MCQs Depreciation

 Here is a set of 30 MCQs from the chapter on Depreciation for Accountancy .

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1. **Depreciation is applicable to which of the following assets?**  

   a) Current Assets  

   b) Fixed Assets  

   c) Liquid Assets  

   d) None of the above  

   **Answer:** b) Fixed Assets

2. **Depreciation refers to the __________ in the value of an asset.**  

   a) Appreciation  

   b) Decrease  

   c) Constant  

   d) Increase  

   **Answer:** b) Decrease

3. **Which method of depreciation assumes equal wear and tear of the asset over its useful life?**  

   a) Diminishing Balance Method  

   b) Straight-Line Method  

   c) Sum of the Years' Digits Method  

   d) None of the above  

   **Answer:** b) Straight-Line Method

4. **Which method calculates depreciation based on the book value of an asset?**  

   a) Written Down Value Method  

   b) Straight-Line Method  

   c) Annuity Method  

   d) Sinking Fund Method  

   **Answer:** a) Written Down Value Method

5. **Under which method does the amount of depreciation decrease every year?**  

   a) Straight-Line Method  

   b) Diminishing Balance Method  

   c) Sum of the Years' Digits Method  

   d) None of the above  

   **Answer:** b) Diminishing Balance Method

6. **The amount of depreciation remains the same every year under which method?**  

   a) Straight-Line Method  

   b) Written Down Value Method  

   c) Double Declining Balance Method  

   d) None of the above  

   **Answer:** a) Straight-Line Method

7. **Which of the following is *not* a cause of depreciation?**  

   a) Wear and tear  

   b) Obsolescence  

   c) Maintenance  

   d) Exhaustion of natural resources  

   **Answer:** c) Maintenance

8. **Depreciation is charged to __________.**  

   a) Profit and Loss Account  

   b) Trading Account  

   c) Balance Sheet  

   d) Capital Account  

   **Answer:** a) Profit and Loss Account

9. **Which of the following is an example of intangible assets?**  

   a) Machinery  

   b) Furniture  

   c) Goodwill  

   d) Inventory  

   **Answer:** c) Goodwill

10. **In which method does the depreciation amount change each year, but the total depreciation over the asset's life remains the same?**  

   a) Straight-Line Method  

   b) Units of Production Method  

   c) Diminishing Balance Method  

   d) Written Down Value Method  

   **Answer:** d) Written Down Value Method

11. **Which accounting concept requires the recording of depreciation?**  

   a) Going Concern Concept  

   b) Accrual Concept  

   c) Prudence Concept  

   d) Cost Concept  

   **Answer:** a) Going Concern Concept

12. **The formula for calculating depreciation under the straight-line method is:**  

   a) (Cost of Asset - Scrap Value) / Useful Life  

   b) (Cost of Asset + Scrap Value) / Useful Life  

   c) (Cost of Asset - Accumulated Depreciation) / Useful Life  

   d) None of the above  

   **Answer:** a) (Cost of Asset - Scrap Value) / Useful Life

13. **What is the objective of providing depreciation?**  

   a) To account for the decrease in market value  

   b) To match revenue with the cost of using an asset  

   c) To increase the value of the asset  

   d) To estimate future replacement costs  

   **Answer:** b) To match revenue with the cost of using an asset

14. **Accumulated depreciation appears in the balance sheet as a __________.**  

   a) Current Liability  

   b) Current Asset  

   c) Deduction from the fixed asset  

   d) Contingent Liability  

   **Answer:** c) Deduction from the fixed asset

15. **Which of the following is true regarding depreciation?**  

   a) It is a cash expense  

   b) It reflects the physical deterioration of an asset  

   c) It increases the value of the asset  

   d) It is provided only in the year of purchase  

   **Answer:** b) It reflects the physical deterioration of an asset

16. **Which method of depreciation provides for a higher depreciation charge in the earlier years?**  

   a) Straight-Line Method  

   b) Double Declining Balance Method  

   c) Annuity Method  

   d) Revaluation Method  

   **Answer:** b) Double Declining Balance Method

17. **Which method is based on the usage or output of the asset?**  

   a) Straight-Line Method  

   b) Written Down Value Method  

   c) Units of Production Method  

   d) Sinking Fund Method  

   **Answer:** c) Units of Production Method

18. **Under which method does the residual value of the asset remain constant over the years?**  

   a) Written Down Value Method  

   b) Straight-Line Method  

   c) Units of Production Method  

   d) Revaluation Method  

   **Answer:** b) Straight-Line Method

19. **Depreciation charged on a revalued asset is based on the __________.**  

   a) Original cost  

   b) Market price  

   c) Revalued amount  

   d) Salvage value  

   **Answer:** c) Revalued amount

20. **The diminishing balance method is also known as:**  

   a) Reducing Balance Method  

   b) Straight-Line Method  

   c) Annuity Method  

   d) Sum of Years' Digits Method  

   **Answer:** a) Reducing Balance Method

21. **Which of the following is not considered while calculating depreciation?**  

   a) Original cost of the asset  

   b) Useful life of the asset  

   c) Market value of the asset  

   d) Residual value  

   **Answer:** c) Market value of the asset

22. **Which method does not use time as a basis for charging depreciation?**  

   a) Straight-Line Method  

   b) Units of Production Method  

   c) Double Declining Balance Method  

   d) Written Down Value Method  

   **Answer:** b) Units of Production Method

23. **What is the correct treatment of depreciation in financial statements?**  

   a) It is debited to the capital account  

   b) It is shown as an asset in the balance sheet  

   c) It is deducted from the asset's value in the balance sheet  

   d) It is added to the value of the asset  

   **Answer:** c) It is deducted from the asset's value in the balance sheet

24. **Obsolescence as a cause of depreciation refers to:**  

   a) Wear and tear due to use  

   b) Reduction in usefulness due to technological advancement  

   c) Exhaustion of natural resources  

   d) Maintenance of assets  

   **Answer:** b) Reduction in usefulness due to technological advancement

25. **Which of the following methods provides a decreasing charge for depreciation over the useful life of the asset?**  

   a) Straight-Line Method  

   b) Sum of the Years' Digits Method  

   c) Revaluation Method  

   d) None of the above  

   **Answer:** b) Sum of the Years' Digits Method

26. **The residual value is the estimated amount that can be recovered from an asset at the end of its useful life after deducting depreciation. This statement is:**  

   a) True  

   b) False  

   **Answer:** a) True

27. **When is depreciation accounted for in financial statements?**  

   a) Only at the time of sale  

   b) At the end of each accounting period  

   c) When the asset is fully depreciated  

   d) Only when required by law  

   **Answer:** b) At the end of each accounting period

28. **Which of the following is an indirect expense in the Profit and Loss Account?**  

   a) Purchase of goods  

   b) Wages  

   c) Depreciation  

   d) Rent received  

   **Answer:** c) Depreciation

29. **An asset costing Rs. 10,000 has a useful life of 5 years and a residual value of Rs. 1,000. The annual depreciation under the straight-line method will be:**  

   a) Rs. 1,800  

   b) Rs. 1,500  

   c) Rs. 2,000  

   d) Rs. 1,900  

   **Answer

:** d) Rs. 1,800

30. **Depreciation is considered as which type of cost?**  

   a) Variable Cost  

   b) Fixed Cost  

   c) Semi-Variable Cost  

   d) None of the above  

   **Answer:** b) Fixed Cost

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