CBSE Class 11 Accountancy Depreciation Reserves and Provisions MCQs Set D

Question: The term ……………….. is used in the context of extraction of natural resources like mines, quarries, etc., that reduces the availability of the quantity of the material or asset.
a) depreciation
b) depletion
c) amortisation
d) None of the options
Answer: b

Question: The main difference between depletion and depreciation is that the former is concerned with the exhaustion of economic resources, but the latter relates to the usage of an asset.
a) True
b) False
c) Can’t say
d) Partially true
Answer: a

Question: Depreciation is a cash expense.
a) True
b) False
c) Can’t say
d) Partially true
Answer: b

Question: In straight line method of depreciation, amount of depreciation reduces year after year.
a) True
b) False
c) Can’t say
d) Partially true
Answer: b

Question: ………………….. implies to an existing asset becoming out-of-date on account of the availability of better type of asset.
a) Obsolescence
b) Depletion
c) Amortisation
d) None of the options
Answer: a

Question: In case of purchase of a second hand asset, original cost includes initial repair cost to put the asset in workable condition.
a) True
b) False
c) Can’t say
d) Partially true
Answer: a

Question: Obsolescence arises from factors like
a) technological changes
b) improvements in production methods
c) change in market demand for the product or service output of the asset
d) All of the options
Answer: d

Question: Depreciation means decline in the value of a fixed assets due to
a) usage of asset
b) passage of time
c) obsolescence
d) All of the options
Answer: d

Question: Depreciation provides fund for replacement.
a) True
b) False
c) Can’t say
d) Partially true
Answer: a

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 options
Answer: b

Question: Provision for depreciation will be shown as a current asset by X Ltd. in the balance sheet.
a) True
b) False
c) Partially true
d) Can’t say
Answer: a

Question: The loss on sale of asset is debited to
a) Reserves
b) Depreciation fund
c) Profit and Loss Account
d) None of the options.
Answer: b

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 options
Answer: c

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
Answer: b

Question: When market value of an asset is higher than book value, depreciation is not charged.
a) True
b) False
c) Can’t say
d) Partially true
Answer: b

Question: Depreciation is deducted before calculating taxable profits.
a) True
b) False
c) Can’t say
d) Partially true
Answer: a

Question: Under ……………….. method, depreciation is charged on the book value of the asset.
a) straight line
b) written down value
c) annuity
d) insurance policy
Answer: b

Question: Which of the following gives the correct formula for calculating the original cost of an asset for depreciation?
a) Original cost = Purchase price
b) Original cost = Purchase price + Freight
c) Original cost = Purchase price + Freight+ Installation cost
d) None of the options
Answer: c

Question: ……….. of an asset is the estimated economic or commercial life of the asset.
a) Useful life
b) Physical life
c) Residual life
d) None of the options
Answer: a

Question: Depreciation is Provided on:
a) Current assets
b) Fictitious asset
c) Intangible Asset
d) Fixed Asset Rem
Answer: d

Question: ………………….. refers to writing-off the cost of intangible assets like patents, copyright, trade marks, franchises, goodwill which have utility for a specified period of time.
a) Depreciation
b) Depletion
c) Amortisation
d) None of the options
Answer: c

Question: What is the original cost of the asset on which depreciation is to be charged?
a) 1,08,000
b) 12,000
c) 1,20,000
d) None of the options
Answer: c

Question: Depreciation is also charged on current assets.
a) True
b) False
c) Can’t say
d) Partially true
Answer: b

Question: ………………… is the estimated net realisable value (or sale value) of the asset at the end of its useful life.
a) Scrap value
b) Original cost
c) Depreciation
d) None of the options
Answer: a

Question: If adequate maintenance expenditure is incurred, depreciation need not be charged.
a) True
b) False
c) Can’t say
d) Partially true
Answer: b

Question: Total amount of depreciation charged over the useful life of the asset must be equal to the depreciable cost.
a) True
b) False
c) Can’t say
d) Partially true
Answer: a

Fill In The Blanks

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: Rs.10,000

Question: The main objective of provision are to account all __________and ___________ .
Answer: Expenses and losses

Question: The original cost of a machinery is Rs.15,000, salvage value is Rs.1500 after 9 years and repair charges in second year is Rs.1,000. The Rate of Depreciation per annum is____.
Answer: 10%

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

Question: The another name of Straight Line Method is Fixed _____method and Fixed _____ on Original cost method.
Answer: Instalment, percentage

Question: Reserve is an _______________of profit.
Answer: appropriation

Question: The accumulated depreciation of the asset is Rs.50,000 as on 1.4.17. The original cost of the asset is Rs. 1,00,000. _____________is the amount of depreciation to be charged under diminishing balance method @10%p.a for the year ended 31.3.18
Answer: 5000

Question: Amortisation is a gradual and systematic writing off of————–.
Answer: Intangible assets

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

Question: Under Fixed Installment Method, depreciation is charged on ______ cost of an asset.
Answer: Original/Acquisition

True/ False

Question: Depreciation will not be charged if the machinery is not used in a particular accounting year.
Answer: False

Question: Reserve is a charge against profit.
Answer: False

Question: Under Straight Line Method the depreciation is charged on the acquisition cost of an asset.
Answer: True

Question: Annual depreciation of an asset is Rs.1,80,000 and the cost of acquiring an asset is Rs.7,20,000, the rate of depreciation would be 15% p.a.
Answer: False

Question: In case of diminishing balance method the asset gets reduced to zero level.
Answer: False

Question: Investment Fluctuation Reserve is also called as General Reserve.
Answer: False

Question: Depreciation is a non –cash expense.
Answer: True

Question: Provision is the amount of any known liability to be determined with substantial accuracy.
Answer: True

Question: Under written down value the depreciation is charged on the original cost of an asset every year.
Answer: False

Question: The yearly depreciation of a machinery under Straight line Method is Rs.60,000 and the machinery is sold on January 1,2017, the amount of depreciation in the year of sale would be Rs.45,000, if the year ends on March 31,2017.
Answer: True

Match The Following

Question:
1. It is created out of business profit             a Secret Reserves
2. It is created out of capital profit                 b Provisions
                                                                      c Revenue Reserve
                                                                      d Capital Reserve
Answer: 1-c; 2 –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. A permanent, continuing and gradual shrinkage in the book value of fixed asset.     a. Written down value method
2. Wear and tear of Fixed asset is charged on the book value of the asset                   b. Straight line Method
                                                                                                                                        c. Depreciation
Answer: 1-c; 2-a

Question:
1. Reserve is created out of profit for specific purpose                   a. Workmen Compensation Reserve
2. Reserve is created out of profit not for specific purpose             b. contingency Reserves
                                                                                                        c. Capital Reserves
                                                                                                        d. None of above.
Answer: 1-a; 2-b

Question:
1. It can be used for distribution of dividends without any pre conditions              a Capital Redemption reserve
2. It can be used for distribution of dividends only if the company satisfies           b Revenue Reserve
    certain conditions prescribed by the companies Act 
                                                                                                                                c Capital Reserve
Answer: 1-b; 2-c