Match List-I with List-II
| List-I | List-II | ||
| (A) | Book value of an asset at a given date | (I) | Original value of the asset - scrap value of the asset |
| (B) | Useful life of an asset | (II) | The value of a depreciable asset at the end of its useful life. |
| (C) | Total depreciation | (III) | An accounting estimate of the number of years an asset is likely to remain in service for the purpose of cost-effective revenue generation. |
| (D) | Residual value | (IV) | Original value of the asset - accumulated depreciation at that time |
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → (A) - (IV), (B) - (III), (C) - (I), (D) - (II)
These are the basic terms of depreciation.
(A) Book value of an asset at a given date
This matches (IV) Original value of the asset − accumulated depreciation at that time. The book value falls each year by the depreciation charged so far.
(B) Useful life of an asset
This matches (III) An accounting estimate of the number of years an asset is likely to remain in service for the purpose of cost-effective revenue generation. It is a number of years, not an amount of money.
(C) Total depreciation
This matches (I) Original value of the asset − scrap value of the asset. Over its whole useful life the asset loses its value down to the scrap value.
(D) Residual value
This matches (II) The value of a depreciable asset at the end of its useful life. Residual value is another name for scrap or salvage value.
So the matching is (A)-(IV), (B)-(III), (C)-(I), (D)-(II).
Tip: Keep the two differences apart: original value − scrap value is the depreciation over the whole life, while original value − depreciation so far is the book value on a given date.