CBSE Class 11 Accountancy Depreciation Provisions And Reserves Worksheet

CBSE Class 11 Accountancy Chapter 7 Depreciation, Provisions and Reserves Fill In The Blanks

Question. Under Straight Line Method, an asset can be depreciated upto the net _____ value or ______ value.
Answer. Ans-scrap ,zero

Question. Annual depreciation of an asset is Rs.25,000 and the cost of acquiring an asset is Rs.5,00,000. So the rate of depreciation would be ____% p.a.
Answer. 5

Question. The another name of Straight Line Method is Fixed _____method and Fixed _____ on Original cost method.
Answer. Instalment, percentage

Question. The balance of machinery on March31, 2019 is Rs.1,60,000. The machinery was purchased on April 1, 2017. Depreciation is charged @ 10% p.a. by Straight Line Method. The  cost price of the machine as on April1, 2017 is Rs._______.
Answer. Rs.2,00,000

Question. In the books of Vandana Ltd. the machinery account showed a debit balance of Rs.1,20,000 as on april 1,2019 and Provision for depreciation account at Rs.24,000. The Machinery was sold on Dec31, 2019 for Rs.56,000. The company charges depreciation @ 20% p.a. on Straight Line Method. Profit or Loss on sale of the Machinery is Rs._____.
Answer. Loss Rs.22,000

Question. The original cost of a machinery is Rs.15,000, salvage value is Rs.1500 after 9 years and repair charges in second year is Rs.1,000. The Rate of Depreciation per annum is____. 
Answer. Ans 10%

Question. A company purchased machinery on December 31,2017 for Rs.60,000. Installation charges were Rs.25,000 and carriage was Rs.15,000.Depreciation provided @10% p.a. under Straight Line Method. The total Depreciation till March 31, 2019 is Rs.______ .
Answer. Rs.12,500

Question. For getting depreciable cost, ________value should be deducted from Original Cost of an Asset.
Answer. scrap/salvage/residual

Question. Under Fixed Installment Method, depreciation is charged on ______ cost of an asset.
Answer. Original/Acquisition

Question. X Ltd purchased machinery worth Rs, 2,00,000 on 1.4.19. The firm follows diminishing balance method @ 10% p.a. The firm wanted to calculate the depreciation for the year20 20-21. On what value will it calculate ---------------.
Answer. Loss 1,80,000

Question. The amount of depreciation charged under diminishing balance method is --------------------.
Answer. Reducing

Question. Given the same rate percentage asset depreciate faster by the --------- as compared to the----------------.
Answer. SLM; WDV

Question. Amortisation is a gradual and systematic writing off of--------------. 
Answer. Intangible assets

Question. Installation, freight and transport expenses are a part of ___________of the asset.
Answer. Historical Cost

Question. When Provision for depreciation account is created depreciation is charged to __________________.
Answer. Provision for depreciation a/c

Question. Provision is a charge on ____________.
Answer. profit

Question. Reserve is an _______________of profit.
Answer. appropriation

Question. Profit on sale of fixed asset is a capital profit and therefore it will be transferred to ___________________.
Answer. capital Reserve

Question. Reserve created for maintaining a stable rate of dividend is termed as ___________.
Answer. dividend equalization Reserve

CBSE Class 11 Accountancy Chapter 7 Depreciation, Provisions and Reserves True And False

1. In case of diminishing balance method the asset gets reduced to zero level. (False)
2. The main aim of charging depreciation is to calculate true profit or loss. (True)
3. Depreciation is a known cash expenditure (False)
4. Under straight line method depreciation is charged on the cost price of fixed assets. (False)
5. Depreciation is a non –cash expense. (True)
6. The book value of the asset can never be reduced to zero in Straight line method. (False)
7. Written down value method is approved by Income Tax Authorities. (True)
8. In Straight Line Method equal depreciation is charged every year. (True)
9. Profit on sale of fixed assets is credited to Asset account. (False)
10. Under Straight Line Method the depreciation is charged on the acquisition cost of an asset. (True)
11. Specific Reserve is the reserve created not for a specific purpose and can be utilized for any purpose. (False)
12. A Reserve is shown on the liabilities side of Balance Sheet under the head of Reserves and Surplus. (True)
13. A Provision is not shown under the head Current Liabilities or as deduction of the asset. (False)
14. Provision is debited to the profit and Loss account. (True)
15. Reserve is credited to the profit and loss appropriation account. (False)
16. Provision is an appropriation of profit. (False)
17. Reserve is a charge against profit. (False)
18. Capital Reserve is created out of Capital Profit. (True)

