CBSE Class 11 Accountancy Depreciation Reserves and Provisions MCQs Set C

Question: Wages paid for erection of machinery are debited to ____________.
a) Wages Account
b) Machinery Account
c) Profit and Loss Account
d) Deferred Wages Account
Answer: b

Question: What is the primary definition of depreciation according to AS-6 (Revised)?
a) A measure of profit earned from asset usage.
b) A measure of the wearing out, consumption, or other loss of value of a depreciable asset.
c) A measure of increase in asset value.
d) A one-time expense for an asset.
Answer: b

Question: In the example given, if a machine’s cost is Rs.1,00,000 and the annual depreciation is Rs.10,000, how much will be charged to the income statement for depreciation in the first year?
a) Rs. 1,00,000
b) Rs. 10,000
c) Rs. 90,000
d) Rs. 0
Answer: b

Question: What is the primary significance of depreciation in an enterprise?
a) It determines the selling price of assets.
b) It has a significant effect in determining and presenting the financial position and results of operations.
c) It solely affects cash flow statements.
d) It is only relevant at the time of asset disposal.
Answer: b

Question: Which of the following is NOT considered a depreciable asset?
a) Machinery
b) Land
c) Furniture
d) Vehicles
Answer: b

Question: A company purchases a machine for Rs.50,000. It has an estimated useful life of 5 years and a salvage value of Rs.5,000. What is the annual depreciation using the straight-line method?
a) Rs. 9,000
b) Rs. 10,000
c) Rs. 11,000
d) Rs. 12,000
Answer: b

Question: Profit on sale of fixed asset is used to create
a) Specific Reserve
b) General Reserve
c) Capital Reserve
d) None of the options
Answer: c

Question: Reserves arising from capital receipts are known as
a) Capital Reserve
b) Reserve Fund
c) Any of Capital Reserve and Reserve Fund
d) None of the options
Answer: a

Question: In purchase method, the excess of net asset of the transferor company acquired by the transferee company over the purchase consideration should be recognized as ________.
a) P & L
b) Goodwill
c) General reserve
d) Capital reserve
Answer: d

Question: Given a profit before depreciation and tax of Rs.50,000 and a depreciation expense of Rs.10,000, what is the profit before tax?
a) Rs. 60,000
b) Rs. 50,000
c) Rs. 40,000
d) Rs. 30,000
Answer: c

Question: If a company buys a patent for Rs.10,00,000 with a useful life of 10 years, the annual amortisation expense would be:
a) Rs. 1,00,000
b) Rs. 10,00,000
c) Rs. 5,00,000
d) Rs. 50,000
Answer: a

Question: Every fixed asset loses its value due to use or other reasons. This decline in the value of asset is known as:
a) Amortization
b) Provisions
c) Depreciation
d) Devaluation
Answer: c

Question: Following are the causes of Depreciation except:
a) Wear and tear due to use or passage of time
b) normal factors
c) Expiration of legal rights
d) Obsolescence
Answer: b

Question: Following are the causes of Depreciation except:
a) Natural resources
b) Fixed asset
c) Liabilities
d) Intangible assets
Answer: a

Question: A franchise with a cost of ₹6,00,000 and a useful life of 12 years would have an annual amortisation expense of:
a) Rs. 6,00,000
b) Rs. 50,000
c) Rs. 5,00,000
d) Rs. 1,00,000
Answer: b

Question: Depreciation is charged on
a) Fixed assets
b) Current assets
c) Both fixed and current assets
d) None of the options
Answer: a

Question: Which of the following asset generally assumed not to depreciate?
a) Machinery
b) Building
c) Land
d) All of the options
Answer: c

Question: Under the annuity method of depreciation, the charge is
a) Increasing every year
b) Decreasing every year
c) Fixed for all years
d) Fluctuating from year to year
Answer: b

Question: According to Companies Act, 1956 Secret Reserves can be created by:
a) Only Private Company
b) Banking and insurance companies
c) Only Public Company
d) Companies Registered under Companies Act
Answer: b

Question: Under the diminishing balance method, the amount of depreciation is calculated on
a) The written-down value of the asset
b) The market value of the asset
c) The original cost of the asset
d) The expected realizable value of the asset
Answer: a

Question: If a machine is purchased for Rs.1,00,000 and has a useful life of 10 years, what would be the annual depreciation expense?
a) Rs. 5,000
b) Rs. 10,000
c) Rs. 20,000
d) Rs. 50,000
Answer: b

