We have compiled the NCERT MCQ Questions for Class 11 Accountancy Chapter 7 Depreciation, Provisions and Reserves with Answers Pdf free download covering the entire syllabus. Practice MCQ Questions for Class 11 Accountancy with Answers on a daily basis and score well in exams. Refer to the Depreciation, Provisions and Reserves Class 11 MCQs Questions with Answers here along with a detailed explanation.
Depreciation, Provisions and Reserves Class 11 MCQs Questions with Answers
Choose the correct option.
Question 1.
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
Answer
Answer: (a) Straight line Method
Question 2.
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
Answer
Answer: (a) Provision for Depreciation A/c is prepared
Question 3.
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
Answer
Answer: (c) Premium Received on issue of shares or debentures
Question 4.
Which of the following is the example of Revenue Reserve?
(a) Profit on Redemption of Debentures
(b) Profit on Revaluation of Fixed
(c) Investment Fluctuation Fund
(d) Profit on Re-issue of forfeited shares
Answer
Answer: (c) Investment Fluctuation Fund
Question 5.
Dividend Equalisation Reserve is :
(a) Specific Reserve
(b) None of these
(c) Secret Reserve
(d) General Reserve
Answer
Answer: (a) Specific Reserve
Question 6.
General Reserves are shown in :
(a) Revaluation Account
(b) Profit and Loss Account
(c) None of these
(d) Balance Sheet
Answer
Answer: (d) Balance Sheet
Question 7.
According to Companies Act, 1956 Secret Reserves can be created by:
(a) Only Private Company
(b) Banking and insurance companies
(c) Only Public Company
(d) Companies Registered under Companies Act
Answer
Answer: (b) Banking and insurance companies
Question 8.
The loss on sale of an asset is debited to:
(a) Profit and Loss Account
(b) Trial Balance Cr. Side
(c) Balance Sheet
(d) Trading Account
Answer
Answer: (a) Profit and Loss Account
Question 9.
Depreciation is Charged on :
(a) Current Assets
(b) Fixed Tangible Assets
(c) None of these
(d) Both Current and Fixed Assets
Answer
Answer: (b) Fixed Tangible Assets
Question 10.
At the end of the year, Depreciation Account is transferred to :
(a) Balance Sheet
(b) Trading Account
(c) Profit & Loss Appropriation Account
(d) Profit & Loss Account
Answer
Answer: (d) Profit & Loss Account
Question 11.
Provision is created by debiting :
(a) Profit and Loss Account
(b) None of these
(c) Profit and Loss Appropriation Account
(d) Trading Account
Answer
Answer: (a) Profit and Loss Account
Question 12.
The cause of Depreciation is :
(a) Wear and tear
(b) Obsolescence
(c) All of these
(d) Usage of Asset
Answer
Answer: (c) All of these
Question 13.
Depreciation is a process of :
(a) Allocation
(b) Valuation
(c) None of these
(d) Depletion
Answer
Answer: (a) Allocation
Question 14.
Under Reducing Balance Method, depreciation to be charged :
(a) Scrap Value
(b) None of these
(c) Real Value
(d) Original value
Answer
Answer: (b) None of these
Question 15.
The depreciation charged on an asset will be credited to :
(a) Depreciation A/c
(b) Asset A/c
(c) Bank A/c
(d) Cash A/c
Answer
Answer: (b) Asset A/c
Question 16.
Every fixed asset loses its value due to use or other reasons. This decline in the value of asset is known as
(a) Amortization
(b) Provisions
(c) Depreciation
(d) Devaluation
Answer
Answer: (c) Depreciation
Explanation:
The fixed assets are long-term assets. They help in the production of goods and services. However, when an asset is in use its value decreases due to the normal wear and tear, efflux of time and obsolescence. This reduction in the value of a fixed asset is known as depreciation.
Question 17.
Following are the causes of Depreciation except
(a) Wear and tear due to use or passage of time.
(b) normal factors
(c) Expiration of legal rights.
(d) Obsolescence.
Answer
Answer: (b) normal factors
Explanation:
The correct option is (b).
Wear and tear due to use or passage of time means deterioration, and the consequent diminution in an assets value, arising from its use in business operations for earning revenue. Wear and tear is the physical deterioration. an asset deteriorates simply with the passage of time, even if they are not being put to any use.
Expiration of legal rights certain categories of assets lose their value after the agreement governing their use in business comes to an end after the expiry of pre-determined period.
Obsolescence is another factor leading to depreciation of fixed assets. Obsolescence means the fact of being “out-of-date”. Obsolescence implies to an existing asset becoming out-of-date on account of the availability of better type of asset.
So, only normal factors are not a cause of depreciation
Question 18.
