MCQ on Depreciation | Accounting Class 11 NCERT

MCQ on Depreciation | Accounting Class 11 NCERT

Free Online MCQs Questions of CBSE Class 11 Accountancy Chapter 16 – Depreciation with Answers. Free Online MCQs Questions for Class 11 Accountancy with Answers was Prepared Based on Latest Exam Pattern. Students can solve NCERT Class 11 Accountancy Depreciation Current Multiple Choice Questions with Answers. Students can assess themselves by practicing following Mcqs.

Fundamental of Accounting MCQ
ACCOUNTING PROCESS MCQ
DEPRECIATION AND RESERVES MCQ
Bills of Exchange

MCQ on (Financial Statement)

Depreciation is a way to write off the cost of an asset over the life of such an asset. Depreciation is treated as non-cash expenses shown in P&L to present an actual profit or loss of business.

Depreciation is a
a. non-cash expense b. cash expense
c. non-cash gain d. cash gain

Answer

Answer: A

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Depreciation is charged on
a. fixed assets b. current assets.
c. Land d. All of the above

Answer

Answer: A

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Depreciation is
a. decline in the market value of tangible fixed assets.
b. The residual value of a fixed asset
c. Cost of a fixed asset’s repair
d. Portion of a fixed cost consumed during the current accounting period

Answer

Answer: D

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Depletion term is used for depreciation in case of
a. Fixed assets b. Tangible assets.
c. Intangible assets d. Natural Assets

Answer

Answer: D

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Depreciation provides fund for
a. replacement b. repairs
c. expansion of capital d. All of the above

Answer

Answer: A

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When market value of an asset is higher than book value depreciation is
a. not charged. b. charged at usual rate
c. charged at lower rate d. charged at higher rate

Answer

Answer: B

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Depreciation is charged
a. to reduce the value of asset to its market value
b. to adjust the cost the assets by portion of a fixed cost consumed during the current accounting period
c. to increase the value of assets to its market value
d. All of the above

Answer

Answer: B

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If adequate maintenance expenditure is incurred, depreciation need
a. not be charged. b. be charged at lower rate
c. be charged at usual rate d. be charged at higher rate

Answer

Answer: C

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Making excessive provision for doubtful debits builds up the secret reserve in the business.
a. True b. False

Answer

Answer: A

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Capital reserves are normally created out of
a. free or distributable profits b. normal operating activities
c. capital profit d. All of the above

Answer

Answer: C

Dividend equalisation reserve is an example of
a. general reserve b. Specific reserve
c. capital reserve d. None of the given

Answer

Answer: B

Reserve the purpose of which has not been spelt out is
a. General reserve b. free reserve
c. Both A & B d. Revenue Reserve.

Answer

Answer: C

Which of the following is/are a charge against profit
a. ‘Provision b. Depreciation
c. Provision and Depreciation d. Provision, Depreciation and Reserve

Answer

Answer: C

To meet future expenses or losses the amount of which is not certain an account is created which is called
a. Depreciation b. Provision
c. Reserve d. Provision and Reserve

Answer

Answer: B

Creation of reserve
a. reduces taxable profits of the business b. does not reduce taxable profits of the business
c. may or may not reduce taxable profits of the business
d. None of the give

Answer

Answer: B

Depreciation is decline
a. in the historical cost of assets b. in the market cost of assets
c. in the fair cost of assets d. Residual cost

Answer

Answer: A

Cost of assets includes
i. cost of item ii. Installation
iii. Freight and Transportation iv. Proceeds from Test run
a. i, ii and iii b. ii, iii and iv
c. i, iii and iv d. All of the above

Answer

Answer: A

Types of reserve are
i. General Reserve ii. Capital Reserve
iii. Accumulated Reserve iv. Specific Reserve
v. Revenue Reserve
a. i, ii, iii and iv b. i, ii, iv and v
c. i, ii, iii and v d. All of the above

Answer

Answer: B

Reserve created for maintaining a stable rate of dividend is termed as
a. Debenture Redemption Reserve b. Dividend Equalisation Reserve
c. Capital Reserve d. General Reserve

Answer

Answer: B

The main object of providing depreciation is
a. To calculate true profit. b. To show true financial position.
c. To reduce tax. d. To provide funds for replacement

Answer

Answer: A

Depreciation arises because of
a. Fall in the market value of an asst. b. Physical wear and tear.
c. Fall in the value of money d. None of them.

