CBSE Class 11 Accountancy Depreciation Reserves and Provisions MCQs Set B

Question: Dividend Equalisation Reserve is:
a) Specific Reserve
b) None of these
c) Secret Reserve
d) General Reserve
Answer: a

Question: The piece of equipment costs Rs.100,000 and has a useful life of 10 years with no salvage value. If the company uses the double declining balance method, what will be the depreciation expense for the second year?
a) Rs. 20,000
b) Rs. 40,000
c) Rs. 18,000
d) Rs. 36,000
Answer: d

Question: The loss on sale of an asset is debited to:
a) Profit and Loss Account
b) Trial Balance Cr. Side
c) Balance Sheet
d) Trading Account
Answer: a

Question: Depreciation is Charged on:
a) Current Assets
b) Fixed Tangible Assets
c) None of these
d) Both Current and Fixed Assets
Answer: b

Question: Provision is created by debiting:
a) Profit and Loss Account
b) None of these
c) Profit and Loss Appropriation Account
d) Trading Account
Answer: a

Question: The cause of Depreciation is:
a) Wear and tear
b) Obsolescence
c) All of these
d) Usage of Asset
Answer: c

Question: Depreciation is a process of:
a) Allocation
b) Valuation
c) Depletion
d) None of the options
Answer: a

Question: Under Reducing Balance Method, depreciation to be charged:
a) Scrap Value
b) None of these
c) Real Value
d) Original value
Answer: b

Question: The depreciation charged on an asset will be credited to:
a) Depreciation A/c
b) Asset A/c
c) Bank A/c
d) Cash A/c
Answer: b

Question: An alternative term used for accumulated depreciation expenses?
a) Provision for depreciation
b) Cumulative depreciation
c) Targeted depreciation
d) Depletion
Answer: a

Question: Depreciation charged under diminishing method:
a) Increase every year
b) Decrease every year
c) Increase in one year and decrease another year
d) Same every year
Answer: b

Question: Which of the following is not a type of reserve:
a) Provision for bad debt
b) General reserve
c) Workmen compensation fund
d) Retained earnings
Answer: a

Question: What is depreciation?
a) Cost of using a fixed asset
b) The value of asset
c) Portion of a fixed assets cost consumed during the current accounting
d) Cost of fixed asset's repair
Answer: a

Question: Amortisation refers to writing off .............
a) Depleting Assets
b) Wasting Assets
c) Intangible Assets
d) Fictitious Assets
Answer: c

Question: Depreciation helps in determining:
a) Accurate level of profit
b) Increases the value of asset
c) Revenue generation
d) Increase the burden of tax
Answer: a

Question: What is the rate of charging depreciation under diminishing method?
a) 12% p.a.
b) 15% p.a.
c) 10% p.a.
d) Not fixed
Answer: d

Question: Under which depreciation method the amount of depreciation expenses remains same throughout the useful life of a fixed asset:
a) Straight line method
b) Reducing balance method
c) Number of units produced method
d) Machine hours method
Answer: a

Question: Which method of depreciation is suitable when expenditure on repairs and maintenance increases as the machine grows old?
a) Reducing Balance Method
b) Straight Line Method
c) Machine Hour Rate Method
d) Sinking Fund Method
Answer: a

Question: Depletion method is normally applied in case of _________ assets.
a) Intangible
b) Tangible
c) Wasting
d) Current
Answer: c

Question: A business decides to sell a machine after 4 years of use. The machine was purchased for Rs.80,000 with an estimated useful life of 10 years and a salvage value of Rs. 8,000. If it is sold for Rs.50,000, what is the gain or loss on the sale?
a) Gain of Rs. 10,000
b) Loss of Rs. 2,000
c) Gain of Rs. 2,000
d) Loss of Rs. 10,000
Answer: c

Question: A company imported a machine on 01.07.2002 for Rs. 64,000, paid customs duty and freight Rs. 32,000 and incurred erection charges Rs. 24,000. On 01.07.2004, one third portion of the imported machinery was sold for Rs. 13,920. Depreciation is to be calculated at 20% p.a. on straight line basis. Profit/Loss on sale will be:
a) Rs. 10,080 (Profit)
b) Rs. 9,800 (Profit)
c) Rs. 9,800 (Loss)
d) Rs. 10,080 (Loss)
Answer: d

