If the book value of an asset stands at________per cent of the original cost, a company need not provide depreciation on it.
Correct answer: C. five
- A. two
- B. fifteen
- C. five
- D. ten
Explanation
Under the stated accounting convention, depreciation need not be provided once the asset’s book value falls to 5% of its original cost. The 5% figure distinguishes this rule from the other percentages listed.
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About Accounting Principles
Accounting principles explain the rules used to record, classify and report business transactions. Coverage includes the accounting equation, double-entry system, accrual and cash bases, matching and prudence concepts, consistency, going concern, business entity, and the difference between capital and revenue items.
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