MULTIPLE CHOICE QUESTIONS

1. Depreciation is related to: (6) Investments

(a) Current Assets (d) Fictitious assets
(c) Fixed assets

2. Depreciation is: value of an asset

A fall in the original cost of an asset (b) A fall in the book
(a) of an asset
A fall in the market value of on asset (d) A fall in the real value
(c)
3. Depreciation is:
(a) A process of valuation of fixed asset
(b) A process of allocation of the cost of fixed asset
(c) A method of providing funds for replacement.
(d) A process of writing off losses.
4. The amount of depreciation remains constant year after year under:
(a) Written Down Value Method (6) Straight Line Method
(c) Sinking Fund Method (d) Annuity Method
5. Ifthe amount of any known liability can be determined with substantial accuracy:
(a) A definite liability should be created (6) A provision should be created
(c) A reserve should be created ) Loss should be written off
6. Provision is:
(a) An appropriation of profits (6) A charge against the profits
()Writing offlosses (d) Charging depreciation
7. The depreciation is an expense accruing:
(a) From the consumption of some readily consumable assets
(6) From the use of fixed assets
(c) From the use of various services.
(d) From the use of current asset
8. Depreciation is the process:
(a) Of allocation of cost of the asset to the periods of its life
(b) Of valuation of assets
(c) Of maintenance of an asset in a state of eficiency
(4) Of providing for losses
9. Straight line method of providing depreciation is useful, when:
(a) Output can be effectively measured
(6) Use of an asset can be measured in terms of time
(c) Utility of the asset is directly related to its productive use
( ) Asset is liquid
10. Depreciation fund method is designed to
(a) Only provide for depreciation of an asset
(6) Provide for depreciation and also to accumulate the amount for its replacement
DeprociduUi

for the payment of some liability

(c) Provide
Providing for future loss transferred to:
(d (depreciation) fund investment is
the sale of sinking
Any profit loss
or on
.
and loss account
(a) Profit
(6) Asset account

(c)Sinking fund account (depreciation fund account)

(d) Depreciation A/c

1. The profit on depreciation policy is transferred to:

(a) Depreciation fund account (b) Asset account
(c) Profit and loss account (d) Depreciation account
13. Under annuity method, the amount of depreciation is:
(a) Increasing every year (b) Decreasing every year
(c) Fixed for all the years
(d) Revalued every year
14. The number of production units expected to be obtained from the use of an asset by an enterprise
(a) Unit life '
is caled
(c) Production life (6) Useful life
15. Which of the d) Expected life
following is not true with regard to fixed assets ?
(a)They are acquired for using them in the
conduct of
(6) They are not meant for resale to business operations
(c) They easily be converted into cash
can
earn profit
d) Depreciation at
specified rates is to be charged on most
16. Which of the of the fixed assets
following is correct? Depreciable assets
(1) Are expected to be used
for more than one
are those assets which:
(2) Have a limited useful accounting period
life
(3) Are held for the
(4) None of purpose of re-sale
these
(a) 1 and2
(c) 2 and 4 (b) 2 and3
17. Which of the (d) 1 and 3
(1) Purchase following
is are of
of a truck
a
capital nature?
3) Wages paid for (2)
(a) I and 3 installation of machinery Cost of repair
ery (4) Road tax
c) 3 and 4
(6) 2 and 3
paid
18. In
which of the (d) 1 and 4
its useful following
economic life? methods, the cost of the
(1) asset is not
Straight line
method spread over in
(3) Units of equal proportion
) 2 and 3 production method (2) Written
down during
c) 3 and 4 (4) All of these value method
19. (b) 1
Which of the and 2
(1) following statements is / are d) 1 and14
(2) Depreciation provision is at the false?
(3) Depreciation is charge
a discretion of the
4) Depreciation is provided against profit management
Depreciation
(a) 1,2 is an only when there is
) 1,2 and and 3
4
appropriation of profit
profit
6) 1,3
() 2,3 and 4
and 4
I f the equipment account has a balance of 22,500 and the acumulated depreciation account hasa
balance ofR 14,000, the book value of the equipment is
(a) 36,500 (b) 7 22,500
(c) ? 14,000 (d) 8,500