CBSE Class 11 Accountancy Chapter 7 Depreciation, Provisions and Reserves MCQs

Question. Which of the following is not considered as a factor affecting amount of depreciation?
a) Rate of Depreciation
b) Depreciable Cost
c) Cost of an Asset
d) Estimated useful life of an asset.
Answer. A

Question. If an asset costing Rs.1,20,000 is depreciated by Straight Line Method @ 10% p.a., it will be zero after
a) 8 years
b) 12 years
c) 10 years
d) 6 years 
Answer. C

Question. Book Value of an asset after 2 years is Rs.80,000; Rate of depreciation is 10% p.a. under Straight Line method. The Original Cost Of an asset would be
a. Rs.8,000
b. Rs. 1,00,000
c. Rs.8,00,000
d. Rs.80,000
Answer. B

Question. Which of the following is not true with regard to the fixed assets?
a) they are not meant to resale to earn profit
b) they are acquired for use over a long period of time
c) they always give profit on sale
d) depreciation at specified rates to be charged on most of the fixed asset Ana
Answer. C

Question. The balance of Fixed Assets account is always :
a. Debit balance
b. Credit Balance
c. Both a. and b. Ana
Answer. A

Question. Depreciation appears in the:
a. Profit and loss account
b. Trading account
c. Profit and loss Appropriation account UND
Answer. A

Question. Depreciation is Provided on:
a. Current assets
b. Fictitious asset
c. Intangible Asset
d. Fixed Asset Rem
Answer. D

Question. If the amount of any known liability can be determined with accuracy:
a. A liability should be provided
b. A reserve should be set aside
c. A provision should be created
Answer. C

Question.  DRR is created to provide funds for
a. Redemption of debentures
b. for meeting unknown liabilities
c. for creating revenue reserves 
Answer. A

CBSE Class 11 Accountancy Chapter 7 Depreciation, Provisions and Reserves MCQs

Question.
i) Depreciation is provided on             a. Non – cash expense
ii) Depreciation is a                             b. cash expense
iii) Depreciation is a process of           c. Fixed Asset
                                                            d. Allocation of cost
Answer. i-c; ii-a; iii-d

Question.
i) the amount of depreciation charged          a. Fixed Assets Account
on Machinery is debited to
ii) Charging depreciation is                           b. Depreciation account
                                                                      c. Voluntary
                                                                      d. Compulsory
Answer. i-b; ii-d

Question.
i) Accumulated depreciation is     a. fall in value of an asset
ii) Depreciation is                         b. already charged as expense
Answer. i-b; ii-a

Question.
i) In Straight line method depreciation                   a. decreases year after year
ii) In written down value method depreciation       b. is charged equally
                                                                              c. increases every year
Answer. i-b; ii a

Question.
i) The annual amount of depreciation to be                 a. Rs. 49,000
charged on machinery having original cost
of Rs.2,50,000, Scrap value Rs. 5,000 and
estimated useful life of the machinery is 5 years.
ii) The yearly depreciation charged on machinery       b. Rs.8,000
having original cost Rs.45,000; Scrap Value
Rs.5,000 and estimated useful life is 5 years
                                                                                      c. 16%
                                                                                      d. 17.78%
Answer. i-a ;ii-b

Question.
i) Under the Straight Line Method rate of            a. Book Value
depreciation will be applied on
ii) Under the Diminishing Balance Method          b. Book value minus Scrap Value
rate of depreciation will be applied on
                                                                            c. Original Cost
                                                                           d. Original Cost Minus Scrap value
Answer. i-C; ii-a

Question.
1. Provision is shown in balance sheet       a. Non – current liabilities
2. Reserves is shown in balance sheet       b. current liabilities
c. share capital
d. Reserves & surplus
Answer. 1-b; 2-d

CBSE Class 11 Accountancy Chapter 7 Depreciation, Provisions and Reserves Case Based MCQs

Direction Read the following case study and answer question on the basis of the same.