Answer

Answer: B

Depreciation is a process of
a. Valuation b. Allocation
c. Both valuation and allocation d. None of them.

Answer

Answer: A

Under the straight line method of providing depreciation it
a. Increase every year. b. Remain constant every year.
c. Decreases every year d. None of them.

Answer

Answer: B

Under the diminishing balance method depreciation it
a. Increases every year. b. Decreases every year.
c. Remain constant every year. d. None of them.

Answer

Answer: B

Under the fixed installment method of providing depreciation it is calculated on:
a. On scrap value b. on balance amount
c. Original cost d. None of them

Answer

Answer: C

Under the diminishing balance method, depreciation is calculated on:
a. Scrap value b. On original value
c. On book value d. None of them

Answer

Answer: C

The amount of depreciation charged on a machinery will be debited to:
a. Machinery account b. Repair account
c. Cash account d. Depreciation account

Answer

Answer: D

Loss on sale of plant and machinery should be written off against:
a. Share premium b. Sale account
c. Profit & loss account d. Depreciation fund account

Answer

Answer: D

Loss on sale of machinery will be:
a. Debited on machinery A/c b. Credited to machinery A/c
c. Credited to profit and loss A/c d. Debited to profit and loss A/c

Answer

Answer: D

Asset which have a limited useful life are termed as
a. Limited assets b. Depreciable assets
c. Unlimited asset d. None of these

Answer

Answer: B

Process of becoming out of date or obsolete is termed as:
a. Physical deterioration b. Depletion
c. Obsolescence d. Amortization

Answer

Answer: C

Which of the term is used to write off in reference to tangible fixed assets.
a. Depreciation b. Depletion
c. Amortization d. Both (b) and (c)

Answer

Answer: A

The economic factors causing depreciation:
a. Time factor b. Obsolescence and inadequacy
c. Wear and tear d. Money valuation

Answer

Answer: C

Profit prior to incorporation is an example of:
a. Capital reserve b. Revenue reserve
c. Secret reserve d. None of these

Answer

Answer: A

Total depreciation cannot exceeds its:
a. Scrap value b. Cost value
c. Market value d. Depreciable value

Answer

Answer: D

Depreciation value of an asset is equal to
a. Cost + Scrap value b. Cost + Market price
c. Cost – Scrap value d. None of these

Answer

Answer: C

Depreciation does not depend on fluctuations as
a. Market value of asset b. Cost of price of asset
c. Scrap value of asset d. None of these

Answer

Answer: A

Depreciation is:
a. An income b. An asset
c. A loss d. A liability

Answer

Answer: C

The books value of an asset is obtained by deducting depreciation from its
a. Market value b. Scrap value
c. Market + Cost price d. Cost

Answer

Answer: D

Depreciation fund method is also known as:
a. Sinking fund method b. Annuity method
c. Sum of years digits method d. None of these

Answer

Answer: A

The method is especially suited to natural resources (mines, quarries, sand, pits etc.) is said to be
a. Annuity method b. Depletion method
c. Revaluation method d. Sum of digits method

Answer

Answer: B

In the provision method of depreciation the asset always appears at
a. Cost price b. Market Price
c. Scrap Value d. None

Answer

Answer: A

Which of the following is the effect on net income if a business decreases provision for doubtful debts?
a. It will increase net income b. It will decrease net income
c. It will increase gross profit and net income d. No effect

Answer

Answer: A

A firm has not recorded the bad debts by mistake. Which of the following is the effect of bad debts omission?
a. Net profit would decrease b. Net profit would increase
c. Gross profit would overstate d. Gross profit would understate

Answer

Answer: B

When it is certain that a debt won’t be recovered. Which of the following is correct?
a. Provision for bad debt is created b. Account receivable is credited
c. Bad debts is credited d. Sales is debited

Answer

Answer: B

A recovery of bad debt
a. increases net income b. decreases net income
c. increases gross profit d. increases gross profit and net income

Answer

Answer: A

The opening balance of “provision for doubtful debts account” is ₹ 1000 whereas the closing balance of debtors account is ₹ 100,000. What amount of provision for doubtful debts should be charged to income statement using a 5% provision for doubtful debts for the current accounting period?
a. ₹ 5000 b. ₹ 4000
c. ₹ 2000 d. ₹ 1000

