CBSE Class 11 Accountancy HOTs Depreciation Provisions and Reserves

CBSE Class 11 Accountancy Chapter 7 Depreciation, Provisions and Reserves Fill In The Blanks

Question. At the time of charging depreciation, ____ account is debited and ____ account is credited.
Answer. Depreciation , Asset

Question. Due to _____ and new technology, the old asset becomes obsolete.
Answer. inventions

Question. Under fixed installment method, depreciation is calculated by deducting the _____value, from the original cost of the asset.
Answer. Scrap

Question. Discarding the old machinery, due to new invention, is called _______.
Answer. obsolescence

Question. Estimated sales value of an asset after its working is called_____.
Answer. scrap value

Question. Under Straight Line method the formula for calculating depreciation is Original Cost of an Asset divided by _________.
Answer. estimated Life of the asset

Question. Depreciation Decreases only the book value of the asset, not ____.
Answer. market value

Question. In Straight line method, annual amount of depreciation remains _____in comparison to diminishing balance method
Answer. Fixed

Question. Other name of Written down Value Method is _____.
Answer. Diminishing balance method

Question. At the end of useful life of an asset, the book value of the asset is ___ under Straight Line Method
Answer. Ans–nil/zero

Question. The original cost of an asset is Rs. 1,20,000 and its Scrap Value is likely to be Rs.20,000 after its estimated useful life of 10 years, the annual depreciation written off will be _____.
Answer. Ans-Rs.10,000

Question. The annual depreciation of a machinery under Straight Line Method is Rs.12,000 and the machinery is sold on Jan 1,2018, the amount of depreciation in the year of sale would be Rs.______, if the year ends on March31 every year.
Answer. Ans-Rs.9000 A

Question. Provision is charged to __________ Account.
Answer. Profit and Loss

Question. The amount of reserve when invested in outside securities is termed as ___________.
Answer. Reserve Fund

Question. Revenue reserve is created out of ________whereas capital reserve is created out of _____________.
Answer. Business profit and capital profit

CBSE Class 11 Accountancy Chapter 7 Depreciation, Provisions and Reserves True And False

1. Discarding the old plant and Machinery due to inventions is called obsolescence. (True) 
2. Providing depreciation reduces the amount of profit available for dividend. (True)
3. In Diminishing balance method of depreciation the rate of depreciation gets reduced every year. (False)
4. Depreciation is the decline in the market value of tangible fixed assets. (False) 
5. Provision reduces taxable profits. (True)
6. If adequate maintenance expenditure is incurred depreciation need not to be charged. (False)
7. Written Down Value method is more suitable for assets which get depreciated on account of expiry of the working life of the asset. (False)
8. The Combined cost on the account of depreciation and repairs remain more or less equal throughout the period under written down value method. (True)
9. When Accumulated depreciation account is opened the asset account need not be disturbed in any way and it continues to show at its original cost. (True)
10. Depreciation is provided only on the fixed assets except land. (True)
6. Provision is the amount of any known liability to be determined with substantial accuracy. (True)
11. Workmen compensation Reserve is shown in the profit and loss account. (False)
12. Reserves are the amount set aside out of capital. (False)
13. Investment Fluctuation Reserve is also called as General Reserve. (False)
14. Provision and Reserves used interchangeably. (True)

CBSE Class 11 Accountancy Chapter 7 Depreciation, Provisions and Reserves MCQs

1.Question. Machinery was sold on September 30, 2015 for Rs.42,000. The company charges depreciation @20% p.a. on Straight line Method. The depreciation for 2013-2014 is
a. Rs. 15,000
b. Rs. 9,600
c. Rs. 4,800
d. Rs.7,500 App
Answer. D

Question. Which of the following is of Capital nature?
a. Freight inward
b. Cost of building
c. Repair done on asset
d. Tax paid Ana
Answer. B

Question. Which of the following tangible fixed asset cannot be depreciated
a. Building
b. Vehicle
c. Plant
d. Land Rem
Answer. D

Question. In which of the following methods, the cost of the asset is not spread over in equal proportion during its useful economic life?
a. Original Cost Method
b. Written Down Value Method
c. Both a. and b.
d. None of these
Answer. B

Question. Which of the following statement is true?
a. Depreciation is a charge against profit.
b. Depreciation is an appropriation to profit
c. Depreciation is provided only if there is a profit.
d. In case of loss, depreciation should not be charged. UND
Answer. A