Geet has recently started her own cloth trading business. Her business is doing quite well and she is deciding to expand it. She decides to maintain accounts of the firm in proper form as per various legal requirements. She is not really versed with the aspects of accountancy. She is confused what reserves to maintain and what provisions to create.
You are a Chartered Accountant. Geet
approaches you for advice.

Question. Why should Geet create provisions?
(a) To meet anticipated or known losses and liabilities
(b) To meet unknown losses and liabilities
(c) To hoard funds
(d) None of the above
Answer. A

Question. In the balance sheet, the amount of provision should be shown by Geet as
(i) by way of deduction from the concerned asset on the assets side.
(ii) on the liabilities side of the balance sheet alongwith current liabilities.
(a) Only (i)
(b) Only (ii)
(c) Either (i) or (ii)
(d) Neither (i) nor (ii)
Answer. C

Question. Using which of the following statements will you justify to Geet the need to create reserves?
(a) Reserves help in strengthening the financial position of an enterprise
(b) Reserves help in meeting future contingencies
(c) Reserves are important to expand the business operations and to bring uniformity in distribution of dividends
(d) All of the above
Answer. D

Question. Geet wants to create a reserve which the management can freely utilise for any purpose. Which reserve should she create?
(a) General Reserve
(b) Specific Reserve
(c) Secret Reserve
(d) None of the above
Answer. A

Question. How will you explain the difference between revenue reserve and capital reserve to Geet?
(a) Revenue reserve is created out of revenue profits whereas capital reserve is created primarily out of capital profit.
(b) Revenue reserve is created to strengthen the financial position, to meet unforeseen contingencies or for some specific purposes.Whereas capital reserve is created for compliance of legal requirements or accounting practices.
(c) Revenue reserve can be utilised only for a specific purpose whereas Capital reserve can be utilised for any purpose.
(d) Both (a) and (b)
Answer. D

Important Questions for NCERT Class 11 Accountancy Depreciation Provisions And Reserves 

Question. Provision is a
(a) Specific Reserve.
(b) General Reserve.
(c) Capital Reserve.
(d) None of these. 

Answer :  D

Question. Profit on sale of fixed asset is used to create
(a) Specific Reserve.
(b) General Reserve.
(c) Capital Reserve.
(d) None of these. 

Answer :  C

Question. If the amount of any known liability cannot be determined accurately.

(a) Provision should be created
(b) Definite liability should be created
(c) Reserve should be created
(d) Should be shown as a contingent liability 

Answer :  A

Question. Which of the following is a correct difference between a provision and reserve?
(a) A provision is created out of a legal necessity whereas a reserve is created as a matter of prudence.
(b) A provision is invested whereas reserve is not invested
(c) A provision is an appropriation of profit whereas a reserve is a charge against profit
(d) A provision can be used for distribution of dividend whereas a reserve cannot be allowed to be used for distribution of dividend. 

Answer :  A

Question. Which of the following statements is not appropriate in relation to “Provision”?
(a) Provision is a charge against profit
(b) Provision is created for known liability
(c) Provision is created for strengthening the financial position of the business.
(d) Creation of provision satisfies the principle of conservatism. 

Answer :  C

Question. Provisions are
(a) external transactions.
(b) internal transactions,
(c) Can be (a) or (b).
(d) None of these. 

Answer :  B

Question. A Provision is
(a) an appropriation of profits.
(b) a charge against profit.
(c) Can be (a) or (b).
(d) None of these. – 

Answer :  B

Question. If the amount of any known liability cannot be determined with accuracy
(a) a liability should be provided.
(b) a provision should be made,
(c) a reserve should be set aside.
(d) None of these. 

Answer :  B

Question. If the amount of any known liability can be determined with accuracy
(a) a liability should be provided.
(b) a provision should be made,
(c) a reserve should be set aside.
(d) None of these. 

