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By Accounting Mcqs No Comments

Depreciation is a process of____________?

A. Valuation
B. Valuation and allocation
C. Allocation
D. Appropriation

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AS-6 on depreciation accounting defines ‗depreciation‘ as the measure of wearing out, consumption or other loss of a value of a depreciable asset arising from use, effluxion of time or obsolescence through technology and market changes. Depreciation is allocated so as to charge a fair proportion of the depreciable amount in each accounting period during the expected useful life of the asset. Depreciation includes amortization of assets whose useful life is predetermined.

Related Mcqs:

  1. Which of the following statements is true with regard to written down value method of depreciation?
    i. The rate at which the asset is written off reduces year after year
    ii. The amount of depreciation provided reduces from year to year
    iii. The rate of depreciation as well as the amount of depreciation reduce year after year
    iv. The value of the asset gets reduced to zero over a period of time

    A. Only (i) above
    B. Only (ii) above
    C. Both (i) and (ii) above
    D. (i),(ii) and (iii) above

  2. Posting is the process of____________?

    A. Posting the letters in drop box
    B. Posting suitable person to a suitable job
    C. Entering in the ledger the information contained in the ledger
    D. All the three

  3. Total depreciation of an asset cannot exceed its:

    A. Scrap value
    B. Residual value
    C. Market value
    D. Depreciable value

  4. Which of the following is not a method of charging depreciation?

    A. Straight line Method
    B. Written down value Method
    C. Discounted present value Method
    D. Sum of digits Method

  5. Which of the following statements best describes the purpose of depreciation?

    A. Regular reduction of asset value to correspond to changes in market value as the asset ages
    B. A process of correlating the market value of an asset with its gradual decline in physical efficiency
    C. Allocation of cost in a manner that will ensure that Plant and Equipment items are not carried on the Balance Sheet in excess of net realizable value
    D. Allocation of the cost of an asset to the periods in which services are received from the asset

  6. The main objective of providing depreciation is to?

    A. Calculate the true profit
    B. Show the true financial position in the Balance Sheet
    C. Provide funds for replacement of fixed assets
    D. Both A. and B. above

  7. Which of the following statements is correct about Depreciation?

    A. Depreciation cannot be provided in case of loss in a financial year
    B. Depreciation is a charge against profit
    C. Depreciation is provided in the books only when there is profit
    D. Depreciation is an appropriation of profit

  8. Depreciation is calculated on the____________?

    A. Cost price of asset
    B. Market price
    C. Cost+ Transport+ Installation expenses
    D. Cost or market values whichever is less

  9. Depreciation appearing in the Trial Balance should be?

    A. Debited to P&L A/c
    B. Shown as liability in Balance Sheet
    C. Reduced from related asset in Balance Sheet
    D. Both A. and C. above

  10. Depreciation Account appearing in the Trial Balance is shown in:

    A. Profit and Loss A/c
    B. Trading A/c
    C. Deducted from the concerned assets A/c
    D. Shown on the liability side

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The correct answer to the question: "Depreciation is a process of____________?" is "Allocation".

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