Chapter 1: Depreciation — Online MCQ Test
ACCOUNTANCY · CLASS 12 INTERMEDIATE 2 YEAR · Telangana State Board
Practice Chapter 1: Depreciation with a free chapter-wise online MCQ test.
This chapter covers: This chapter covers depreciation concepts causes methods straight line diminishing balance method ledger accounting asset disposal and provision for depreciation..
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Chapter 1: Depreciation — Important Questions & Answers
What is depreciation?
- A. An increase in the value of an asset over time
- B. A gradual decrease in the value of a fixed asset due to use and passage of time
- C. A liability created for future expenses
- D. The profit earned from selling an asset
Answer: B. A gradual decrease in the value of a fixed asset due to use and passage of time
Depreciation means the systematic reduction in the book value of a fixed asset over its useful life due to wear and tear, usage, or time.
Depreciation means the systematic reduction in the book value of a fixed asset over its useful life due to wear and tear, usage, or time.
Which of the following is a common cause of depreciation?
- A. Wear and tear
- B. Appreciation in market price
- C. Increase in demand for the asset
- D. Capital investment by owner
Answer: A. Wear and tear
Wear and tear is one of the main causes of depreciation because assets lose utility as they are used.
Wear and tear is one of the main causes of depreciation because assets lose utility as they are used.
A machine was purchased for ₹1,00,000 and depreciation is charged at 10% per annum under the straight line method. What is the annual depreciation?
- A. ₹5,000
- B. ₹10,000
- C. ₹15,000
- D. ₹20,000
Answer: B. ₹10,000
Under the straight line method, depreciation is calculated on original cost. 10% of ₹1,00,000 is ₹10,000.
Under the straight line method, depreciation is calculated on original cost. 10% of ₹1,00,000 is ₹10,000.
A plant costing ₹2,00,000 is depreciated at 20% per annum by diminishing balance method. What is the depreciation for the first year?
- A. ₹20,000
- B. ₹30,000
- C. ₹40,000
- D. ₹50,000
Answer: C. ₹40,000
Under the diminishing balance method, first-year depreciation is calculated on the original cost. 20% of ₹2,00,000 is ₹40,000.
Under the diminishing balance method, first-year depreciation is calculated on the original cost. 20% of ₹2,00,000 is ₹40,000.
An asset costing ₹80,000 has a scrap value of ₹8,000 and useful life of 4 years. Which method is generally more suitable if equal charge is desired each year?
- A. Diminishing balance method
- B. Straight line method
- C. Revaluation method
- D. Insurance method
Answer: B. Straight line method
The straight line method is suitable when equal depreciation is to be charged every year based on cost less scrap value.
The straight line method is suitable when equal depreciation is to be charged every year based on cost less scrap value.