Question: Book value means
a) Expected sale price
b) Current market price if purchased now
c) Value as shown in the books of account
d) Original acquisition price
Answer: c

Question: Which method of depreciation would you recommend for coal mines?
a) Diminishing balance method
b) Fixed installment method
c) Sum of year's digits
d) Depletion method
Answer: d

Question: Which of the following depreciation methods is not recognised 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: According to the Companies Act of 1956, secret reserves can be created by:
a) Only private companies
b) Banking and insurance companies
c) Only public company
d) Companies registered under the Companies Act
Answer: b

Question: At the end of the year, the depreciation account is transferred to:
a) Balance sheet
b) Trading account
c) Profit & loss appropriation account
d) Profit & loss account
Answer: d

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

Question: Which of the following is the example of the 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: A Ltd. purchased a machine on 1.1.2020 for Rs.1,20,000. Installation expenses were Rs.30,000. Residual value after 5 years Rs.5,000. On 1.7.2020, expenses for repair were incurred to the extent of Rs.2,000. Depreciation is provided @10% p.a. under written down value method. Total depreciation after 2nd year
a) Rs.25,000
b) Rs.13,000
c) Rs.10,500
d) Rs.28,500
Answer: d

Question: Which of the following best describes 'Depreciation'?
a) Valuation of fixed asset at the end of the year
b) Verification of assets
c) Allocation of cost of fixed assets over its useful life
d) Decreasing the market value of asset
Answer: c

Question: A Provision is
a) an appropriation of profits
b) a charge against profit
c) Can be an appropriation of profits or a charge against profit
d) None of the options
Answer: b

Question: Ambuja Cement Ltd. purchased a machine on 1-1-2020 for Rs.1,20,000. Installation expenses were Rs.10,000. Its residual value after 10 years is Rs.5,000. On 1-03-2020 expenses on its repairs were incurred to the extent of Rs.2,000. Depreciation is provided under straight line method. Books are closed on 31st March every year. The amount of depreciation for the current year will be:
a) Rs.3,125
b) Rs.3,175
c) Rs.12,500
d) Rs.12,700
Answer: a

Question: Which of the following is a correct distinction between a Revenue reserve and a Capital reserve?
a) A revenue reserve is created out of capital profits whereas a capital reserve is created out of business profits
b) A revenue reserve can be used for distribution of dividend with certain preconditions whereas a capital reserve can be used for distribution of dividend without any preconditions
c) A revenue reserve is created for strengthening the financial position whereas capital reserve is created for meeting capital losses or to be used for purposes specified by the Companies Act
d) There is no distinction between revenue reserve and capital reserve
Answer: c

Question: The term amortisation is used to write off
a) Fixed Assets
b) Intangible Assets
c) Tangible Assets
d) Wasting Assets
Answer: b

Question: The W.D.V. of an asset after three years of depreciation on reducing balance method @15% p.a. is Rs.49,130. What was its original value?
a) Rs.40,000
b) Rs.80,000
c) Rs.45,000
d) Rs.70,250
Answer: b

Question: A machine is purchased on 1st April, 2018 for Rs.80,000. Expenses incurred on its installation is Rs.20,000. The residual value at the end of its expected useful life of 4 years is estimated at Rs.10,000. The amount of depreciation under Straight Line Method, for the year ended on 31st March, 2019 will be:
a) Rs.22,500
b) Rs.20,000
c) Rs.17,500
d) Rs.13,125
Answer: a

Question: According to the Companies Act, 1956, secret reserves can be created by _______.
a) Only private company
b) Banking and insurance companies
c) Only public company
d) Companies registered under the Companies Act
Answer: b

Question: Which one of the following is not a feature of written down value method of depreciation?
a) The book value of the asset becomes zero at any one point of time
b) The depreciation is calculated on the book value of assets and not on the cost
c) The amount of depreciation charged on a specific asset reduces every year
d) There is no need to estimate the residual value and estimated life at the time of deciding the amount of depreciation
Answer: a

Question: Amount of depreciation charged under diminishing balance method remains
a) Increasing
b) Decreasing
c) Fixed
d) Fluctuating
Answer: b

Question: Charging depreciation is
a) compulsory
b) voluntary
c) dependent on the condition of assets
d) None of the options
Answer: a