CBSE Class 11 Accountancy Depreciation Reserves and Provisions MCQs Set E

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: Depreciable cost of an asset is equal to
a) Cost + Net residual value
b) Cost – Net residual value
c) Cost – Depreciation
d) None of the options
Answer: b

Question: A machine is purchased for 50,000 and is expected to have a useful life of 10 years. At the end of 10th year, it is expected to have a sale value of 6,000 but expenses related to its disposal are estimated at 1,000. Then its net residual value is
a) 6,000
b) 5,000
c) 1,000
d) None of the options
Answer: b

Question: What is the written down value of the machinery sold?
a) 5,76,000
b) 10,00,000
c) 6,40,000
d) None of the options
Answer: a

Question: Secret reserve is called such as it is not known to outside stakeholders.
a) True
b) False
c) Can’t say
d) Partially true
Answer: a

Question: The original cost of the asset is Rs 2,50,000 and freight and installation charges are Rs 25,000. The useful life of the asset is 10 years and net residual value is estimated to be Rs 50,000. What is the amount of depreciation to be charged every year under straight line method assuming that the asset is purchased on 1st January, 2021?
a) 22,500
b) 25,000
c) 30,000
d) None of the options
Answer: a

Question: Which of the following is\are limitations of straight line method?
a) This method reduces the book value of an asset to zero although the asset may still be in existence.
b) It is a very simple method.
c) Depreciation charged is same every year making comparison of profits for different years easy.
d) All of the options
Answer: a

Question: Which of the following is/are the advantage(s) of written down value method?
a) It results into almost equal burden of depreciation and repair expenses taken together every year on profit and loss account
b) Income Tax Act accept this method for tax purposes
c) As a large portion of cost is written-off in earlier years, loss due to obsolescence gets reduced
d) All of the options
Answer: d

Question: Straight line method is suitable for assets in which
a) repair charges are low.
b) the possibility of obsolescence is low.
c) scrap value depends upon the time period involved.
d) All of the options
Answer: d

Question: Making excessive provision for doubtful debts builds up the secret reserve in the business.
a) True
b) False
c) Can’t say
d) Partially true
Answer: a

Question: A machine is purchased for 50,000 and is expected to have a useful life of 10 years. At the end of 10th year it is expected to have a sale value of 6,000 but expenses related to its disposal are estimated at 1,000. Then its depreciable cost is
a) 45,000
b) 50,000
c) 44,000
d) None of the options
Answer: a

Question: Under ……………….. method, a fixed and equal amount in the form of depreciation is charged every year during the life time of the asset.
a) straight line
b) written down value
c) annuity
d) insurance policy
Answer: a

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: Written down value method is based on a more realistic assumption that the benefits from asset go on diminishing with the passage of time.
a) True
b) False
c) Can’t say
d) Partially true
Answer: a

Question: Written down value method is suitable for assets which are affected by technological changes and require more repair expenses with passage of time.
a) True
b) False
c) Can’t say
d) Partially true
Answer: a

Question: XYZ Ltd. purchased a plant for 5,00,000 on 1st April, 2020, and spent 50,000 for its installation. The salvage value of the plant after its useful life of 10 years is estimated to be Rs 10,000. Pass journal entry for depreciation on 31st March, 2021.
a) Depreciation A/c Dr 54,000 To Plant A/c 54,000
b) Plant A/c Dr 54,000 To Depreciation A/c 54,000
c) Depreciation A/c Dr 50,000 To Plant A/c 50,000
d) None of the options
Answer: a

Question: M/sMehra and Sons acquired amachine for 1,80,000 on 1st October, 2020, and spent 20,000 for its installation. The firm writes-off depreciation at the rate of 10% on original cost every year. What is the journal entry for charging depreciation to profit and loss account on 31st March, 2021?
a) Profit and Loss A/c Dr 10,000 To Depreciation A/c 10,000
b) Profit and Loss A/c Dr 9,000 To Depreciation A/c 9,000
c) Depreciation A/c Dr 10,000 To Plant A/c 10,000
d) None of the options
Answer: a

Question: What is the journal entry for crediting depreciation amount to provision for depreciation account?
a) Depreciation A/c Dr To Provision for Depreciation A/c
b) Provision for Depreciation A/c Dr To Depreciation A/c
c) Depreciation A/c Dr To Asset A/c
d) None of the options
Answer: a

Question: Which of the following does not correctly differentiate between straight line and written down value method?
a) In written down value method, depreciation is charged on the basis of original cost whereas in straight line method, the basis of charging depreciation is net book value.
b) The annual amount of depreciation charged every year remains fixed or constant under straight line method whereas in written down value method, the annual amount depreciation is highest in the first year and subsequently declines.
c) Straight line method is not recognised by Income tax law while written down value method is recognised by the income tax law.
d) None of the options
Answer: a