Question. Which of the following expenses is not included in the acquisition cost of a plant and equipment?
a. Cost of site preparation
b. Repairs
c. Installation Cost
d. Freight and transportation charges Ana
Answer. B

Question. Original Cost of an asset is Rs.3,50,000; its salvage value is Rs 25,000; useful life 5 years. Annual Depreciation under Straight Line Method :
a. Rs 65,000
b. Rs85,000
c. Rs.35000
d. Rs.17,500 APP
Answer. A

Question. Original Cost of an asset is Rs.3,50,000; its salvage value is Rs 25,000; useful life 5 years. Rate of Depreciation under Straight Line Method :
a. 18.57 % p.a.
b. 20 % p.a.
c. 15 % p.a.
d. 17 % p.a. APP
Answer. A

Question. On April 1, 2016, a machinery was purchased for Rs.1,00,000. Rate of Depreciation Charged @ 12% p.a. under Straight line method. The book value on May 31,2017 would be
a) Rs. 24,000
b) Rs. 86,000
c) Rs.34,000
d) Rs. 14,000 APP
Answer. B

Question. Dividend equalisation reserve is
a. Specific Reserve
b. General Reserve
c. Revenue Reserve
Answer. A

Question. To strengthening the financial position of the business, the following reserve is created
a. Revenue Reserve
b. Revaluation reserve
c. Specific Reserve
Answer. A

Question. Provision for Bad debt is created to
a. To cover the loss
b. To Cover the Debt
c. To cover the profit
Answer. B

CBSE Class 11 Accountancy Chapter 7 Depreciation, Provisions and Reserves MatchThe Following

Question.
i) A permanent, continuing and gradual                   a. Written down value method
shrinkage in the book value of fixed asset.
ii) Wear and tear of Fixed asset is charged            b. Straight line Method
on the book value of the asset
                                                                               c. Depreciation
Answer. i- c. ii-a

Question.
i) This method takes into consideration                   a. Profit and Loss account
repairs and maintenance cost in later years.
ii) Loss on sale of an asset is shown                       b. Written down value method
                                                                                c. Credit side of Asset account
Answer. I-b, ii a, c

Question.
i) Depreciation arises because of             a. obsolescence
ii) In straight line method the                    b. Fall in the value of assets
depreciation is calculated on
                                                                 c. Wear and tear
                                                                 d. original cost
                                                                 e. Book value
Answer. i-c; ii-d

Question.
i) Provision for depreciation              a. fixed assets
needs to be deducted from
ii) Provision for doubtful debts          b. Sundry Debtors
needs to be deducted from
                                                         c. Sundry Creditors
                                                         d. General Reserve
Answer. i- a; ii b

Question.
i) Amortisation refers to writing off             a. Current Assets
ii) Factor for determining the amount         b. Intangible Assets
of depreciation
                                                                   c. Estimated life of an asset
Answer. i-b; ii-c

Question.
i) Residual value of an asset is also known as       a. Cost of Asset
ii) in original cost method                                        b. Scrap value of the asset at the end of its useful life.
                                                                                c. Equal depreciation is charged.
Answer. i-b; ii-c

Question.
i) It is created out of business profit          a) Secret Reserves
ii) It is created out of capital profit             b) Provisions
                                                                 c) Revenue Reserve
                                                                 d) Capital Reserve
Answer. i)-c; ii) –d

Question.
1. Provision is created :            a. To strengthen the financial position.
2. Reserve is created :             b. To Ascertain true Financial position .
                                                 c. To face the financial difficulties.
                                                 d. none of above
Answer. 1-b; 2-a

Question.
1. Provision is created :                          a. Created out of profit
2. Reserve is created :                           b. created against profit
c . created to meet unknown liability      d. None of above.
Answer. 1-b; 2-a

Question.  What causes depreciation
Answer : Depreciation is caused by
• By constant use
• By the expiry of a time

Question. State the two factors for determining the amount of depreciation
Answer : The two factors for determining the amount of depreciation are
• The total cost of the asset
• The estimated useful life of the asset

Question. What is the formula of a depreciable cost?
Answer : Depreciable Cost= Cost of Asset – Scrap Value

Question. State two features of Provisions.
Answer : The two features of Provisions are.
• Provision is arranged to meet a known liability
• The liability is known but the amount of these liabilities cannot be ascertained with reasonable accuracy
• Provision is a charge against profit and as such reduces the profits of the year in which it is created

