Commerce Accountancy

Accounting Principles and Practice

1,241 Questions

Accounting principles and practice questions cover core concepts like assets, depreciation, financial statements, and ledger adjustments. These topics are essential for commerce students preparing for academic and competitive exams. Regular practice ensures a strong grasp of standard accounting standards and business operations.

Asset depreciationFinancial statement adjustmentsAccounting standardsSingle entry systemCapital expenditure

Accounting Principles and Practice Questions

Multiple choice book keeping and accountancy accounting for depreciation factors for determining depreciation factors of depreciation need for depreciation and the factors affecting the amount of depreciation

 The depreciation charged if not deducted from assets will appear under which account____.

  1. Provision for fixed asset account

  2. Provision for asset account

  3. Accumulated depreciation account

  4. Depreciation account
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Option C is correct one.
The amount of depreciation is then transferred to Profit and Loss Account at the end of the year. However, the Asset Account will appear at cost. Further, the accumulated depreciation appears either shown as a deduction from the asset or the same may appear in the liability side of the Balance Sheet.

Multiple choice book keeping and accountancy accounting for depreciation factors for determining depreciation factors of depreciation need for depreciation and the factors affecting the amount of depreciation

The annual amount of depreciation charged every year  _______ under written down value method.

  1. Highest in earlier years and gets decline in later years

  2. Highest in earlier years and gets increases in later years

  3. lowest in earlier years and gets decline in later years

  4. Lowest in earlier years and gets increases in later years
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Under written down value of method, depreciation calculated at a fixed percentage on the original cost in the first year and on the written down value, in subsequent years of a fixed depreciable asset. Under this method, the rate of depreciation remains constant year after year whereas the amount of depreciation goes on decreasing.

Multiple choice book keeping and accountancy accounting for depreciation factors for determining depreciation factors of depreciation need for depreciation and the factors affecting the amount of depreciation

Straight line method and written down value method are generally used for calculating ____________ amount in practice.

  1. Depreciation

  2. Appreciation

  3. Historical cost

  4. None of the Above
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

There are two most commonly used method of depreciation i.e.,  Straight line method and Written down value method.

Under straight line method of depreciation, a fixed and equal amount of depreciation, calculated at a fixed percentage on the original cost of a fixed depreciable asset is written off during each accounting period over the expected useful life of the asset.
Under the written down value method, depreiation calculated at a fixed percentage on the original cost (in the first year) and on the written down value, (in subsequent years) of a fixed depreciable asset is written off during each accounting period over the expected useful life of the asset. Under this method, the rate of depreciation remains constant year after year ehereas the amlount of depreciation goes on decreasing.

Multiple choice book keeping and accountancy accounting for depreciation factors for determining depreciation factors of depreciation need for depreciation and the factors affecting the amount of depreciation

Under Straight line method depreciation is charged on the basis of ___________.

  1. Original Cost

  2. Cash Cost

  3. Both

  4. None
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Under straight line method of depreciation, a fixed and equal amount of deprecation, calculated at a fixed percentage on the original cost of a fixed depreciable asset is written off during each accounting period over the expected useful life of asset.

Multiple choice book keeping and accountancy accounting for depreciation factors for determining depreciation factors of depreciation need for depreciation and the factors affecting the amount of depreciation

Under Written down value method the basis of charging depreciation is __________.

  1. Net book value

  2. Original cost

  3. Net Realisable Value

  4. None
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Under written down value of method, depreciation calculated at a fixed percentage on the original cost in the first year and on the written down value, in subsequent years of a fixed depreciable asset. Under this method, the rate of depreciation remains constant year after year whereas the amount of depreciation goes on decreasing.

Multiple choice book keeping and accountancy accounting for depreciation factors for determining depreciation factors of depreciation need for depreciation and the factors affecting the amount of depreciation

The annual amount of depreciation charged every year remains _______ under straight line method

  1. Fixed

  2. Changing

  3. Zero

  4. None
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Under straight line method of depreciation, a fixed and equal amount of deprecation, calculated at a fixed percentage on the original cost of a fixed depreciable asset is written off during each accounting period over the expected useful life of asset.

Multiple choice book keeping and accountancy accounting for depreciation factors for determining depreciation factors of depreciation need for depreciation and the factors affecting the amount of depreciation

There are two types of arrangements for recording _________on fixed assets.

  1. Depreciation

  2. Appreciation

  3. Appraisal

  4. Undervaluation
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

There are two methods of reccording depreciation :

1. By charging to asset account
2. By creating provision for depreciation/ Accumulated Depreciation Account.

Multiple choice book keeping and accountancy accounting for depreciation factors for determining depreciation factors of depreciation need for depreciation and the factors affecting the amount of depreciation

Original cost of asset : 80,000 scrap value : 10,000 Life of asset : 10 years
calculate annual depreciation ______.

