MCQs on Depreciation

Depreciation is referred to as the reduction in the cost of a fixed asset in sequential order, due to wear and tear until the asset becomes obsolete.

Following are some of the multiple choice questions and answers, that will help the students in brushing up their understanding of the concept of depreciation.

Q1. The main objective of depreciation is

(a) To show the previous profit

(b) To calculate net profit

(c) To reduce tax

(d) To satisfy the tax department

Answer: B

Q2. Depreciation is generated due to

(a) Increase in the value of liability

(b) Decrease in capital

(c) Wear and tear

(d) Decrease in the value of assets

Answer: C

Q3 What is the purpose of making a provision for depreciation in the accounts?

(a) To charge the cost of fixed assets against profits

(b) To show the current market value of fixed asset

(c) To make cash available to replace fixed assets

(d) To make a provision for repairs

Answer: A

Q4. According to straight line method of providing depreciation, the depreciation

(a) Remains constant

(b) Increase each year.

(c) Decrease each year

(d) None of them.

Answer: A

Q5. Total amount of depreciation of an asset cannot exceed its

(a) Depreciable value

(b) Scrap value

(c) Market value

(d) None of these

Answer: A

Q6. According to fixed instalment method, the depreciation is calculated on

(a) Balance amount

(b) Original cost

(c) Scrap value

(d) None of them

Answer: B

Q.7 Salvage value means

(a) Definite sale price of the asset

(b) Cash to be received when life of the asset ends

(c) Cash to be paid when asset is disposed off

(d) Estimated disposal value

Answer: D

Q8. Depreciation is calculated under diminishing balance method, based on

(a) Original value

(b) Book value

(c) Scrap value

(d) None of them

Answer: B

Q9. Depreciation amount charged on a machinery will be debited to:

(a) Repair account

(b) Cash account

(c) Depreciation account

(d) Machinery account

Answer: C

Q10. In accounting, becoming out of date or obsolete is known as

(a) Amortization

(b) Obsolescence

(c) Depletion

(d) Physical deterioration

Answer: B

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