of buying new assets

• The method of selling old assets

Which of the following is a type of depreciation?

• Straight-line depreciation

• Curved depreciation

• Circular depreciation

• Square depreciation

How do you calculate straight-line depreciation?

• Divide the asset's cost by its lifespan

• Multiply the asset's cost by its lifespan

• Add the asset's cost to its lifespan

• Subtract the asset's lifespan from its cost

Why is depreciation important in business?

• It helps in increasing the asset's value

• It helps in reducing taxes

• It helps in buying new assets

• It helps in selling old assets

Which method of depreciation results in the same amount of depreciation each year?

• Double declining balance

• Straight-line

• Sum-of-the-years-digits

• Units of production

What is the lifespan of an asset?

• The time it takes to sell the asset

• The time it takes to buy the asset

• The time the asset is expected to be useful

• The time the asset is stored

Which of the following is NOT a method of depreciation?

• Straight-line

• Double declining balance

• Sum-of-the-years-digits

• Triple declining balance

If an asset costs £100 and has a lifespan of 5 years, what is the annual straight-line depreciation?

• £10

• £20

• £25

• £50

What happens to an asset's value as it depreciates?

• It increases

• It stays the same

• It decreases

• It doubles

Which depreciation method is best for assets that lose value quickly?

• Straight-line

• Double declining balance

• Sum-of-the-years-digits

• Units of production