MCQ Question for Accountancy Class 11 With Answers Chapter 7 Depreciation, Provisions and Reserves

Check the below NCERT MCQ Class 11 Accountancy Chapter 7 Depreciation, Provisions and Reserves with Answers available with PDF free download. MCQ Questions for Class 11 Accountancy with Answers were prepared based on the latest syllabus and examination pattern issued by CBSE, NCERT and KVS. Our teachers have provided below Depreciation, Provisions and Reserves Class 11 Accountancy MCQs Questions with answers which will help students to revise and get more marks in exams

Depreciation, Provisions and Reserves Class 11 Accountancy MCQs Questions with Answers

Refer below for MCQs Depreciation, Provisions and Reserves with solutions. Solve questions and compare with the answers provided below

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 above

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

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 these 

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

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

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)

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 implies to an existing asset becoming out-of-date on account of the availability of better type of asset.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 above

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 

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 above

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

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

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)

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

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

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

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

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

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

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)

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 above

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 these

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 above

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

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

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 these

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 above

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 above

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 above

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

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

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

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 these

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 these

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 these

Question. The original cost of the asset is ` 2,50,000 and freight and installation charges are ` 25,000. The useful life of the asset is 10 years and net residual value is estimated to be ` 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 these

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 above

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 above

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)

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

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

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)

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)

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)

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

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 ` 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 above

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

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

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 above

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 above

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 these

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 above

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 above

Fill In The Blanks

Question. Given the same rate percentage asset depreciate faster by the ——— as compared to the —————-.

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____.

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

Question. Reserve is an _______________of profit.

Question. The main objective of provision are to account all __________and ___________ . 

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

Question. At the end of useful life of an asset, the book value of the asset is ___ under Straight Line Method

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 _____.

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.

Question. Amortisation is a gradual and systematic writing off of————–.

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

Question. The another name of Straight Line Method is Fixed _____method and Fixed _____ on Original cost method.

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._______.

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

Question. The Secret Reserve can be merged with the profit during the ______.

Question. Under Straight Line method the formula for calculating depreciation is Original Cost of an Asset divided by _________.

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.

Question. Other name of Written down Value Method is _____.

Question. Under Fixed Installment Method, depreciation is charged on ______ cost of an asset.

Question. Depreciation is a process of _________________.

True/ False

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

Question. Provision is debited to the profit and Loss account.

Question. Reserve is a charge against profit.

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

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

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.

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.

Question. Investment Fluctuation Reserve is also called as General Reserve.

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

Question. Amortisation refers to writing off fictitious assets.

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

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

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

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

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.

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

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

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

Question. Depreciation is a non –cash expense.

Match The Following

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 certain conditions prescribed by the companies Act	b Revenue Reserve
	c Capital Reserve

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

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

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

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

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.

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

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

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

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

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