# 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.

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

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

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

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

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

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

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

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

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

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

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

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

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

• 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

• 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

• 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

• 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

• 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

• 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

• 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

• 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.

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

• 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.

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

• 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

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

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

• 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

• 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

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

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

• 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)

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

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

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

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

• 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

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

• 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

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

• 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

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

• 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

• 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

• 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

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

• 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

• 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

• 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

• 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

• 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

• 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

• 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

• 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

• 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

• 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

• 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

• 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

• 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

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

• 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

• 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

• 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

• 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

• 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

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

• 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%

• An increase in the value of fixed asset is referred to as:
c. Appreciation d. Attraction

• 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

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

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

• 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

• 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

• 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

• 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

• 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

• 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

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

• 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

• 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

• 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

• 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

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

• 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

• 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

• 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

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

• 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

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

• 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

• 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

• 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

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

• 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

• 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

• Depreciation is charge against profit under the concept of
c. Revenue Recognition d. Consistency

• 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

• 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%

• 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

• 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%