Depreciation, Provisions and Reserves Class 11 MCQs Questions with Answers

Question 1.
Which of the following methods of depreciation is not recognized 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

Question 2.
Asset Disposal A/c is prepared when :
(a) Provision for Depreciation A/c is prepared
(b) Asset A/c is prepared
(c) Profit & Loss A/c is prepared
(d) Depreciation A/c is prepared

Answer

Question 3.
Which of the following is the example of Capital Reserve?
(a) Workmen’s Compensation Fund
(b) None of these
(c) Premium Received on issue of shares or debentures
(d) General Reserve

Answer

Question 4.
Which of the following is the example of 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

Question 5.
Dividend Equalisation Reserve is :
(a) Specific Reserve
(b) None of these
(c) Secret Reserve
(d) General Reserve

Answer

Question 6.
General Reserves are shown in :
(a) Revaluation Account
(b) Profit and Loss Account
(c) None of these
(d) Balance Sheet

Answer

Question 7.
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

Question 8.
The loss on sale of an asset is debited to:
(a) Profit and Loss Account
(b) Trial Balance Cr. Side
(c) Balance Sheet
(d) Trading Account

Answer

Question 9.
Depreciation is Charged on :
(a) Current Assets
(b) Fixed Tangible Assets
(c) None of these
(d) Both Current and Fixed Assets

Answer
Question 10.
At the end of the year, Depreciation Account is transferred to :
(a) Balance Sheet
(b) Trading Account
(c) Profit & Loss Appropriation Account
(d) Profit & Loss Account

Answer

Question 11.
Provision is created by debiting :
(a) Profit and Loss Account
(b) None of these
(c) Profit and Loss Appropriation Account
(d) Trading Account

Answer

Question 12.
The cause of Depreciation is :
(a) Wear and tear
(b) Obsolescence
(c) All of these
(d) Usage of Asset

Answer

Question 13.
Depreciation is a process of :
(a) Allocation
(b) Valuation
(c) None of these
(d) Depletion

Answer

Question 14.
Under Reducing Balance Method, depreciation to be charged :
(a) Scrap Value
(b) None of these
(c) Real Value
(d) Original value

Answer
Question 15.
The depreciation charged on an asset will be credited to :
(a) Depreciation A/c
(b) Asset A/c
(c) Bank A/c
(d) Cash A/c

Answer

Question 16.
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

Question 17.
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

Question 18.
Following are the causes of Depreciation except
(a) Natural resources
(b) Fixed asset
(c) Liabilities
(d) Intangible assets

Answer

Question 19.
An alternative term used for accumulated depreciation expenses?
(a) Provision for depreciation
(b) Cumulative depreciation
(c) Targeted depreciation
(d) Depletion
Answer

Question 20.
Depreciation charged under diminishing method
(a) Increase every year
(b) Decrease every year
(c) Increase in one year and decrease another year
(d) Same every year

Answer

Question 21.
Which of the following is not a type of reserve
(a) Provision for bad debt
(b) General reserve
(c) Workmen compensation fund
(d) Retained earnings

Answer

Question 22.
What is depreciation?
(a) Cost of using a fixed asset
(b) The value of asset
(c) Portion of a fixed assets cost consumed during the current accounting
(d) Cost of fixed asset’s repair

Answer

Question 23.
Depreciation helps in determining
(a) Accurate level of profit
(b) Increases the value of asset
(c) Revenue generation
(d) Increase the burden of tax

Answer

Question 24.
What is the rate of charging depreciation under diminishing method?
(a) 12% p.a.
(b) 15% p.a.
(c) 10% p.a.
(d) Not fixed
Answer

Question 25.
Under which depreciation method the amount of depreciation expenses
remains same throughout the useful life of a fixed asset
(a) Straight line method
(b) Reducing balance method
(c) Number of units produced method
(d) Machine hours method

Answer

1. How do we describe the process of adjusting the value of an

asset by recognizing that it is consumed in a way that does not
completely eliminate the resource?