Question. If the amount of any unknown liability cannot be determined accurately
1. Provision should be created
2. Definite liability should be created
3. Reserve should be created
4. Should be shown as a contingent liability
Answer : Provision should be created

Question. Provision is made to meet the unknown liability. Is it true or false
Answer : True

Question. Depreciation is provided only on fixed assets except for land
Answer : True

CBSE Class 11 Accountancy Chapter 7 Depreciation, Provisions and Reserves Assertion–Reasoning MCQs

Direction - There are two statements marked as Assertion (A) and Reason (R). Read the statements and choose the appropriate option from the options given below (a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A) (b) Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A) (c) Assertion (A) is true, but Reason (R) is false (d) Assertion (A) is false, but Reason (R) is true

Question. Assertion (A) Depreciation is a charge against the revenue of the corresponding period and must be deducted before arriving at net profit.
Reason (R) Depreciation is as much the cost as any other expense incurred in the normal course of business.
Answer. A

Question. Assertion (A) Charging depreciation is important to represent true and fair financial position.
Reason (R) If depreciation on assets is not provided for, then the assets will be overvalued.
Answer. A

Question. Assertion (A) Provisions are created by crediting the profit and loss account.
Reason (R) The amount of provision for expense and loss is a charge against the revenue of the current period.
Answer. D

Question. Assertion (A) Reserves reduces the amount of profits available for distribution among the owners of the business.
Reason (R) Reserve is a charge against profit.
Answer. C

CBSE Class 11 Accountancy Chapter 7 Depreciation, Provisions and Reserves Case Based MCQs

Direction Read the following case study and answer questions  on the basis of the same.

Arya Ltd. has a manufacturing plant in Delhi. On 1st July, 2021, Arya Ltd purchased a machine for Rs 1,08,000 and spent Rs 12,000 on its installation. At the time of purchase, it was estimated that the effective commercial life of the machine will be 12 years after which its salvage value will be Rs 12,000. The machinery is such that the possibility of obsolescence is low and do not require much repair expenses with passage of time. The accounts are closed on 31st December every year.

Question. Why should depreciation be charged on the manufacturing plant of Arya Ltd?
(a) For matching of costs and revenue.
(b) To comply with law.
(c) To reflect true and fair financial position.
(d) All of the above
Answer. C

Question. Which of the following accounting standard should be followed by Arya Ltd. to charge depreciation?
(a) Accounting Standard-7
(b) Accounting Standard-6
(c) Accounting Standard-8
(d) Accounting Standard-9 
Answer. B

Question. Which of the following method should be used by Arya Ltd. to charge depreciation?
(a) Written down value method
(b) Straight line method
(c) Insurance policy method
(d) None of the above
Answer. B

Question. What is the original cost of the asset on which depreciation is to be charged?
(a) Rs1,08,000
(b) Rs12,000
(c) Rs1,20,000
(d) None of these
Answer. C

Question. What is the amount of depreciation charged in the first year?
(a) Rs9,000
(b) Rs10,000
(c) Rs4,500
(d) Rs5,000
Answer. C

Direction Read the following case study and answer question on the basis of the same.

WHERE Ltd. is a manufacturing firm and has a machinery worth Rs 50,00,000. As on 1st April, 2018 the provision for depreciation stood at Rs 50,00,000. WHERE Ltd. charges depreciation on machinery at 20% p.a. by the diminishing balance method. A piece of machinery purchased on 1st April, 2016 for Rs 10,00,000 was sold on 1st October, 2018 for Rs 6,00,000.

Question. Under written down value method, a fixed and equal amount in the form of depreciation is charged every year during the life time of the asset.
(a) True
(b) False
(c) Can’t say
(d) Partially true
Answer. B

Question. Which of the following is the probable reason for WHERE Ltd’s adoption of written down value method for charging depreciation?
(a) The machinery is such that its repair charges are low
(b) The possibility of obsolescence of machinery is low
(c) The machinery is such that it is affected by technological changes and require more repair expenses with passage of time
(d) None of the above
Answer. C

Question. What is the total depreciation charged on the machinery sold?
(a) Rs4,24,000
(b) Rs3,60,000
(c) Rs4,40,000
(d) None of these
Answer. A

Question. What is the written down value of the machinery sold?
(a) Rs5,76,000
(b) Rs10,00,000
(c) Rs6,40,000
(d) None of these
Answer.  A

Question. What is the balance carried down in the machinery account?
(a) Rs50,00,000
(b) Rs40,00,000
(c) Rs44,24,000
(d) None of these
Answer. B