Answer :  A 

Question. Which of the following is a correct distinction between a Revenue reserve and a Capital reserve?
(a) A revenue reserve is created out of capital profits whereas a capital reserve is created out of business profits.
(b) A revenue reserve can be used for distribution of dividend with certain preconditions whereas a capital reserve can be used for distribution of dividend without any preconditions
(c) A revenue reserve is created for strengthening the financial position whereas capital reserve is created for meeting capital losses or to be used for purposes specified by the Companies Act.
(d) There is no distinction between revenue reserve and capital reserve 

Answer :  C

Question. Which of the following statements are correct about a “Provision”?
(i) Provisions are a charge against the profits of an enterprise
(ii) Provisions are created out of divisible profits
(iii) Creation of provisions are not necessary for a business
(iv) Provisions are created to meet a known liability
(a) (i), (U) and (iii)
(b) (ii) and (iv) only
(c) (i), (iii) and (iv)
(d) (i) and (iV) only 

Answer :  D 

Question. Reserves arising from capital receipts are known as
(a) Capital Reserve.
(b) Reserve Fund,
(c) Any of (a) and (b).
(d) None of these. 

Answer :  A

CBSE Class 11 Accountancy Chapter 7 Depreciation, Provisions and Reserves Fill In The Blanks

Question. Depreciation is a non- cash expenditure because it does not involve any ---------------------.
Answer. Cash outflow

Question. Land is not depreciated as its useful life is _____________.
Answer. Unlimited

Question. Depletion is done in case of _______________.
Answer. Natural resources

Question. The amount of depreciation charged on machinery is debited to ____________.
Answer. Depreciation a/c

Question. Providing depreciation reduces the amount of profit available for __________.
Answer. Dividend

Question. Depreciation is a process of _________________.
Answer. allocation of cost

Question. In the event of an asset being sold, a new account titled ________________ is opened.
Answer. Asset Disposal Account

Question. The asset which is an exception from depreciation is _________.
Answer. Land

Question. The book value of an asset is Rs. 85,000 and the original cost is Rs.1,00,000. If the asset is sold at a loss of Rs. 8000, the sale proceeds will be _________.
Answer. 77,000

Question. The book value of an asset is Rs. 93,000 and the original cost is Rs. 1,20,000. After earning a profit of Rs. 5000, the asset is sold at Rs. ________.
Answer. 98,000

Question. If the depreciable cost of an asset is Rs. 90,000 and its scrap value is Rs. 9000, then the original cost of an asset is ___________.
Answer. 99,000

Question. Reduction in the book value of an asset over a period of time is called___________.
Answer. Depreciation

Question. Cost of an asset minus scrap value /life of an asset is the formulae for calculating depreciation under _____________ method.
Answer. SLM

CBSE Class 11 Accountancy Chapter 7 Depreciation, Provisions and Reserves True And False

1. For calculating depreciable cost of an asset, accumulated depreciation is deducted from Original cost of an asset. (True)
2. The yearly depreciation of a machinery under Straight line Method is Rs.60,000 and the machinery is sold on January 1,2017, the amount of depreciation in the year of sale would be Rs.45,000, if the year ends on March 31,2017. (True)
3. Under the Straight Line Method, asset is depreciated more in the initial years as compared to the later years of its life. (False)
4. Under written down value the depreciation is charged on the original cost of an asset every year. (False)
5. For calculating depreciable cost of an asset, accumulated depreciation is deducted from Original cost of an asset. (True)
6. Depletion term is used in case of intangible assets. (False)
7. Annual depreciation of an asset is Rs.1,80,000 and the cost of acquiring an asset is Rs.7,20,000, the rate of depreciation would be 15% p.a. (False)
8. Another name of fixed instalment Method is written down value method. (False)
9. Depreciation will not be charged if the machinery is not used in a particular accounting year. (False)

CBSE Class 11 Accountancy Chapter 7 Depreciation, Provisions and Reserves MCQs

Question. Depreciation is calculated from the date of:
a. Purchase of an asset
b. Receipt of an asset at business premises
c. Asset put to use
d. Asset installed UND
Answer. A

Question. Amortisation refers to writing off
a. Depleting Asset
b. Wasting asset
c. Intangible Asset
d. Fictitious asset Rem
Answer. C

Question. Which one of the following is not an objective of providing depreciation
a. For ascertaining the true profit and loss
b. Showing the True And Fair view of financial statement
c. For avoiding overpayment of income tax
d. Depreciation is a gradual and continuing process. 
Answer. C

Question. Depreciation is a
a. Reserve
b. Provision
c. Both a. and b.
d. None of these 
Answer. D

Question. An asset was purchased for Rs. 1,00,000 and as per Reducing Balance Method, 10 % depreciation is charged every year. What is the value of asset at the end of 4 years.
a. Rs.65,610
b. Rs. 65,680
c. Rs.75,610
d. Rs.75,630 
Answer. A

