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Depreciation Accounting

This test covers the multiple choice questions for concept and methods of depreciation.

15 Questions Published
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Questions

Question 1 Multiple Choice (Single Answer)

Depreciation is charged on the _____ of assets.

  1. market value
  2. book value
  3. future value
  4. realisable value
Question 2 Multiple Choice (Single Answer)

Which of the following is not a cause for charging depreciation?

  1. Current market value
  2. Physical depreciation
  3. Time factor
  4. Economic factors such as obsolescence
Question 3 Multiple Choice (Single Answer)

The total cost of asset debited at the time of purchase does not include

  1. installation charges
  2. freight paid on bringing asset to the business
  3. interest on loan after the purchase of asset
  4. repair or alteration made at the time of purchase
Question 4 Multiple Choice (Single Answer)

The method in which a fixed amount is charged every year as depreciation is called

  1. diminishing balance method
  2. original cost method
  3. sum of digits method
  4. all of these
Question 5 Multiple Choice (Single Answer)

The amount of depreciation account should be transferred to

  1. profit and loss appropriation account
  2. profit and loss account
  3. trading account
  4. balance sheet
Question 6 Multiple Choice (Single Answer)

A machinery is purchased on August 1, 2011 for Rs. 1,20,000. It was put into use with effect from October 1, 2011. If it is to be depreciated @ 25% p.a, what should be the amount of depreciation for the year ended on March 31, 2012?

  1. Rs. 30,000
  2. Rs. 20,000
  3. Rs. 1,500
  4. Rs. 15,000
Question 7 Multiple Choice (Single Answer)

A machinery is purchased on April 1, 2009 for Rs. 2,00,000. It is depreciated @ 10% p.a. on straight line method. It is sold on December 31, 2011 at 80% of book value. The books are closed on 31 March every year. What is the resultant profit or loss at the time of sale of machinery?

  1. Rs. 15,000 profit
  2. Rs. 29,000 loss
  3. Rs. 29,000 profit
  4. Rs. 33,000 loss
Question 8 Multiple Choice (Single Answer)

Which of the following assets does not depreciate?

  1. Furniture
  2. Tools
  3. Land
  4. All of these
Question 9 Multiple Choice (Single Answer)

If an asset is charged to depreciation by straight line method instead of diminishing balance method at the same rate of depreciation, which of the following will be the effect at the time of its sale?

  1. It will show lower profit at the time of sale.
  2. It will show more loss at the time of sale.
  3. It will show higher profit at the time of sale.
  4. None of these
Question 10 Multiple Choice (Single Answer)

The profit or loss on sale of investment in depreciation fund method is transferred to

  1. profit and loss account
  2. asset account
  3. profit and loss appropriation account.
  4. depreciation fund account
Question 11 Multiple Choice (Single Answer)

The value of a machine is Rs. 1,02,400 on April 1, 2012. It was purchased on April 1, 2009 and since then it is being depreciated @ 20% p.a. on diminshing balance method. Calculate the original cost of asset.

  1. Rs. 2,00,000
  2. Rs. 163840
  3. Rs. 1,70,667
  4. Rs. 1,60,000
Question 12 Multiple Choice (Single Answer)

In which of the following methods of depreciation, an amount written off as depreciation is invested in readily saleable securities?

  1. Depreciation fund method
  2. Sum of digits method
  3. Annuity method
  4. Written down value method
Question 13 Multiple Choice (Single Answer)

If the provision of depreciation account has been created, what will be its implication in the financial statement?

  1. This account should appear on the credit side of the balance sheet.
  2. This account may be subtracted from the respective asset account.
  3. None of these
  4. Both option (1) and (2)
Question 14 Multiple Choice (Single Answer)

A machinery was purchased for Rs. 4,00,000 on April 1, 2008 and it was depreciated @ 10% p.a. on straight line basis. The method was changed w.e.f year 2011-12 and depreciation chargeable on March 31, 2011 was calculated on written down value basis. It was decided to implement it with retrospective effect. Calculate the amount to be debited or credited to profit and loss account for difference in depreciation amount.

  1. Credit Rs. 11,600
  2. Debit Rs. 11,600
  3. Debit Rs. 4,000
  4. Credit Rs. 4,000
Question 15 Multiple Choice (Single Answer)

A machinery was purchased on April 1, 2009 for Rs. 5,00,000. It was depreciated @ 20% p.a. on reducing balance method. If 1/4th of it was sold on January 1, 2012 for Rs. 70,000, calculate profit or loss on the sale of machinery.

  1. Rs. 2,000 profit
  2. Rs. 2,000 loss
  3. Rs. 13,750 profit
  4. Rs. 2,02,000 loss
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