Class 11 Accountancy Chapter 7 Depreciation, Provisions and Reserves MCQ Question With Answers

Depreciation, Provisions and Reserves Class 11 MCQ is one of the best strategies to prepare for the CBSE Class 11 Board exam. If you want to complete a grasp concept or work on one’s score, there is no method except constant practice. Students can improve their speed and accuracy by doing more MCQs on Depreciation, Provisions and Reserves Class 11, which will help them all through their board tests.

Depreciation, Provisions and Reserves Class 11 MCQ Questions with Answers

Class 11 Accountancy MCQ with answers are given here to Chapter 7 Depreciation, Provisions and Reserves. These MCQs are based on the latest CBSE board syllabus and relate to the latest Class 11 Accountancy syllabus. By Solving these Class 11 MCQs, you will be able to analyze all of the concepts quickly in the chapter and get ready for the Class 11 Annual exam.

Learn Class 11 Depreciation, Provisions and Reserves MCQs with answers pdf free download according to the latest CBSE and NCERT syllabus. Students should prepare for the examination by solving CBSE Class 11 Accountancy Depreciation, Provisions and Reserves MCQ with answers given below

Question 1. Depreciation means decline in the value of a fixed assets due to
(a) usage of asset
(b) passage of time
(c) obsolescence
(d) All of these 

Question 2. Depreciation is a cash expense.
(a) True
(b) False
(c) Can’t say
(d) Partially true

Question 3. Why should depreciation be charged on the manufacturing plant of Arya Ltd?
(a) For matching of costs and revenue.
(b) To comply with law.
(c) To reflect true and fair financial position.
(d) All of the above

Question 4. Which of the following accounting standard should be followed by Arya Ltd. to charge depreciation?
(a) Accounting Standard-7
(b) Accounting Standard-6
(c) Accounting Standard-8
(d) Accounting Standard-9

Question 5. ………………….. implies to an existing asset becoming out-of-date on account of the availability of better type of asset.
(a) Obsolescence
(b) Depletion
(c) Amortisation
(d) None of the above

Question 6. Which of the following expenses is not included in the acquisition cost of a plant and equipment?
(a) Cost of site preparation
(b) Repairs
(c) Installation Cost
(d) Freight and transportation charges 

Question 7. Depreciation is deducted before calculating taxable profits.
(a) True
(b) False
(c) Can’t say
(d) Partially true

Question 8. Which of the following is/are cause(s) of depreciation?
(i) Wear and tear due to use or passage of time.
(ii) Expiration of legal rights.
(iii) Obsolescence.
(iv) Abnormal factors.
(a) Only (i)
(b) (i) and (iii)
(c) (i), (iii) and (iv)
(d) (i), (ii), (iii), (iv)

Question 9. Which of the following points out the need for depreciation?
(i) Matching of costs and revenue
(ii) Consideration of tax
(iii) True and fair financial position
(iv) Compliance with law
(a) Only (i)
(b) (i) and (iii)
(c) (i), (iii) and (iv)
(d) (i), (ii), (iii), (iv)

Question 10. The main difference between depletion and depreciation is that the former is concerned with the exhaustion of economic resources, but the latter relates to the usage of an asset.
(a) True
(b) False
(c) Can’t say
(d) Partially true

Question 11. Obsolescence arises from factors like 
(a) technological changes
(b) improvements in production methods
(c) change in market demand for the product or service output of the asset
(d) All of the above

Question 12. Provision for depreciation will be shown as a current asset by X Ltd. in the balance sheet.
(a) True
(b) False
(c) Partially true
(d) Can’t say

Question 13. Under written down value method, a fixed and equal amount in the form of depreciation is charged every year during the life time of the asset.
(a) True
(b) False
(c) Can’t say
(d) Partially true

Question 14. In straight line method of depreciation, amount of depreciation reduces year after year.
(a) True
(b) False
(c) Can’t say
(d) Partially true

Question 15. When market value of an asset is higher than book value, depreciation is not charged.
(a) True
(b) False
(c) Can’t say
(d) Partially true

Question 16. Depreciation provides fund for replacement.
(a) True
(b) False
(c) Can’t say
(d) Partially true

Question 17. Under ……………….. method, depreciation is charged on the book value of the asset.
(a) straight line
(b) written down value
(c) annuity
(d) insurance policy