Question. The value of machinery as on April1, 2018 is Rs. 64,000 which was purchased on April 1, 2016 for Rs.1,00,000 was sold on October1, 2018 and depreciation charged thereon @ 20% p.a. under Written Down Value Method. The total Depreciation Provided on the Machinery Sold is
a. Rs. 42,300
b. Rs.42,400
c. Rs. 42,000
d. Rs.42,600 
Answer. B

Question. This charge is used in case of exhaustion of wasting asset
a. Depreciation
b. Amortisation
c. Depletion 
Answer. C

Question. The balance of Machinery Account as on March 31, 2018 is Rs.1,08,000. The machinery was purchased on April 1, 2017. Depreciation is charged @10% p.a. by Diminishing Balance Method. What is the original cost of an asset purchased on April1, 2017.
a. Rs. 1,30,000
b. Rs.1,25,000
c. Rs. 1,20,000 
Answer. C

Question. The Written Down Value of an asset after 3 years of depreciation on Reducing Balance Method @20% p.a. is Rs.64,000. Its original cost is:
a. Rs.1,25,000
b. Rs.1,26,000
c. Rs. 80,000 
Answer. A

Question. Diminishing Value Method means a method by which
a. The rate of depreciation falls year to year
b. The amount on which depreciation is calculated falls year to year.
c. The Rate as well as the amount to which it is applied falls year by year
d. None of the above Ana
Answer. B

Question. When an Organisation Follows Written Down value Method , in the Balance sheet the asset will be represented at
a. Net Book Value
b. Historical cost
c. Cost or market price, whichever is less Ana
Answer. A

Question. The loss on sale of asset is debited to
a. Reserves
b. Depreciation fund
c. Profit and Loss Account
d. None of the Above. 
Answer. B

Question. Which of the following is objective of provision?
(a) To meet anticipated losses and liabilities
(b) To meet unknown losses and liabilities
(c) To hoard funds
(d) None of the above
Answer. A

Question. Provision is a charge against profit and is created by crediting profit and loss account.
(a) True
(b) False
(c) Can’t say
(d) Partially true
Answer. B

Question. In the balance sheet, the amount of provision may be shown as
(i) by way of deduction from the concerned asset on the assets side.
(ii) on the liabilities side of the balance sheet along with current liabilities.
(a) Only (i)
(b) Only (ii)
(c) Either (i) or (ii)
(d) Neither (i) nor (ii)
Answer. C

Question. Provisions are created according to the principle of prudence or conservatism.
(a) True
(b) False
(c) Can’t say
(d) Partially true
Answer. A

Question. …………………. are the appropriations of profit to strengthen the financial position of the business.
(a) Reserve
(b) Provision
(c) Contingency fund
(d) None of the above
Answer. A

Question. Reserve is a charge against profit.
(a) True
(b) False
(c) Can’t say
(d) Partially true
Answer. B

Question. Reserves are shown under the head ‘Reserves and Surpluses’ on the liabilities side of the balance sheet.
(a) True
(b) False
(c) Can’t say
(d) Partially true
Answer. A

Question. Which of the following correctly differentiates between provision and reserves?
(a) A provision is a charge against profitwhereas reserve is an appropriation of profit.
(b) Provision is made for a known liability or expense the amount of which is not certain whereas reserve is created for strengthening the financial position of the business.
(c) Provision is deducted before calculating taxable profits whereas a reserve is created from profit after tax and therefore it has no effect on taxable profit.
(d) All of the above
Answer. D

Question. Provision can be used for distribution as dividends.
(a) True
(b) False
(c) Can’t say
(d) Partially true
Answer. B

Question. When the purpose for which reserve is created is not specified, it is called………………… .
(a) General reserve
(b) Specific reserve
(c) Revenue reserve
(d) Capital reserves
Answer. A

Question. General reserve is also termed as free reserve because the management can freely utilise it for any purpose.
(a) True
(b) False
(c) Can’t say
(d) Partially true
Answer. A

Question. ………………… is the reserve, which is created for some specific purpose and can be utilised only for that purpose.
(a) General reserve
(b) Specific reserve
(c) Revenue reserve
(d) Capital reserve
Answer. B