Question: How is depreciation best described?
a) A temporary increase in the value of fixed assets.
b) A permanent, continuing, and gradual shrinkage in the book value of fixed assets.
c) A measure of profits earned from asset usage.
d) An expense incurred only when an asset is sold.
Answer: b

Question: Depreciation charges are
a) Cash expenses
b) Financial expenses
c) Non-cash expenses
d) Non-operating expenses
Answer: c

Question: Original cost of an asset is Rs.1,26,000; Salvage value is Rs.6,000; Useful Life is 6 Years. The rate of depreciation under Straight Line Method will be:
a) 15.87%
b) 16.67%
c) 15.80%
d) 16.56%
Answer: a

Question: Depreciation charged under diminishing method ________.
a) Decrease every year
b) Increase in one year and decrease another year
c) Same every year
d) Increase every year
Answer: a

Question: For depreciation of mines, the suitable method is:
a) Straight Line
b) WDV
c) Depletion
d) Annuity Method
Answer: c

Question: General Reserves are shown in:
a) Revaluation Account
b) Profit and Loss Account
c) None of these
d) Balance Sheet
Answer: d

Question: Which of the following is the example of Revenue Reserve?
a) Profit on Redemption of Debentures
b) Profit on Revaluation of Fixed
c) Investment Fluctuation Fund
d) Profit on Re-issue of forfeited shares
Answer: c

Question: Dividend Equalization Reserve and Debenture Redemption Reserve are examples of______
a) Revenue Reserve
b) General Reserve
c) Capital Reserve
d) Secret Reserve
Answer: a

Question: What will be the percentage of depreciation under SLM in the following case: Original Cost of Machine Rs. 1,50,000, Salvage value after 9 years Rs. 15,000, Repair charges in 2nd year Rs. 10,000
a) 11.11%
b) 10%
c) 10.34%
d) 9.37%
Answer: b

Question: Which of the following statements is not appropriate in relation to "Provision"?
a) Provision is a charge against profit
b) Provision is created for known liability
c) Provision is created for strengthening the financial position of the business
d) Creation of provision satisfies the principle of conservatism
Answer: c

Question: A machinery which costs Rs.2,00,000 is depreciated at 25% per year using the Written Down Value Method. At the end of three years, it will have a net book value of
a) Rs.1,50,000
b) Rs.84,375
c) Rs.1,12,500
d) Rs.1,00,000
Answer: b

Question: At the end of the year, Depreciation Account is transferred to:
a) Balance Sheet
b) Trading Account
c) Profit & Loss Appropriation Account
d) Profit & Loss Account
Answer: d

Question: Depreciation is provided on _________.
a) Current assets
b) Liquid assets
c) Fictitious assets
d) Fixed assets
Answer: d

Question: Which of the following asset does not depreciate?
a) Machinery and equipment
b) Motor Vehicles
c) Land
d) Furniture
Answer: c

Question: Depreciation refers to
a) Closure of a plant due to lock out
b) Closure of a plant due to labour issues
c) Loss of equipment over time due to wear and tear
d) Destruction of plant in a fire accident
Answer: c

Question: Which of the following methods of depreciation is not recognized by Income Tax Law?
a) Straight line Method
b) None of these
c) Both, Straight Line and Diminishing Balance Methods
d) Diminishing Balance Method
Answer: a

Question: Asset Disposal A/c is prepared when:
a) Provision for Depreciation A/c is prepared
b) Asset A/c is prepared
c) Profit & Loss A/c is prepared
d) Depreciation A/c is prepared
Answer: a

Question: Which of the following is the example of Capital Reserve?
a) Workmen's Compensation Fund
b) None of these
c) Premium Received on issue of shares or debentures
d) General Reserve
Answer: c

Question: The term depletion is used in relation to ___________.
a) Fixed assets
b) Wasting assets
c) Current assets
d) Intangible assets
Answer: b