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Q NA for few selected topics.

1, Differentiate accumulative depreciation from annual depreciation.

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(discussed )
2, Differentiate scrap sale from scrap value. (discussed )
3,Differentiate net realizable value from net book value.
Net book value = Cost of NCA - accumulative depreciation.

Net realizable value = expected selling price +total production n

selling cost
Net book value come across in depreciation lesson while net
realizable value is discussed in inventory valuation.
4, Differentiate straight line method from diminishing balance
method.
Straight line method Diminishing balance method
• Calculated based on cost of • Calculated based on net
NCA book value.
• Annual depreciation remain • Annual depreciation gets
unchanged until the last reduced over its useful life
year of depreciation time.
• Easy in calculation • Complicated in calculation
• Last year of useful life time • Net book value does not get
net book value gets zero. zero even in last years.
• Appropriate for NCA with • Appropriate for NCA with
low maintenance cost. high maintenance cost and
quick obsoleted NCA.

Lushani Perera
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5, State three similarities between straight line method and reducing

balance method.
• Double entry for depreciation remains unchanged disregarding
the depreciation method. Page | 2

• Both method complies to accounting principles and concepts of

prudence ,matching and consistency.
• Both the method based on time rather than their real usage.
6, Reasons for disposal of non current asset before the end of its useful
time.
• High maintenance cost
• Frequent break down
• Out of fashion
• Less efficiency
• Fast technology
7, Mode of selling ( disposing ) a non current asset
• On cash or cheque
• On credit basis
• By exchanging with another NCA
8, Reasons for irrecoverable debts from trade receivable.
• Bankruptcy
• Demise
• Run away from the country
• Frauds
• Trade dispute
9, Differentiate irrecoverable debts from allowance for irrecoverable
debts.

Lushani Perera
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Irrecoverable debts Allowance for irrecoverable debts

• Certain to not to get
recovered.
• There is an impact on trade
receivable account.
• Uncertain of recovery.
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• No impact on trade
receivable account.

• Considered as an expense • Can be an expenses or

to the income statement. income to the income
statement.

10, state similarities of irrecoverable debts and allowance for

irrecoverable debts.
• Both are adjustment
• Both adjusted in income statement and SOFP
• Both based on credit sales of a business.
• Both are adjusted to comply with prudence and matching
concepts.

Lushani Perera