NCERT Class 11 Chapter 7 Accountancy Depreciation Reserves and Provisions MCQ

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1. What Journal Entry will be passed: Value of asset being sold transferred to Asset Disposal Account?

A. Asset Disposal A/c Dr

B. Asset A/c Dr

C. Asset A/c Dr

D. Asset Sale A/c Dr

2. Which method of depreciation suffers from the limitation of unequal burden on profit and loss account?

A. Fixed Instalment Method

B. Reducing Balance Method

C. Depletion Method

D. Annuity method

3. Which method of charging depreciation is accepted by Income Tax Act?

A. Written down value method

B. Both Written down value method and Straight Line method

C. Straight Line method

D. None of the above

4. Depreciation is a process of:

A. Allocation of cost

B. None of the above

C. Valuation of asset

D. Both valuation of asset and allocation of cost

5. Depreciation is which of the following expenditure:

A. Non-cash

B. Both cash and non-cash

C. Cash

D. None of the above

6. Which of the following statements is NOT true about Provisions?

A. It is an appropriation of profit.

B. It is a charge against profits.

C. It is shown on the liability side of Balance sheet.

D. It is discretionary as a matter of financial prudence.

7. Which of the following statements is NOT true about Reserves?

A. It is a charge against profits.

B. It is an appropriation of profit.

C. It is shown on the liability side of Balance sheet.

D. It is discretionary as a matter of financial prudence.

8. If the amount of any known liability cannot be determined with substantial accuracy:

A. A provision should be created.

B. A Contingent liability should be created.

C. A definite liability should be created.

D. A reserve should be created.

9. Under which method the amount of depreciation remains same year after year?

A. Fixed Installment Method

B. Reducing Balance Method

C. Annuity method

D. Depletion Method

10. As per the Original Cost method which is the correct formula for calculating Annual depreciation?

A. Depreciation = Cost of asset Scrap value/ Estimated life of asset

B. Depreciation = Scrap value - Cost of asset / Estimated life of asset

C. Depreciation = Cost of asset - Market value / Estimated life of asset

D. Depreciation = Cost of asset - Scrap value/ Market value of asset

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11. Which of the following factor DOES NOT affect the amount of depreciation?

A. Market value of asset

B. Estimated useful life of asset

C. Total cost of asset

D. Scrap value

12. Which of the following is the cause of depreciation?

A. All of the options.

B. By constant use

C. By Expiry of time

D. By permanent fall in prices

13. According to which Accounting Standard, companies are liable to make provision for depreciation?

A. AS-6 (Revised)

B. AS-4 (Revised)

C. AS-3 (Revised)

D. AS-10

14. According to Companies Act, creation of secret reserve is prohibited except in case of______

A. Banking, Insurance and Financial companies

B. Commercial undertakings

C. Industrial undertakings

D. NGOs.

15. Dividend Equalization Reserveand Debenture Redemption reserveare examples of______

A. Revenue Reserve

B. General Reserve

C. Capital Reserve

D. Secret Reserve.

16. Any reserve which is not apparent on the face of Balance sheet is known as______

A. Secret reserve.

B. General Reserve

C. Revenue reserve

D. Capital Reserve

17. The reserve created out of Profit on reissue of forfeited shares is known as______

A. Capital Reserve

B. General Reserve

C. Revenue reserve

D. Secret reserve.

18. Provision is a______against profits to meet______liabilities.

A. Charge & unknown

B. Appropriation & Known

C. Appropriation & unknown.

D. Charge & Known

19. On 30th June 06, half of the machinery purchased on 1st July,03 for Rs. 40,000 was sold for Rs. 9500. The amount of loss will be Rs____The rate of depreciation is 10% p.a. on original cost.

A. 4500

B. 4800

C. 4200

D. 4000

20. The term____is used to show loss in the value of intangible assets.

A. Amortization

B. Obsolescence

C. Depletion

D. Depreciation

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21. Which account will be debited in the Journal entry for transfer of accumulated depreciation on asset disposed off?

A. Provision for Depreciation A/c

B. Asset disposal A/c

C. Asset A/c

D. Depreciation A/c.

22. What will be the amount of loss suffered on machinery purchased for Rs. 10,000 on 1-1-2010 and sold for Rs. 5000 on 30-6-12. The rate of depreciation charged 10% p.a. on written down method.

A. 1925

B. 1927

C. 1926

D. 1928

23. 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

24. 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

25. 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