Question: Which of the following factors affect the useful life of an asset?
(i) Legal or contractual limits
(ii) Repair and maintenance policy of the business organisation
(iii) Technological obsolescence
(iv) The number of shifts for which asset is to be used
a) Only (i)
b) (i) and (iii)
c) (i), (iii) and (iv)
d) (i), (ii), (iii), (iv)
Answer: d

Question: Which of the following is/are feature(s) of depreciation?
(i) It is decline in the book value of fixed assets.
(ii) It includes loss of value due to effluxion of time, usage or obsolescence.
(iii) It is a continuing process.
a) (i) and (ii)
b) (ii) and (iii)
c) (i) and (iii)
d) (i), (ii), (iii)
Answer: d

Question: Which of the following points out the need for depreciation?
(i) Matching of costs and revenue
(ii) Consideration of tax
(iii) True and fair financial position
(iv) Compliance with law
a) Only (i)
b) (i) and (iii)
c) (i), (iii) and (iv)
d) (i), (ii), (iii), (iv)
Answer: d

Question: Which of the following factors affect the amount of depreciation?
(i) Cost of asset
(ii) Tax rate
(iii) Estimated net residual value
(iv) Depreciable cost
a) Only (i)
b) (i) and (iii)
c) (i), (iii) and (iv)
d) (i), (ii), (iii), (iv)
Answer: c

Question: Which of the following is/are limitations of written down value method?
(i) As depreciation is calculated at fixed percentage of written down value, depreciable cost of the asset cannot be fully written-off.
(ii) It is difficult to ascertain a suitable rate of depreciation.
a) Only (i)
b) Only (ii)
c) Both (i) and (ii)
d) Neither (i) nor (ii)
Answer: c

Question: Which of the following is/are cause(s) of depreciation?
(i) Wear and tear due to use or passage of time.
(ii) Expiration of legal rights.
(iii) Obsolescence.
(iv) Abnormal factors.
a) Only (i)
b) (i) and (iii)
c) (i), (iii) and (iv)
d) (i), (ii), (iii), (iv)
Answer: d

Question: Expected useful life of an asset means
(i) the period over which a depreciable asset is expected to be used by the enterprise.
(ii) the number of production of similar units expected to be obtained from the use of the asset by the enterprise.
a) Only (i)
b) Only (ii)
c) Both (i) and (ii)
d) Neither (i) nor (ii)
Answer: c

Fill In The Blanks

Question: Given the same rate percentage asset depreciate faster by the ——— as compared to the —————-.
Answer: SLM; WDV

Question: Profit on sale of fixed asset is a capital profit and therefore it will be transferred to ___________________.
Answer: capital Reserve

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

Question: Depreciation is a non- cash expenditure because it does not involve any ———————.
Answer: cash outflow

Question: The Secret Reserve can be merged with the profit during the ______.
Answer: lean period

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 is a process of _________________.
Answer: allocation of cost

Question: The balance of machinery on March31, 2019 is Rs.1,60,000. The machinery was purchased on April 1, 2017. Depreciation is charged @ 10% p.a. by Straight Line Method. The cost price of the machine as on April1, 2017 is Rs._______.
Answer: Rs.2,00,000

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: Rs.9000

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

True/ False

Question: Amortisation refers to writing off fictitious assets.
Answer: False

Question: Under straight line method depreciation is charged on the cost price of fixed assets.
Answer: False

Question: The depreciation is calculated on the market value of the asset under Original Cost Method.
Answer: False

Question: For calculating depreciable cost of an asset, accumulated depreciation is deducted from Original cost of an asset.
Answer: True

Question: Another name of fixed instalment Method is written down value method.
Answer: False 

Question: Discarding the old plant and Machinery due to inventions is called obsolescence.
Answer: True

Question: Provision is debited to the profit and Loss account.
Answer: True

Question: A car which has been repaired after an accident will fetch the same price n the market even if it has not been used.
Answer: False

Question: A Reserve is shown on the liabilities side of Balance Sheet under the head of Reserves and Surplus.
Answer: True

Match The Following

Question:
1. It is created for meeting Capital Losses or to be used for purpose specified by the Companies Act       a Provision
2. It is created for strengthening the financial position and meeting the unforeseen contingencies             b General Reserve
                                                                                                                                                                      c Revenue reserve
                                                                                                                                                                      d Capital Reserve
Answer: 1-d; 2- c

Question:
1. Purpose of Creating capital reserve is :                                   a. To strengthen the financial position
2. Purpose of Creating Revenue reserve is                                 b. To Ascertain true Financial position .
                                                                                                     c. To capital losses
                                                                                                     d. none of above
Answer: 1-c, 2-a

Question:
1. This method takes into consideration repairs and maintenance cost in later years.         a. Profit and Loss account
2. Loss on sale of an asset is shown                                                                                     b. Written down value method
                                                                                                                                               c. Credit side of Asset account
Answer: 1-b; 2-a, c

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:
1. Provision is shown in balance sheet                          a. Non – current liabilities
2. Reserves is shown in balance sheet                          b. current liabilities
                                                                                       c. share capital
                                                                                       d. Reserves & surplus
Answer: 1-b; 2-d