Answer

Answer: B

The opening and closing balances of provision for doubtful debts account are ₹ 1000 and ₹ 2000 whereas bad debts are totalled ₹ 200
a. ₹ 800 is to be deducted from total debtors balance in the balance sheet
b. ₹ 1200 is to be subtracted from total debtors balance in the balance sheet
c. ₹ 800 is to be added to total debtors balance in the balance sheet
d. ₹ 1200 is to be added to total debtors balance in the balance sheet

Answer

Answer: B

Which of the following double entries is used to transfer “bad debts recovered” to income statement?
a. Bad debts recovered Debit and income statement Credit
b. Income statement Debit and bad debts recovered Credit
c. Cash Debit and bad debts recovered Credit
d. Bad debts recovered debit and cash Credit

Answer

Answer: A

What does aged debtors analysis signify?
a. shows how long debts have been outstanding
b. How old the customers are
c. How long does a business take to repay the bank loans
d. Minimum number of old debtors

Answer

Answer: A

Which of the following is the most common cause of bad debt?
a. Debtor refusal to repayment b. Debtor left the country
c. Debtor committed a crime d. Debtor declared to be a bankrupt

Answer

Answer: D

According to a general rule of accounting, the older a debts is outstanding, the more likelihood that the debt will turn out to be a
a. provision for bad debt b. profitable debt for the business
c. bad debt d. asset for the business

Answer

Answer: C

Total debtors=₹ 5000, the closing balance of provision for doubtful debt a/c is ₹ 500. Identify what amount should be shown in balance sheet regarding the debtors?
a. ₹5000-₹ 500=₹4500 b. ₹5000+₹500=₹5500
c. ₹4500-₹500=₹5000 d. ₹4500-₹500=₹4000

Answer

Answer: A

Which accounting concept dictates the inclusion of “provision for doubtful debts” in the financial statements?
a. Accrual concept b. Matching concept
c. Going concern concept d. Prudence concept

Answer

Answer: D

Which of the following is an alternative term for “provision for doubtful debts”?
a. Reserve for doubtful debts b. Stipulation for doubtful debts
c. Allowance for doubtful debts d. Discount for doubtful debts

Answer

Answer: C

At the end of accounting period, XYZ Company finds out that its total debtors are ₹10,000. On scrutiny of accounts, it turned out that a bad debt amounting to ₹1000 was not recorded in the books of accounts. Furthermore, having considered the current economic situation, management of the company decided to increase the provision for doubtful debts by ₹500. Find out what net amount to be expensed out in the income statement?
a. ₹10,000 b. ₹1000
c. ₹1500 d. ₹11,000

Answer

Answer: C

A firm decided to provide for a 4% or ₹160 allowance for doubtful debts on all outstanding debts. Which of the following is the value of total outstanding debts of the firm at the time of creating the provision?
a. ₹2000 b. ₹5000
c. ₹1000 d. ₹ 4000

Answer

Answer: D

Which of the following is a commonly used base to create the provision for doubtful debts?
a. Total purchases b. Total credit sales
c. Total current assets d. Total current liabilities

Answer

Answer: B

Which of the following debtors have highest probability to default on trade debts?
a. Over 90 days old debtors b. 30 to 60 days old debtors
c. 60 to 90 days old debtors d. Current month debtors

Answer

Answer: A

Provision for doubtful debts account is a/an
a. Asset account b. Contra asset account
c. Nominal account d. Liability account

Answer

Answer: A

Suppose that provision for doubtful debts account’s opening balance is ₹3222, closing balance=₹5222 and bad debts written off during the accounting period amount to ₹500. Work out the total amount needed to debit in the profit and loss account?
a. ₹2500 b. ₹8444
c. ₹8944 d. ₹7944

Answer

Answer: A

Provision for cash discount on debtors is a percentage of
a. Debtors b. Net debtors
c. Net debtors less provision for doubtful debt d. Net sales

Answer

Answer: C

If actual bad debts are more than the provisions for bad debts, then there will a
a. Credit balance of Provision for Bad Debts Account
b. Debit balance of Provision for Bad Debts Account
c. Debit balance of Bad Debts Account
d. Debit balance of Discount on Debtors Account

Answer

Answer: C

M/s ABC firm has imported a machine from abroad. Which of the following is NOT the element of machine’s cost?
a. Purchase price of machine b. Import duty
c. Demurrage charges d. Refundable tax

