MCQs on Depreciation

The main objective of depreciation is

• To show the previous profit

• To calculate net profit

• To reduce tax

• To satisfy the tax department

Depreciation is generated due to

• Increase in the value of liability

• Decrease in capital

• Wear and tear

• Decrease in the value of assets

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

• To charge the cost of fixed assets against profits

• To show the current market value of fixed asset

• To make cash available to replace fixed assets

• To make cash available to replace fixed assets

Total amount of depreciation of an asset cannot exceed its

• Depreciable value

• Scrap value

• Market value

• None of these

According to fixed instalment method, the depreciation is calculated on

• Balance amount

• Original cost

• Scrap value

• None of them

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

Depreciation is calculated under diminishing balance method, based on

• (a) Original value

• (b) Book value

• (c) Scrap value

• (d) None of them

Depreciation amount charged on a machinery will be debited to:

• (a) Repair account

• (b) Cash account

• (c) Depreciation account

• (d) Machinery account

In accounting, becoming out of date or obsolete is known as

• (a) Amortization

• (b) Obsolescence

• (c) Depletion

• (d) Physical deterioration

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.