Which of the following statements is correct about Depreciation?

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. 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

3. Which of the following statements is correct about Trial Balance?

   A. The Trial Balance is prepared after preparing the Profit and Loss Account
   B. The Trial Balance shows only balances of Assets and Liabilities
   C. The Trial Balance shows only nominal account balances
   D. The Trial Balance has no statutory importance from the point of view of law

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 is true with respect to providing depreciation under diminishing balance method?

   A. The amount of depreciation keeps increasing every year while the rate of depreciation keeps decreasing
   B. The amount of depreciation and the rate of depreciation decrease every year
   C. The amount of depreciation decreases while the rate of depreciation remains the same
   D. The amount of depreciation and the rate of depreciation increases every year

6. Which of the following is an external cause of depreciation?

   A. Routine repair and maintenance
   B. Misuse
   C. Obsolescence
   D. Wear and tear

7. Depreciation decreases____________?

   A. Liabilities
   B. Cash
   C. Bank
   D. Capital

8. Total depreciation of an asset cannot exceed its:

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

9. 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

10. Depreciation fund method is also known as__________?

    A. Sinking Fund Method
    B. Annuity Method
    C. Sum of Year Digits Method
    D. None of these

    Submitted by: Syed Nizakat Ali Shah