(a) Adjustment

(b) Valuation

(c) Depreciation
(d) Waning
2. If the estimated amount of depreciation on equipment for a
period is Rs. 2,000, the adjusting entry to record depreciation
would be?

(a) Debit depreciation expense, Rs. 2,000; credit accumulated depreciation, Rs. 2,000

(b) Debit depreciation expense, Rs. Rs. 2,000; credit cash, Rs. 2,000

(c) Debit equipment, Rs. 2,000; credit depreciation expense, Rs. 2,000

(d) Debit accumulated depreciation, Rs. 2,000; credit depreciation expense, Rs. 2,000
3. Which one of the following most closely defines 'Amortization'?

(a) The depreciation of tangible fixed assets

(b) The depreciation of intangible fixed assets

(c) The depreciation of current assets

(d) The revaluation of land and buildings

4. Book value = cost minus _____________?

(a) Current liabilities

(b) Salvage value

(c) Accumulated depreciation

(d) Residual value

5. What is process called, where costs of the natural resources are
allocated over its useful life?

(a) Capitalization

(b) Depletion

(c) Amortization
(d) Depreciation
6. Depreciation arises due to?

(a) Physical wear and tear of the Asset

(b) Fall in the market value of an Asset

(c) Fall in the value of money

(d) None of these

7. A machine that cost Rs. 120,000 has accumulated depreciation of
Rs. 50,000. The book value of machine is?

(a) Rs. 50,000

(b) Rs. 70,000

(c) Rs. 120,000

(d) Rs. 170,000

8. What is the process of allocating the cost of intangible assets
over its estimated life?

(a) Depreciation

(b) Amortization

(c) Depletion

(d) Trial balance

9. Which of the following items is not a non-cash item?

(a) Depreciation expense

(b) Amortization expense

(c) Depletion expense

(d) Income tax expense

10. Depreciable value of an asset is equal to?

(a) Cost + scrap value

(b) Cost + market price

(c) Cost – scrap value

(d) None of the given options

>> Read Accounting for Deprecation

MCQs 11 To 20
11. A decrease in value of a fixed asset due to age, wear and tear is
known as?

(a) Depreciation

(b) Accumulated Depreciation

(c) Appreciation

(d) Written Down Value

12. Fixed assets are also called?

(c) Liquid assets

(d) Floating assets

13. Which of the following intangible assets is not amortized?

(a) Patents

(b) Goodwill

(c) Copyrights

(d) Franchises
14. All of the following are needed for the computation of
depreciation except?
(a) Expected disposal date

(b) Cost

(c) Residual value

(d) Estimated total useful life to the present and future owners
15. The sale of equipment costing Rs. 8,000, with accumulated
depreciation of Rs. 6,700 and sale price of Rs. 2,000, would result
in a?

(a) Gain of Rs. 2,000

(b) Gain of Rs. 700

(c) Loss of Rs. 700

(d) Loss of Rs. 600

16. Which of the following would not be a basis for estimating the
useful life of a piece of equipment?

(a) Years of service

(b) Weight

(c) Potential production in units

(d) Hours of service

17. Firms charge depreciation each year?

(a) To ensure there is enough money in the firm to replace the asset

(b) To spread the cost of the asset over its working life

(c) To reduce the profit and thus reduce the dividends they can pay to share holders

(d) Because the law states they must be reduced

18. Which one of the following items is not a consideration when
recording periodic depreciation expense on plant assets?

(a) Salvage value

(b) Estimated useful life

(c) Cash needed to replace the plant asset

(d) Initial cost of the plant assets

19. Loss in value of an asset owing to the physical deterioration or
obsolescence is called?
(a) Book value

(b) Capital gain

(c) Depreciation

(d) Both a & c

20. Under the straight line method of depreciation?

(a) Amount of depreciation increases every year

(b) Amount of depreciation decreases every year

(c) Amount of depreciation remains constant for every year

(d) None of the given options