Question 18. Depreciation is also charged on current assets.
(a) True
(b) False
(c) Can’t say
(d) Partially true

Question 19. What is the original cost of the asset on which depreciation is to be charged?
(a) 1,08,000
(b) 12,000
(c) 1,20,000
(d) None of these

Question 20. Which of the following gives the correct formula for calculating the original cost of an asset for depreciation?
(a) Original cost = Purchase price
(b) Original cost = Purchase price + Freight
(c) Original cost = Purchase price + Freight+ Installation cost
(d) None of the above

Question 21. Which of the following factors affect the amount of depreciation?
(i) Cost of asset
(ii) Tax rate
(iii) Estimated net residual value
(iv) Depreciable cost
(a) Only (i)
(b) (i) and (iii)
(c) (i), (iii) and (iv)
(d) (i), (ii), (iii), (iv)

Question 22. Which of the following method should be used by Arya Ltd. to charge depreciation?
(a) Written down value method
(b) Straight line method
(c) Insurance policy method
(d) None of the above

Question 23. ………………… is the estimated net realisable value (or sale value) of the asset at the end of its useful life.
(a) Scrap value
(b) Original cost
(c) Depreciation
(d) None of these

Question 24. The term ……………….. is used in the context of extraction of natural resources like mines, quarries, etc., that reduces the availability of the quantity of the material or asset.
(a) depreciation
(b) depletion
(c) amortisation
(d) None of the above

Question 25. In case of purchase of a second hand asset, original cost includes initial repair cost to put the asset in workable condition.
(a) True
(b) False
(c) Can’t say
(d) Partially true

Question 26. If adequate maintenance expenditure is incurred, depreciation need not be charged.
(a) True
(b) False
(c) Can’t say
(d) Partially true

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Question 27. Depreciation is Provided on:
(a) Current assets
(b) Fictitious asset
(c) Intangible Asset
(d) Fixed Asset Rem

Question 28. The loss on sale of asset is debited to
(a) Reserves
(b) Depreciation fund
(c) Profit and Loss Account
(d) None of the Above. 

Question 29. ………………….. refers to writing-off the cost of intangible assets like patents, copyright, trade marks, franchises, goodwill which have utility for a specified period of time.
(a) Depreciation
(b) Depletion
(c) Amortisation
(d) None of the above

Question 30. Depreciable cost of an asset is equal to 
(a) Cost + Net residual value
(b) Cost – Net residual value
(c) Cost – Depreciation
(d) None of the above

Question 31. Total amount of depreciation charged over the useful life of the asset must be equal to the depreciable cost.
(a) True
(b) False
(c) Can’t say
(d) Partially true

Question 32. The original cost of the asset is ` 2,50,000 and freight and installation charges are ` 25,000. The useful life of the asset is 10 years and net residual value is estimated to be ` 50,000. What is the amount of depreciation to be charged every year under straight line method assuming that the asset is purchased on 1st January, 2021?
(a) 22,500
(b) 25,000
(c) 30,000
(d) None of these

Question 33. Which of the following is\are limitations of straight line method?
(a) This method reduces the book value of an asset to zero although the asset may still be in existence.
(b) It is a very simple method.
(c) Depreciation charged is same every year making comparison of profits for different years easy.
(d) All of the above

Question 34. Which of the following is/are the advantage(s) of written down value method?
(a) It results into almost equal burden of depreciation and repair expenses taken together every year on profit and loss account
(b) Income Tax Act accept this method for tax purposes
(c) As a large portion of cost is written-off in earlier years, loss due to obsolescence gets reduced
(d) All of the above

Question 35. A machine is purchased for 50,000 and is expected to have a useful life of 10 years. At the end of 10th year, it is expected to have a sale value of 6,000 but expenses related to its disposal are estimated at 1,000. Then its net residual value is
(a) 6,000
(b) 5,000
(c) 1,000
(d) None of these

Question 36. ……….. of an asset is the estimated economic or commercial life of the asset.
(a) Useful life
(b) Physical life
(c) Residual life
(d) None of these

Question 37. A machine is purchased for 50,000 and is expected to have a useful life of 10 years. At the end of 10th year it is expected to have a sale value of 6,000 but expenses related to its disposal are estimated at 1,000. Then its depreciable cost is
(a) 45,000
(b) 50,000
(c) 44,000
(d) None of these

