MCQs on Depreciation (2nd Year Accounting)
1. Depreciation is charged on:
a) Current assets
b) Fixed assets
[Correct] c) Tangible fixed assets
d) Inventory
2. Which of the following is NOT a cause of depreciation?
a) Wear and tear
b) Obsolescence
[Correct] c) Appreciation
d) Passage of time
3. Depreciation is shown in the:
a) Cash book
[Correct] b) Profit and Loss account
c) Trading account
d) Balance sheet only
4. Depreciation is charged to:
a) Increase profit
[Correct] b) Match cost with revenue
c) Increase the value of assets
d) Record revenue
5. The method of depreciation where equal amount is charged every year is called:
a) Diminishing balance method
[Correct] b) Straight line method
c) Sum of years digits
d) Revaluation method
6. Under straight-line method, depreciation is calculated on:
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MCQs on Depreciation (2nd Year Accounting)
a) Book value
b) Market value
[Correct] c) Original cost
d) Replacement cost
7. Which of the following is an intangible asset?
[Correct] a) Goodwill
b) Building
c) Plant
d) Equipment
8. The main objective of providing depreciation is:
a) To reduce tax liability
[Correct] b) To allocate the cost of asset
c) To maintain the asset
d) To sell the asset
9. Which of the following assets is not depreciated?
[Correct] a) Land
b) Building
c) Machinery
d) Furniture
10. Under diminishing balance method, depreciation is calculated on:
[Correct] a) Book value
b) Original cost
c) Scrap value
d) Current cost
11. Residual value means:
a) Market value of asset
b) Insurance value
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MCQs on Depreciation (2nd Year Accounting)
[Correct] c) Estimated salvage value at the end of useful life
d) Replacement cost
12. Depreciation is a process of:
a) Valuation
[Correct] b) Allocation
c) Appreciation
d) Revaluation
13. Which method is suitable for assets like patents or copyrights?
[Correct] a) Straight-line method
b) Diminishing balance method
c) Units of production method
d) Sum of years method
14. Obsolescence is caused by:
a) Physical damage
b) Normal wear and tear
[Correct] c) Technological changes
d) Change in location
15. The amount of depreciation is transferred to:
a) Capital account
[Correct] b) Profit and Loss account
c) Cash account
d) Sales account
16. The provision for depreciation account is:
a) Personal account
b) Nominal account
[Correct] c) Real account
d) Liability account
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MCQs on Depreciation (2nd Year Accounting)
17. Which of the following statements is true?
a) Depreciation increases the value of asset
b) Depreciation increases the cash balance
[Correct] c) Depreciation reduces the book value of asset
d) Depreciation is paid in cash
18. The net book value of an asset is equal to:
[Correct] a) Cost price - Accumulated depreciation
b) Scrap value + Depreciation
c) Cost price + Depreciation
d) Original cost only
19. The amount of depreciation charged depends on:
a) Cash flow
b) Market rate of interest
[Correct] c) Useful life of the asset
d) Company profit
20. The depreciation of a computer is caused mainly due to:
a) Weather
b) Heat
[Correct] c) Obsolescence
d) Termite attack
21. Which is not a depreciation method?
[Correct] a) FIFO
b) Straight-line method
c) Diminishing balance method
d) Units of production method
22. The accounting entry for charging depreciation is:
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MCQs on Depreciation (2nd Year Accounting)
a) Depreciation A/c Dr. To Cash A/c
[Correct] b) Depreciation A/c Dr. To Asset A/c
c) Depreciation A/c Dr. To Capital A/c
d) Depreciation A/c Dr. To Sales A/c
23. The residual value of an asset is also known as:
a) Book value
[Correct] b) Scrap value
c) Market value
d) Insurance value
24. If an asset is sold, the accumulated depreciation is:
[Correct] a) Written off
b) Carried forward
c) Ignored
d) Treated as income
25. Depreciation is treated as:
a) Revenue income
[Correct] b) Revenue expenditure
c) Capital income
d) Capital expenditure
26. Which of the following is NOT a feature of depreciation?
a) It is a non-cash expense
b) It reduces book value of asset
c) It is charged yearly
[Correct] d) It is charged on current assets
27. The total cost of asset minus scrap value divided by useful life gives:
[Correct] a) Annual depreciation
b) Book value
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MCQs on Depreciation (2nd Year Accounting)
c) Market value
d) Current value
28. Depreciation on an asset stops when:
a) Asset is fully depreciated
b) Asset is sold
[Correct] c) Both a and b
d) None of these
29. The useful life of an asset depends on:
a) Company policy
b) Government rules
[Correct] c) Nature of the asset
d) Price level changes
30. The method that results in higher depreciation expense in earlier years is:
a) Straight-line method
[Correct] b) Diminishing balance method
c) Units of production method
d) Revaluation method
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