Following are the causes of Depreciation except
(a) Natural resources
(b) Fixed asset
(c) Liabilities
(d) Intangible assets
Answer
Answer: (a) Natural resources
Explanation:
Depletion is an accrual accounting technique used to allocate the cost of extracting natural resources such as timber, minerals, and oil from the earth. Like depreciation and amortization, depletion is a non-cash expense that lowers the cost value of an asset incrementally through scheduled charges to income.
Question 19.
An alternative term used for accumulated depreciation expenses?
(a) Provision for depreciation
(b) Cumulative depreciation
(c) Targeted depreciation
(d) Depletion
Answer
Answer: (a) Provision for depreciation
Explanation:
Provision for depreciation is an alternative term used for accumulated depreciation expenses. Depreciation expense is recognized on the income statement as a non-cash expense that reduces the company’s net income.
Question 20.
Depreciation charged under diminishing method
(a) Increase every year
(b) Decrease every year
(c) Increase in one year and decrease another year
(d) Same every year
Answer
Answer: (b) Decrease every year
Explanation:
Depreciation charged by diminishing value method will decrease every year as the asset will decrease in its value every year due to obslence and wear and tear etc. So correct answer is b
Question 21.
Which of the following is not a type of reserve
(a) Provision for bad debt
(b) General reserve
(c) Workmen compensation fund
(d) Retained earnings
Answer
Answer: (a) Provision for bad debt
Explanation:
Provision for bad debts is a liability for the business and is not any reserve.
Question 22.
What is depreciation?
(a) Cost of using a fixed asset
(b) The value of asset
(c) Portion of a fixed assets cost consumed during the current accounting
(d) Cost of fixed asset’s repair
Answer
Answer: (a) Cost of using a fixed asset
Explanation:
Depreciation is the cost of using a fixed asset .It is the decrease in the value of a fixed asset due to wear and tear in the asset due to their constant use.Example- Decrease in the value of machine as they become old.
Question 23.
Depreciation helps in determining
(a) Accurate level of profit
(b) Increases the value of asset
(c) Revenue generation
(d) Increase the burden of tax
Answer
Answer: (a) Accurate level of profit
Explanation:
The purpose of depreciation is to achieve the matching principle of accounting, that is, a company is attempting to match the historical cost of a productive asset (that has a useful life of more than a year) to the revenues earned from using the asset.
Question 24.
What is the rate of charging depreciation under diminishing method?
(a) 12% p.a.
(b) 15% p.a.
(c) 10% p.a.
(d) Not fixed
Answer
Answer: (d) Not fixed
Explanation:
Under this method, the amount of depreciation is calculated as a fixed percentage of the reducing or diminishing value of the asset standing in the books at the beginning of the year, so as to bring down the book value of the asset to its residual value. The amount of depreciation goes on decreasing every year.
Question 25.
Under which depreciation method the amount of depreciation expenses remains same throughout the useful life of a fixed asset
(a) Straight line method
(b) Reducing balance method
(c) Number of units produced method
(d) Machine hours method
Answer
Answer: (a) Straight line method
Explanation:
Under straight line method of depreciation the amount of depreciation expenses remains same in the entire useful life of fixed asset because, under straight line method the depreciation is charged on the original cost of the asset and not on diminishing value of the asset.
Fill in the correct words
Question 1.
Depreciation is decline in the value of ………………….
Answer
Answer: Assets
Question 2.
Installation, freight and transport expenses are a part of ……………….
Answer
Answer: Acquisition cost
Question 3.
Provision is a ………………. against profit.
Answer
Answer: Charge
Question 4.
Reserve created for maintaining a stable.rate of dividend is termed as ………………….
Answer
Answer: Dividend Equilisation Fund
State whether the following statements are True or False.
Question 1.
Depreciation is a non-cash expense.
Answer
Answer: True
Question 2.
Depreciation is also charged on current assets.
Answer
Answer: False
Question 3.
Depreciation is decline in the market value of tangible fixed assets.
Answer
Answer: False
Question 4.
The main cause of depreciation is wear and tear caused by its usage.
Answer
Answer: True
Question 5.
Depreciation must be charged so as to ascertain true profit or loss of the business.
Answer
Answer: True
Question 6.
Depletion term is used in case of intangible assets.
Answer
Answer: False
Question 7.
Depreciation provides fund for replacement.
Answer
Answer: True
Question 8.
When market value of an asset is higher than book value, depreciation is not charged.
Answer
Answer: False
Question 9.
Depreciation is charged to reduce the value of asset to its market value.
Answer
Answer: False
Question 10.
If adequate maintenance expenditure is incurred, depreciation need not be charged.
Answer
Answer: False
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