Multiple choice questions for Ch # 6.

DEPRECIATION
MC
QS
(1)

(2)

(3)

(4)

(5)

(6)

(7)

(8)

EACH QUESTIONS HAS FOUR POSSIBLE ANSWERS

CHOOSE THE CORRECT ANSWER: (T) Means TRUE
Answer
The main object of providing depreciation is:
(a)
To calculate true profit. (T)
(b)
To show true financial position.
(c)
To reduce tax.
(d)
To provide funds for replacement.
Depreciation arises because of:
(a)
Fall in the market value of an asst.(b)
Physical wear and tear. (T)
(c)
Fall in the value of money.
(d)
None of them.
Depreciation is a process of:
(a)
Valuation (T)
(b)
Allocation
(c)
Both valuation and allocation
(d)
None of them.
Under the straight line method of providing depreciation it:
(a)
Increase every year.(b)
Remain constant
every year. (T)
(c)
Decreases every year
(d)
None of them.
Under the diminishing balance method depreciation it:
(a)
Increases every year.(b)
Decreases every
year. (T)
(c)
Remain constant every year.
(d)
None of them.
Under the fixed installment method of providing depreciation it
is calculated on:
(a)
Original cost (T)
(b)
on balance amount(c)
On scrap value
(d)
None of them
Under the diminishing balance method, depreciation is
calculated on:
(a)
Scrap value
(b)
On original
value(c)
On book value (T)
(d)
None of them
The amount of depreciation charged on a machinery will be
debited to:
(a)
Machinery account
(b)
Depreciation
account (T)
(c)
Cash account
d)
Repair account

(9)

(10)

(11)

(12)

(13)

(14)

(15)

(16)

(17)

(18)

(19)

Loss on sale of plant and machinery should be written off

against:
(a)
Share premium(b)
Depreciation fund
account (T)
(c)
Sale account
(d)
Profit & loss account
Loss on sale of machinery will be:
(a)
Debited on machinery A/c(b)
Credited to
machinery A/c (T)
(c)
Credited to profit and loss A/c
(d)
None of them
Asset which have a limited useful life are termed as:
(a)
Limited assets
(b)
Depreciation
assets (T)
(c)
Unlimited asset
(d)
None of these
Process of becoming out of date or obsolete is termed as:
(a)
Physical deterioration
(b)
Depletion(c)
Obsolescence (T)
(d)
Amortization
Which of the term is used to write off in reference to tangible
fixed assets.
(a)
Depreciation(T) (b)
Depletion(c)
Amortization
(d)
Both (b) and (c)
The economic factors causing depreciation:
(a)
Time factor(b)
Obsolescence and
inadequacy (T)
(c)
Wear and tear
(d)
Money valuation
Profit prior to incorporation is an example of:
(a)
Capital reserve (T)
(b)
Revenue reserve(c)
Secret reserve
(d)
None of these
Total depreciation cannot exceeds its:
(a)
Scrap value
(b)
Cost value(c)
Market value
(d)
Depreciable value (T)
Depreciation value of an asset is equal to:
(a)
Cost + Scrap value
(b)
Cost + Market
price(c)
Cost Scrap value (T)
(d)
None of these
Depreciation does not depend on fluctuations as:
(a)
Market value of asset (T)
(b)
Cost of price of asset(c)
Scrap value of asset
(d)
None of these
Depreciation is:
(a)
An income
(b)
An asset(c)
A

(20)

(21)

(22)

(23)

(24)

loss (T)
(d)
A liability
The books value of an asset is obtained by deducting
depreciation from its:
(a)
Market value
(b)
Scrap value(c)
Market + Cost price
(d)
Cost (T)
Depreciation fund method is also known as:
(a)
Sinking fund method (T)
(b)
Annuity method
(c)
Sum of years digits method
(d)
None of these
The method is specially suited to natural resources (mines,
quarries, sand, pits etc.) is said to be:
(a)
Annuity method
(b)
Depletion
method (T)
(c)
Revaluation method
(d)
Sum of digits
method
Double declining method is often used in the:
(a)
Pakistan
(b)
South Africa(c)
Japan
(d)
U.S.A(T)
In the provision method of depreciation the asset always appears
at:
(a)
Cost price (T) (b)
Market Price(c)
Scrap Value
(d)
None