Accounting MCQ on Depreciation

Accounting MCQ on Depreciation

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1. Depreciation is:

(a) an income

(b) an asset

(c) a liability

(d) a loss

Ans. (d) a Loss

2. Depreciation is a charge on:

(a) Liquid Assets

(b) Current Assets

(c) Fixed Assets

(d) Fictitious Assets

Ans. (c) Fixed Assets

3. In Machinery Account, depreciation charged is shown:

(a) on the credit side

(b) on the debit side

(c) as closing balance

(d) All of the above

Ans. (a) on the credit side

4. Depreciation arises due to:

(a) wear and tear in assets

(c) obsolescence

 (b) efflux of time

(d) All of the above

Ans. (d) All of the above

5. A machinery costing 8,00,000 is depreciated @20% p.a. at straight line method basis. At the end of three years, the book value of the machinery will be

(a) 2,20,000

(b) 3,20,000.

(c)  4,20,000.

(d)  5,20,000.

Ans. (b) 3,20,000.

6. Asset Disposal Account is prepared:

(a) at the time of purchase of an asset

(b) at the time of sale of an asset

(c) at the time of purchase of additional machinery

(d) when the scrap value of asset is zero.

Ans. (b) at the time of sale of an asset

7. Under which method of providing depreciation, a fixed percentage of depreciation is applied every year on the book value?

 (a )  Depreciation Fund Method

(b) Insurance Policy Method

(c) Written Down Value Method

(d) Straight Line Method

Ans. (c) Written Down Value Method

8. Loss on sale of machinery is shown on:

(a) debit side of machinery account

(b) credit side of depreciation account

(c) debit side of depreciation account

(d) credit side of machinery account.

Ans. (d) credit side of machinery account.

9. Depreciation is charged on:

(a) Fictitious Assets

(b) Fixed Assets

(c) Current Assets

(d) Liquid Assets

Ans.  (b) Fixed Assets

10. Depletion method of depreciation is applicable to:

(a) Patents

(b) Oil well

(c) Loose tools

(d) Machineries

Ans. (b) Oil well

11. The method of depreciation applicable to a mine is:

(a) Depletion method

(b) Machine-hour method

(c) Diminishing balance method

(d) Straight Line method

Ans. (a) Depletion method

12. Depletion method of depreciation is applicable to:

(a) Current Assets

(b) Fictitious Assets

(c)  Intangible Assets

(d) Wasting Assets

Ans. (d) Wasting Assets

13. The main objective of providing depreciation is:

(a) to ascertain true profit

(b) to reduce the income tax amount

(c) to know the true financial position

(d) All of the above

Ans. (d) All of the above

14. The term ‘Amortisation’ is used in terms of:

(a) Intangible Assets

(b) Tangible Assets

(c) Wasting Assets

 (d) Fixed Assets

Ans. (a) Intangible Assets

15. Straight line method of charging depreciation is also known as:

(a) Original cost method

(b) Equal instalment method

(c)  Fixed instalment method

(d) All of the above

Ans. (d) All of the above

16. Under which of the following method, depreciation is charged at a fixed percentage on

the original cost of assets?

 (a) Straight line method

(b) Written down value method

(c) Depreciation fund method

(d) None of the above

Ans. (a) Straight line method

17. Under written down value method, the amount of depreciation:

(a) increases every year

(b) decreases every year

(c) remains constant every year

(d) All of the above

Ans. (b) decreases every year

18. Which of the following asset is generally not depreciable?

(a) Land

(b) Plant and Machinery

(c) Building

(d) Office Furniture

Ans. (a) Land

19. Depreciation account is a :

(a) Personal Account

(b) Real Account

(c)  Nominal Account

(d) Natural Account

Ans. (c)  Nominal Account

20. Which method of depreciation is approved by income tax authorities?

(a) Straight line method

(b) Written down value method

(c) Both (a) and (b)

(d) None of the above

Ans. (b) Written down value method