Question. Identify specific reserves from the following
(i) Dividend equalisation reserve
(ii) Provision for depreciation
(iii) Workmen compensation fund
(iv) Investment fluctuation fund
(a) (i) and (iii)
(b) (i) and (ii)
(c) (i), (ii) and (iv)
(d) (i), (iii) and (iv)
Answer. D

Question. Reserve created for maintaining a stable rate of dividend is termed as……… .
(a) Dividend equalisation reserve
(b) Provision for depreciation
(c) Workmen compensation fund
(d) Investment fluctuation fund
Answer. A

Question. …………………….. are created from revenue/profits which arise out of the normal operating activities of the business and are otherwise freely available for distribution as dividend.
(a) General reserve
(b) Specific reserve
(c) Revenue reserve
(d) Capital reserve
Answer. C

Question. Capital reserves are created out of capital profits which do not arise from the normal operating activities.
(a) True
(b) False
(c) Can’t say
(d) Partially true
Answer. A

Question. Which of the following does not correctly differentiate between revenue reserve and capital reserve?
(a) Revenue reserve is created out of revenue profits where as capital reserve is created primarily out of capital profit.
(b) Revenue reserve is created to strengthen the financial position, to meet unforeseen contingencies or for some specific purposes.Whereas capital reserve is created for compliance of legal requirements or accounting practices.
(c) Revenue reserve can be utilised only for a specific purpose whereas capital reserve can be utilised for any purpose.
(d) None of the above
Answer. C

Question. Reserves can be meant for the purpose of
(a) meeting a future contingency
(b) strengthening the general financial position of the business
(c) redeeming a long-term liability
(d) All of the above
Answer. D

Question. Creation of reserve reduces taxable profits of the business.
(a) True
(b) False
(c) Can’t say
(d) Partially true
Answer. B

Question. …………………… is a reserve which does not appear in the balance sheet.
(a) General reserve
(b) Specific reserve
(c) Secret reserve
(d) Capital reserve
Answer. C

Question. Secret reserve is called such as it is not known to outside stakeholders.
(a) True
(b) False
(c) Can’t say
(d) Partially true
Answer. A

Question. Making excessive provision for doubtful debts builds up the secret reserve in the business.
(a) True
(b) False
(c) Can’t say
(d) Partially true
Answer. A

CBSE Class 11 Accountancy Chapter 7 Depreciation, Provisions and Reserves Match The Following

Question.
i) Depreciation is provided on          a. Fixed Asset
ii) Depletion is provided on              b. Current asset
                                                        c. Wasting asset
Answer. 1-a ;2-c

Question.
i) An expense that can be added to                a. Repairs
purchase price of an asset to calculate
Original Cost for the purpose of charging
depreciation is
ii) An expense that cannot be added to          b. Repairs to second hand machinery
purchase price of an asset to calculate
Original Cost for the purpose of charging
depreciation is
Answer. 1-b; 2-a

Question.
i) It is not a Depreciable Tangible Asset      a. land
ii) Amortisation is charged on                      b. Plant
                                                                    c. Goodwill
Answer. 1-a; 2-c

Question.
i) Original cost of an asset is                                    a. Rs.20,000
Rs. 1,05,000; Scrap Value is Rs.5,000
and estimated life of the asset is 5 years.
Calculate the annual amount of depreciation
ii) Book value of an asset is Rs.1,00,000 ;                 b. Rs. 80,000
its Original Cost is Rs.2,05,000 and the sale
proceed is Rs.1,80,000. Profit on sale of the
asset would be
                                                                                    c. Rs.25,000
Answer. 1-a; 2-b

Question.
i) What would be the total amount                      a. Rs.8,00,000
of depreciation of two years ending
on March31,2018, if, the machinery was
purchased on September 30,2016 for
Rs.2,00,000 and the rate of depreciation
is 15% p.a. under Straight Line Method?
ii) Book Value of an asset after 2 years is            b. Rs. 1,00,000
Rs.80,000; Rate of depreciation is 10%
p.a. under Straight Line method. The
Original Cost Of an asset would be
                                                                             c. Rs.8,000
                                                                             d. Rs.45,000
Answer. 1-d; 2-b

Question.
i) It is not considered as a                a. Rate of Depreciation
factor affecting amount of
depreciation
ii) It is the Original Cost minus         b. Depreciable Cost
scrap value of an Asset
                                                         c. Cost of an Asset
Answer. 1-a; 2-b

