Chapter 1 ACCOUNTANCY : Depreciation — Online MCQ Test
ACCOUNTANCY · CLASS 12 INTER II YEAR · Andhra State Board
Practice Chapter 1 ACCOUNTANCY : Depreciation with a free chapter-wise online MCQ test.
This chapter covers: This chapter covers causes and methods of calculating depreciation including straight line and written down value methods alongside provision for depreciation accounts..
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Chapter 1 ACCOUNTANCY : Depreciation — Important Questions & Answers
What is the primary cause of depreciation for a tangible fixed asset?
- A. Wear and tear
- B. Appreciation in market value
- C. Increase in production capacity
- D. Change in management
Answer: A. Wear and tear
Depreciation is the permanent decrease in the value of a tangible asset due to wear and tear, passage of time, or obsolescence.
Depreciation is the permanent decrease in the value of a tangible asset due to wear and tear, passage of time, or obsolescence.
Which accounting principle justifies the charging of depreciation?
- A. Matching Principle
- B. Dual Aspect Concept
- C. Money Measurement Concept
- D. Realization Concept
Answer: A. Matching Principle
According to the Matching Principle, the cost of an asset should be allocated over its useful life to match revenues generated by the asset.
According to the Matching Principle, the cost of an asset should be allocated over its useful life to match revenues generated by the asset.
If the original cost of a machine is Rs 1,00,000 and the estimated scrap value is Rs 10,000 with a useful life of 10 years, what is the annual depreciation under the Straight Line Method?
- A. Rs 10,000
- B. Rs 9,000
- C. Rs 11,000
- D. Rs 8,000
Answer: B. Rs 9,000
(Cost - Scrap Value) / Useful Life = (1,00,000 - 10,000) / 10 = 9,000.
(Cost - Scrap Value) / Useful Life = (1,00,000 - 10,000) / 10 = 9,000.
Comparing Straight Line and WDV methods, which statement is true?
- A. SLM charges higher depreciation in initial years compared to WDV
- B. WDV results in an increasing depreciation charge over time
- C. SLM results in a constant depreciation charge annually
- D. WDV is easier to calculate than SLM
Answer: C. SLM results in a constant depreciation charge annually
SLM charges a fixed percentage of the original cost every year, resulting in constant annual depreciation.
SLM charges a fixed percentage of the original cost every year, resulting in constant annual depreciation.
Which of the following scenarios would lead to an increase in the annual depreciation amount under the WDV method?
- A. Charging a lower rate
- B. Adding a major capital expenditure to the existing asset
- C. Reduction in asset usage
- D. Passing more time
Answer: B. Adding a major capital expenditure to the existing asset
Adding capital expenditure increases the book value of the asset, which in turn increases the depreciation calculated on that base in subsequent years.
Adding capital expenditure increases the book value of the asset, which in turn increases the depreciation calculated on that base in subsequent years.