Question 38. Written down value method is based on a more realistic assumption that the benefits from asset go on diminishing with the passage of time.
(a) True
(b) False
(c) Can’t say
(d) Partially true

Question 39. Expected useful life of an asset means
(i) the period over which a depreciable asset is expected to be used by the enterprise.
(ii) the number of production of similar units expected to be obtained from the use of the asset by the enterprise.
(a) Only (i)
(b) Only (ii)
(c) Both (i) and (ii)
(d) Neither (i) nor (ii)

Question 40. Which of the following is/are feature(s) of depreciation?
(i) It is decline in the book value of fixed assets.
(ii) It includes loss of value due to effluxion of time, usage or obsolescence.
(iii) It is a continuing process.
(a) (i) and (ii)
(b) (ii) and (iii)
(c) (i) and (iii)
(d) (i), (ii), (iii)

Question 41. Which of the following factors affect the useful life of an asset?
(i) Legal or contractual limits
(ii) Repair and maintenance policy of the business organisation
(iii) Technological obsolescence
(iv) The number of shifts for which asset is to be used
(a) Only (i)
(b) (i) and (iii)
(c) (i), (iii) and (iv)
(d) (i), (ii), (iii), (iv)

Question 42. Under ……………….. method, a fixed and equal amount in the form of depreciation is charged every year during the life time of the asset.
(a) straight line
(b) written down value
(c) annuity
(d) insurance policy

Question 43. XYZ Ltd. purchased a plant for 5,00,000 on 1st April, 2020, and spent 50,000 for its installation. The salvage value of the plant after its useful life of 10 years is estimated to be ` 10,000. Pass journal entry for depreciation on 31st March, 2021.
(a) Depreciation A/c Dr 54,000 To Plant A/c 54,000
(b) Plant A/c Dr 54,000 To Depreciation A/c 54,000
(c) Depreciation A/c Dr 50,000 To Plant A/c 50,000
(d) None of the above

Question 44. Secret reserve is called such as it is not known to outside stakeholders.
(a) True
(b) False
(c) Can’t say
(d) Partially true

Question 45. Making excessive provision for doubtful debts builds up the secret reserve in the business.
(a) True
(b) False
(c) Can’t say
(d) Partially true

Question 46. Which of the following is/are limitations of written down value method? 
(i) As depreciation is calculated at fixed percentage of written down value, depreciable cost of the asset cannot be fully written-off.
(ii) It is difficult to ascertain a suitable rate of depreciation.
(a) Only (i)
(b) Only (ii)
(c) Both (i) and (ii)
(d) Neither (i) nor (ii)

Question 47. Written down value method is suitable for assets which are affected by technological changes and require more repair expenses with passage of time.
(a) True
(b) False
(c) Can’t say
(d) Partially true

Question 48. Which of the following does not correctly differentiate between straight line and written down value method?
(a) In written down value method, depreciation is charged on the basis of original cost whereas in straight line method, the basis of charging depreciation is net book value.
(b) The annual amount of depreciation charged every year remains fixed or constant under straight line method whereas in written down value method, the annual amount depreciation is highest in the first year and subsequently declines.
(c) Straight line method is not recognised by Income tax law while written down value method is recognised by the income tax law.
(d) None of the above

Question 49. Straight line method is suitable for assets in which
(a) repair charges are low.
(b) the possibility of obsolescence is low.
(c) scrap value depends upon the time period involved.
(d) All of the above

Question 50. M/sMehra and Sons acquired amachine for 1,80,000 on 1st October, 2020, and spent 20,000 for its installation. The firm writes-off depreciation at the rate of 10% on original cost every year. What is the journal entry for charging depreciation to profit and loss account on 31st March, 2021?
(a) Profit and Loss A/c Dr 10,000 To Depreciation A/c 10,000
(b) Profit and Loss A/c Dr 9,000 To Depreciation A/c 9,000
(c) Depreciation A/c Dr 10,000 To Plant A/c 10,000 
(d) None of the above

Question 51. What is the journal entry for crediting depreciation amount to provision for depreciation account?
(a) Depreciation A/c Dr To Provision for Depreciation A/c
(b) Provision for Depreciation A/c Dr To Depreciation A/c
(c) Depreciation A/c Dr To Asset A/c
(d) None of the above

Question 52. What is the written down value of the machinery sold?
(a) 5,76,000
(b) 10,00,000
(c) 6,40,000
(d) None of these

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