Answer

Answer: D

In the calculation of depreciation, all of the following items are actually estimates except:
a. Useful life b. Residual value
c. Historical cost d. Salvage value

Answer

Answer: B

Which of the following fixed assets is not depreciated in the ordinary circumstances?
a. Plant and machinery b. Building
c. Land d. Equipment

Answer

Answer: C

A car was purchased for ₹ 550000. Its residual value was estimated to be ₹ 50000 while its monthly depreciation expenses are ₹ 10000 using straight line method. Which of the following is the annual rate of depreciation?
a. 25% b. 24%
c. 22% d. 20%

Answer

Answer: C

An increase in the value of fixed asset is referred to as:
a. Addition b. Acclamation
c. Appreciation d. Attraction

Answer

Answer: C

A fixed asset having book value of ₹ 25000 was sold for ₹22000. Which of the following is the gain or loss on the sale of fixed asset?
a. Gain of ₹3000 b. Loss of ₹ 3000
c. Gain of ₹ 22000 d. Loss of ₹ 25000

Answer

Answer: B

Decline in the value of intangible assets is termed as
a. Amortisation b. Depletion
c. Declination d. Subtraction

Answer

Answer: A

Which of the following is a biological asset
a. Dog b. Horse
c. Cow d. All of the above

Answer

Answer: C

Items of property, plant and equipment can be recognized as assets when their cost can be measured reliably and it is likely that the future economic benefits associated with the assets will
a. increase gradually b. Will diminish with the passage of time
c. will flow to the entity d. not be available

Answer

Answer: C

Under the revaluation model of fixed assets provided by the international accounting standards, the revaluation of the fixed assets should be carried out
a. After 10 years b. After 7 years
c. Once 2 to 5 years d. Once 3 to 5 year

Answer

Answer: D

Journal entry for revaluation of assets is
a. Asset Account Dr
To Revaluation Account
b. Asset Account Dr
To Depreciation Account
c. Revaluation Account Dr.
To Depreciation Account
d. Depreciation Account Dr
To Revaluation Account

Answer

Answer: A

A company purchased a new machine for ₹ 5000000 and machine’s test run was started to make sure that machine works properly. There was expense of ₹ 75000 incurred on test run, however the sale proceeds of test production were ₹ 70000. You are required to find out the total cost of machine?
a. ₹ 5000000 b. ₹ 4930000
c. ₹ 5075000 d. ₹ 5005000

Answer

Answer: D

The purchase price of a software that will be used for more than 12 months should be regarded as
a. A revenue expenditure b. A capital expenditure
c. A deferred revenue expenditure d. A deferred capital expenditure

Answer

Answer: A

Which of the following is the correct formula for calculating depreciation using service hours’ method?
a. Depreciation=(Cost – Scrape value) / Total hours X Actual hours
b. Depreciation=(Cost – Accumulated depreciation) / Total hours X Actual hours
c. Depreciation=(Cost – Accumulated depreciation) / Total hours X Total hours
d. Depreciation=(Cost – Scrape value) / Actual hours X Total hours

Answer

Answer: A

The estimate about useful life of a fixed asset
a. can never be changed b. can be changed

Answer

Answer: B

Cost of a fixed asset – Accumulated depreciation expenses of the fixed asset=
a. Book value of a fixed asset b. Market value of a fixed asset
c. Historical cost of a fixed asset d. Recoverable amount of a fixed asset

Answer

Answer: A

Depreciable amount + Residual value of a fixed asset =?
a. Depreciation expenses b. Accumulated depreciation
c. Cost of the fixed asset d. Future economic benefits of a fixed asset

Answer

Answer: C

A fixed asset was bought for ₹ 500000. Its accumulated depreciation is ₹ 400000 and rate of depreciation is 20%. Calculate its depreciation expenses for the current accounting period using reducing balance method?
a. ₹ 100000 b. ₹ 80000
c. ₹ 40000 d. ₹ 20000

Answer

Answer: D

Which of the following is/are a kind of depreciation expenses?
a. Depletion b. Depletion and Amortisation
c. Depletion and Appreciation d. Depletion, Amortisation and Appreciation

Answer

Answer: B

An alternative term used for accumulated depreciation expenses?
a. Provision for depreciation b. Cumulative depreciation
c. Targeted depreciation d. Progressive depreciation

