Question 1

The main objective of providing depreciation is to

Accepted Answer

A)  Calculate the true profit
B)  Show the true financial position in the Balance Sheet
C)  Provide funds for replacement of fixed assets
D)  Both (a)  and (b)  above

Question 2

Which of the following is not a method of charging depreciation

Accepted Answer

A)  Straight line Method .
B)  Written down value Method .
C)  Discounted present value Method .
D)  Sum of digits Method

Question 3

Which of the following statements is correct?

Accepted Answer

A)  Depreciation cannot be provided in case of loss in a financial year
B)  Depreciation is a charge against profit
C)  Depreciation is provided in the books only when there is profit
D)  Depreciation is an appropriation of profit

Question 4

Which of the following factors are primarily considered to determine the economic life of an asset?

Accepted Answer

A)  Passage of time, asset usage, and obsolescence
B)  Tax regulations and SEBI guidelines
C)  Tax regulations and asset usage
D)  SEBI guidelines and Asset usage A

Question 5

Provision is created for -

Accepted Answer

A)  Unknown Liabilities .
B)  Known Liabilities .
C)  Creation of Secret Reserves .
D)  All the Three

Question 6

In the above question if the depreciation is charged @10% on written down value method, find the profit or loss on sale of the Second hand car.

Accepted Answer

A)  Loss of ` 20,000 .
B)  Loss of ` 22,000 .
C)  Loss of ` 11,000 .
D)  Profit of ` 11,000

Question 7

------ is also known as Appraisal system of depreciation

Accepted Answer

A)  Inventory system .
B)  Survey system .
C)  Annuity system .
D)  Insurance A

Question 8

Depreciation is a process of -

Accepted Answer

A)  Valuation of fixed assets .
B)  Allocation of cost over the useful life of assets
C)  Generating funds replacements of the assets .
D)  Avoidance of tax

Question 9

Which of the following is not depreciated

Accepted Answer

A)  Building .
B)  Land .
C)  Plant and Machinery .
D)  Office equipment

Question 10

Depreciation is calculated on the

Accepted Answer

A)  Cost price of asset .
B)  Market price .
C)  Cost+ Transport+ Installation expenses.
D)  Cost or market values whichever is less

Question 11

Which of the following statements best describes the purpose of depreciation?

Accepted Answer

A)  Regular reduction of asset value to correspond to changes in market value as the asset ages
B)  A process of correlating the market value of an asset with its gradual decline in physical efficiency
C)  Allocation of cost in a manner that will ensure that Plant and Equipment items are not carried on the Balance Sheet in excess of net realizable value
D)  Allocation of the cost of an asset to the periods in which services are received from the asset

Question 12

Schedule XIV of the Companies Act specifies ------ as minimum rate of depreciation (WDV)  on ship fishing vessels

Accepted Answer

A)  27% .
B)  33% .
C)  10% .
D)  15%

Question 13

Which of these is not a Business expense-

Accepted Answer

A)  Fire Insurance of other building .
B)  LIC Premium of proprietor .
C)  Interest on Capital
D)  Commission on sales

Question 14

The portion of the acquisition cost of the asset yet to be allocated is known as

Accepted Answer

A)  Written down value
B)  Accumulated value
C)  Salvage value
D)  Residual Value

Question 15

When a person purchasing goods on credit he becomes a………….. in the books of the seller-

Accepted Answer

A)  Debtor .
B)  Creditor .
C)  Defaulter .
D)  Offender

Question 16

The accounting process of gradually converting the unexpired cost of fixed assets into expenses over a series of accounting periods is

Accepted Answer

A)  Depreciation
B)  Physical deterioration of the asset
C)  Decrease in market value of the asset
D)  Valuation of an asset at a point of time

Question 17

Bad debts recovered account will be transferred to

Accepted Answer

A)  Debtor's Account
B)  Profit and Loss Account
C)  Provision for Doubtful Debt Account
D)  Either (b ) or (c)  above

Question 18

A second hand car is purchased for ` 2,00,000 and sold at ` 1,40,000 after two years. If depreciation is charged @ 10% on SLM method, find the profit or loss on sale of the car.

Accepted Answer

A)  20,000 Loss .
B)  20,000 Profit .
C)  10,000 Loss .
D)  10,000 Profit A

Question 19

Which of the following is an external cause of depreciation

Accepted Answer

A)  Routine repair and maintenance .
B)  Misuse .
C)  Obsolescence .
D)  Wear and tear

Question 20

Which of the following is true with respect to providing depreciation under diminishing balance method?

Accepted Answer

A)  The amount of depreciation keeps increasing every year while the rate of depreciation keeps decreasing
B)  The amount of depreciation and the rate of depreciation decrease every year
C)  The amount of depreciation decreases while the rate of depreciation remains the same
D)  The amount of depreciation and the rate of depreciation increases every year

Exam 34: Depreciation and Asset Provision

The main objective of providing depreciation is to

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Which of the following is not a method of charging depreciation

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Which of the following statements is correct?

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Which of the following factors are primarily considered to determine the economic life of an asset?

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Provision is created for -

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In the above question if the depreciation is charged @10% on written down value method, find the profit or loss on sale of the Second hand car.

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------ is also known as Appraisal system of depreciation

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Depreciation is a process of -

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Which of the following is not depreciated

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Depreciation is calculated on the

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Which of the following statements best describes the purpose of depreciation?

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Schedule XIV of the Companies Act specifies ------ as minimum rate of depreciation (WDV) on ship fishing vessels

Correct AnswerverifiedShow Answer

Which of these is not a Business expense-

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The portion of the acquisition cost of the asset yet to be allocated is known as

Correct AnswerverifiedShow Answer

When a person purchasing goods on credit he becomes a………….. in the books of the seller-

Correct AnswerverifiedShow Answer

The accounting process of gradually converting the unexpired cost of fixed assets into expenses over a series of accounting periods is

Correct AnswerverifiedShow Answer

Bad debts recovered account will be transferred to

Correct AnswerverifiedShow Answer

A second hand car is purchased for ` 2,00,000 and sold at ` 1,40,000 after two years. If depreciation is charged @ 10% on SLM method, find the profit or loss on sale of the car.

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Which of the following is an external cause of depreciation

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Which of the following is true with respect to providing depreciation under diminishing balance method?

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