Question.
i) When Provision for depreciation             a. Asset account
Account is maintained, depreciation
is charged to
ii) Depreciation charged on an Asset          b. Provision for Depreciation Account
is Debited to
                                                                    c. Depreciation Account
Answer. 1- b; 2-c

Question.
i) Accumulated depreciation               a. Asset Disposal Account
account is another name of
ii) Depreciation charged on                b. Provision for Depreciation Account
the asset sold will be charged to
                                                           c. Depreciation of All fixed assets
                                                           d. Asset Account
Answer.1-b; 2-a

CBSE Class 11 Accountancy Chapter 7 Depreciation, Provisions and Reserves Case Based MCQs

Direction Read the following case study and answer question on the basis of the same.

M/s XYZ purchased a plant for Rs 5,00,000 on 1st April, 2017, and spent Rs 50,000 for its installation. The salvage value of the plant after its useful life of 10 years is estimated to be Rs 10,000.The owner of the firm has certain dilemmas regarding the concept of depreciation. You are required to advise him regarding the same by answering the following questions.

Question. By using which of the following statements would you explain the concept of depreciation to the owner?
(a) Depreciation is a measure of the wearing out, consumption or other loss of value of depreciable asset arising from use, effluxion of time or obsolescence through technology and market-change
(b) Depreciation is a measure of the wearing out, consumption or other loss of value of depreciable asset arising from use or obsolescence
(c) Depreciation is reduction in the value of assets
(d) None of the above
Answer. A

Question. Which of the following factors that affect the amount of depreciation would you point out to the owner to keep in mind?
(a) Historical cost of asset
(b) Estimated net residual value
(c) Depreciable cost
(d) All of the above
Answer. D

Question. Using which of the following statement would you explain the importance of straight line method of depreciation to owner?
(a) It results into almost equal burden of depreciation and repair expenses taken together every year on profit and loss account
(b) Income Tax Act accept this method for tax purposes
(c) As a large portion of cost is written-off in earlier years, loss due to obsolescence gets reduced
(d) This method makes it possible to distribute full depreciable cost over useful life of the asset
Answer. D

Question. Using which of the following statement would you explain the importance of written down value method of depreciation to owner?
(a) This method is suitable for fixed assets which last for long and which require increased repair and maintenance expenses with passage of time
(b) Income Tax Act accepts this method for tax purposes
(c) As a large portion of cost is written-off in earlier years, loss due to obsolescence gets reduced
(d) All of the above
Answer. D

Question. What will be the amount of depreciation charged annually using straight line method?
(a) Rs50,000
(b) Rs54,000
(c) Rs55,000
(d) None of these
Answer. B

Direction Read the following case study and answer questions on the basis of the same.

On 1st April, 2017, X Ltd. purchased a machinery for Rs 12,00,000. On 1st October, 2019 a part of the machinery purchased on 1st April, 2017 for Rs 80,000 was sold for Rs 45,000 and a new machinery at the cost of Rs 1,58,000 was purchased and installed on the same date. The company has adopted the method of providing 10% p.a. depreciation on the diminishing balance of the machinery. X Ltd. maintains provision for depreciation and machinery disposal account. You are required to answer the following questions.

Question. Which of the following points need to be kept in mind when provision for depreciation account is maintained?
(a) Asset account continues to appear at its original cost year after year over its entire life
(b) Depreciation is accumulated on a separate account instead of being adjusted in the asset account at the end of each accounting period
(c) Both (a) and (b)
(d) None of the above
Answer. C

Question. What is the balance carried in the machinery account in March, 2018?
(a) Rs12,00,000
(b) Rs10,80,000
(c) Rs9,60,000
(d) None of these
Answer. A

Question. What is the accumulated depreciation on the machinery worth Rs 80,000 that was sold?
(a) Rs8,000
(b) Rs7,200
(c) Rs18,440
(d) None of these
Answer. C

Question. What is the gain or loss on the sale of machinery worth Rs 80,000?
(a) Rs16,560 profit
(b) Rs16,560 loss
(c) Rs35,000 loss
(d) Rs35,000 profit
Answer. B

Question. Provision for depreciation will be shown as a current asset by X Ltd. in the balance sheet.
(a) True
(b) False
(c) Partially true
(d) Can’t say
Answer. B