Answer

Answer: A

Which of the following is a double entry for depreciation expenses?
a. Accumulated depreciation debit and depreciation expenses Credit
b. Depreciation expenses Debit and accumulated depreciation Credit
c. Cash Debit and depreciation expenses Credit d. Depreciation expenses Debit and cash Credit

Answer

Answer: B

Which of the following is the normal balance of an accumulated depreciation account?
a. Debit balance b. Credit balance
c. either debit or credit balance d. Nil balance

Answer

Answer: B

A company purchased a vehicle for ₹ 600000. I will be used for 5 years and its residual value is expected to be ₹100000. What is the annual amount of deprecation using straight line method of depreciation?
a. ₹ 100000 b. ₹ 140000
c. ₹ 120000 d. ₹ 110000

Answer

Answer: A

Dividend Equalisation Reserve is a
a. Capital Reserve b. General Reserve
c. Revenue Reserve d. Deferred Revenue Reserve

Answer

Answer: C

Secret reserve is a reserve
a. appears in the balance sheet on Assets Side b. appears in the balance sheet on Liabilities Side
c. appears equally on both Assets and Liabilities Side
d. does not appear in the balance sheet

Answer

Answer: A

Showing contingent liabilities as actual liabilities is an example of
a. Provision b. Revenue Reserve
c. Capital Reserve d. Secret Reserve

Answer

Answer: D

Which of the following represent Secret Reserve
i. Undervaluation of inventories/stock ii. Charging capital expenditure to P&L account
iii. Making excessive provision for doubtful debts
iv. Showing contingent liabilities as actual liabilities a. i, ii and iii b. i, ii and iv
c. ii, iii and iv d. All of the above

Answer

Answer: D

Which of the reserve(s) following is/are capital reserve
i. Premium on issue of shares or debenture ii. Workman Compensation Fund
iii. Profit on redemption of debentures iv. Profit on revaluation of fixed asset & liabilities.
v. Profits prior to incorporation a. i, ii, iii and iv b. i, iii, iv and v
c. ii, iii, iv and v d. All of the above

Answer

Answer: B

Importance of creating reserves are
i. reducing the taxable profit ii. Meeting a future contingency
iii. Strengthening the general financial position of the business
iv. Redeeming a long-term liability like debentures etc. a. i, ii and iii b. i, iii and iv
c. ii, iii and iv d. All of the above

Answer

Answer: C

General reserve is a type of
a. Revenue reserve b. Capital Reserve
c. Both A&B d. Neither A nor B

Answer

Answer: A

Where the provision for depreciation account or accumulated method of depreciation is in place, assets in balance sheet is
a. shown at original cost for the successive year
b. shown at depreciated cost for the successive year
c. not shown
d. either A or B

Answer

Answer: A

Which is known as fixed percentage on original cost method of depreciation?
a. Written Down Value b. Straight Line
c. Annuity d. None of the given

Answer

Answer: B

Depreciation is charge against profit under the concept of
a. Matching b. Business Entity
c. Revenue Recognition d. Consistency

Answer

Answer: A

Depreciation is
a. credited to Income and Expenditure Account b. Debited to Income and Expenditure Account
c. credited to Balance Sheet b. Debited to Balance Sheet

Answer

Answer: B

If the original cost of the asset is ₹ 2,50,000 The useful life of the asset is 10 years and net residual value is estimated to be ₹ 50,000, the rate of depreciation under straight line method will
a. 10% b. 12.5%
c. 8% 9. 8.33%

Answer

Answer: C

If the original cost of the asset is ₹ 2,00,000 and depreciation is charged @ 10% p.a. at written down value, the book value of the assets after a period of three account year will be
a. ₹ 140000 b. ₹ 160000
c. ₹ 162000 d. ₹ 145800

Answer

Answer: D

If the original cost of a truck is ₹ 9,00,000 and its net salvage value after 16 years of useful life is ₹ 50,000 then the appropriate rate of depreciation under the WDV method will be
a. 16.67% b. 6.25%
c. 6.62% d. 12.25%

Answer

Answer: A

If the original cost of an asset is ₹ 5,00,000 and rate of the depreciation is 10% what will be difference in the book value of the cost under SLM and WDV method after a period of 3 years?
a. NIL b. ₹ 14500
c. ₹ 22500 d. ₹ 18750

Answer

Answer: B