  1. 7000

  2. 5000

  3. 8000

  4. None
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Depreciation has been defines as "the diminution in the utility or value of an asset, due to natural wear and tear, exhaustio of the subject matter, effluxion of time accident, etc. There are various methods of calcuating depreciation .

Formula for depreciation when scrap value is given and rate of depreciation is not given is:
Depreciation = (Original cost - Scrap value) / Useful life of asset 
In the given question,
Original cost of asset = Rs. 80000
Scrap value = Rs. 10000
useful life of asset = 10 Years
Depreciation = Rs. (80000 - 10000) / 10
Depreciation = Rs. 7000

Multiple choice book keeping and accountancy accounting for depreciation factors for determining depreciation factors of depreciation need for depreciation and the factors affecting the amount of depreciation

Asset account continues to appear at its _____________ every year for entire life.

  1. Book value

  2. Written Down Value

  3. Original Cost

  4. None
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Option C is the Correct option.

Asset account continues to appear at its original cost year after year over its entire life; Depreciation is accumulated on a separate account instead of being adjusted into the asset account at the end of each accounting period.

Multiple choice book keeping and accountancy accounting for depreciation factors for determining depreciation factors of depreciation need for depreciation and the factors affecting the amount of depreciation

Original cost of asset $800000$ 
Written down value : $500000$
Rate of depreciation : $10$%
Calculate depreciation under written down value.

  1. $50,000$
  2. $45,000$
  3. $55,000$

  4. None of these
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Depreciation under written down value method is calculated on the basis of written down vakue of asset.

Formula for charging depreciation under written down value method is:
Depreciation = Written doen value of assets * Rate of depreciation
Depreciation = Rs. 500000 * 10%
Depreciation = Rs.50000

Multiple choice book keeping and accountancy accounting for depreciation factors for determining depreciation factors of depreciation need for depreciation and the factors affecting the amount of depreciation

The amount realised at the end of working life of an asset ___________.

  1. Residual value

  2. Market price

  3. Original cost

  4. Written down value
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Every assets has its estimated life of working. After the life, the asset must be disposed off. On disposal, organization may receive some amount on sale of such asset. 

The value realized at the end of working life of an asset is called residual value. 

Multiple choice book keeping and accountancy accounting for depreciation factors for determining depreciation factors of depreciation need for depreciation and the factors affecting the amount of depreciation

Depreciation is charged on ____________ assets.

  1. Tangible fixed

  2. Current

  3. Floating

  4. Intangible
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Depreciation is defined as the reduction in the value of  fixed asset due to normal wear & tear, usage and obsolescence. Depreciation is a loss and debited to profit & loss account. 

Following journal entry is passed for depreciation:

Depreciation A/c                              Dr.
     To  Fixed Asset A/c 

Multiple choice book keeping and accountancy accounting for depreciation factors for determining depreciation factors of depreciation need for depreciation and the factors affecting the amount of depreciation

By the amount of depreciation, the value of asset __________.

  1. decreases

  2. increases

  3. becomes zero

  4. remains costant
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Depreciation is defined as the reduction in the value of  fixed asset due to normal wear & tear, usage and obsolescence. Depreciation is a loss and debited to profit & loss account. 

Following journal entry is passed for depreciation:

Depreciation A/c                              Dr.
     To Asset A/c 

By the amount of depreciation, the value of fixed asset decreases. 

Multiple choice book keeping and accountancy accounting for depreciation factors for determining depreciation factors of depreciation need for depreciation and the factors affecting the amount of depreciation

Depreciation is charged only on fixed asset.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Depreciation is the permanent and continuous decrease in the book value of a depreciable fixed asset due to use, effluxion of time, obsolescence, expiration of legal rights or any other cause.

An analysis of definition given above highlights the characteristics of depreciation as follows:
  1. It is related to depreciable fixed assets only.
  2. It is a fall in the book value of depreciable fixed asset.
  3. It is a permanent decrease in the book value of an asset.

Multiple choice book keeping and accountancy accounting for depreciation factors for determining depreciation factors of depreciation need for depreciation and the factors affecting the amount of depreciation

In case there is revision in estimated useful life of a depreciable asset, the remaining unamortized amount is charged to __________.

  1. remaining useful life

  2. written off in the current year as current charges

  3. written off in the current year as prior period adjustment
  4. treated as deferred revenue expenditure to be written off in $3$ years
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

In case the useful life of the asset is changed, the amortised amount should be charged to the asset over the revised remaining estimated useful life of the asset. Such a revision should be treated as change in accounting estimates.