MCQs For NCERT Class 11 Chapter 7 Depreciation Provisions and Reserves

Please refer to the MCQ Questions for Class 11 Accountancy Chapter 7 Depreciation Provisions and Reserves with Answers. The following Depreciation Provisions and Reserves Class 11 Accountancy MCQ Questions has been designed based on the latest syllabus and examination pattern for Class 11. Our experts have designed MCQ Questions for Class 11 Accountancy with Answers for all chapters in your NCERT Class 11 Accountancy book.

Depreciation Provisions and Reserves Class 11 MCQ Questions with Answers

See below Depreciation Provisions and Reserves Class 11 Accountancy MCQ Questions, solve the questions and compare your answers with the solutions provided below. 

Question. What is the balance carried down in the machinery account?
(a) 50,00,000
(b) 40,00,000
(c) 44,24,000
(d) None of these

Question. Which of the following is/are feature(s) of accumulated depreciation account method?
(i) Asset account continues to appear at its original cost year after year over its entire life.
(ii) Depreciation is accumulated on a separate account instead of being adjusted in the asset account at the end of each accounting period.
(a) Only (i)
(b) Only (ii)
(c) Both (i) and (ii)
(d) Neither (i) nor (ii)

Question. In the Balance sheet, provision for depreciation of ` 20,000 is shown on 
(a) the liabilities side of the balance sheet. 
(b) by way of deduction from the original cost of the asset concerned on the asset side of the balance sheet.
(c) Either (a) or (b)
(d) None of the above 

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

Question. The amount set aside for the purpose of providing any known liability, the amount of which cannot be ascertained with reasonable accuracy, is known as
(a) Reserve
(b) Provision
(c) Contingency fund
(d) None of these

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)

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

Question. Fixed assets are subject to decline in value and this decline is technically referred to as …………….
(a) Obsolescence
(b) Depreciation
(c) Reduction
(d) None of these

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

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

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

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

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

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

Question. Creating Reserve is important because it helps in
(a) Meeting the future contingencies
(b) Strengthening the Financial position of the business
(c) Both a. and b
(d) None of these

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

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

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)

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

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

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

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

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

Question. Which of the following are advantages of straight line method of depreciation? 
(a) It is very simple, easy to understand and apply.
(b) This method makes it possible to distribute full depreciable cost over useful life of the asset.
(c) Both (a) and (b)
(d) None of the above

Question. Straight line method is based on the faulty assumption of same amount of the utility of an asset in different accounting years.
(a) True
(b) False
(c) Can’t say
(d) Partially true

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

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

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

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

Question. It is the physical life of an asset that matters for the purpose of depreciation. 
(a) True
(b) False
(c) Can’t say
(d) Partially true

Question. What is the amount of depreciation charged in the first year?
(a) 9,000
(b) 10,000
(c) 4,500
(d) 5,000

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

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

Question. What will be the amount of depreciation charged annually using straight line method?
(a) 50,000
(b) 54,000
(c) 55,000
(d) None of these

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)

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

Question. Which of the following statement is true?
(a) Depreciation is a charge against profit.
(b) Depreciation is an appropriation to profit
(c)Depreciation is provided only if there is a profit.
(d) In case of loss, depreciation should not be charged. 

Question. What is the balance carried in the machinery account in March, 2018?
(a) 12,00,000
(b 10,80,000
(c) 9,60,000
(d) None of these

Question. What is the accumulated depreciation on the machinery worth80,000 that was sold?
(a) 8,000
(b) 7,200
(c) 18,440
(d) None of these

Question. What is the gain or loss on the sale of machinery worth ` 80,000?
(a) 16,560 profit
(b) 16,560 loss
(c) 35,000 loss
(d) 35,000 profit

Question. Which of the following is the probable reason for WHERE Ltd’s adoption of written down value method for charging depreciation?
(a) The machinery is such that its repair charges are low
(b) The possibility of obsolescence of machinery is low
(c) The machinery is such that it is affected by technological changes and require more repair expenses with passage of time
(d) None of the above

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

Question. What is the total depreciation charged on the machinery sold?
(a) 4,24,000
(b) 3,60,000
(c) 4,40,000
(d) None of these 

Question. Depreciation, being a charge against profit, is debited to income statement/statement of profit and loss.
(a) True
(b) False
(c) Can’t say
(d) Partially true

Question. ………… issued by The Institute of Chartered Accountants of India (ICAI) defines depreciation.
(a) Accounting Standard-5
(b) Accounting Standard-4
(c) Accounting Standard-6
(d) Accounting Standard-7

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

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

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

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

(a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A)
(b) Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A)
(c) Assertion (A) is true, but Reason (R) is false
(d) Assertion (A) is false, but Reason (R) is true

Question. Assertion (A) Reserves reduces the amount of profits available for distribution among the owners of the business.
Reason (R) Reserve is a charge against profit. 

Question. Assertion (A) Charging depreciation is important to represent true and fair financial position.
Reason (R) If depreciation on assets is not provided for, then the assets will be overvalued.  

Question. Assertion (A) Provisions are created by crediting the profit and loss account.
Reason (R) The amount of provision for expense and loss is a charge against the revenue of the current period. 

Question. Assertion (A) Depreciation is a charge against the revenue of the corresponding period and must be deducted before arriving at net profit.
Reason (R) Depreciation is as much the cost as any other expense incurred in the normal course of business.    

Fill In The Blanks

Question. The amount of depreciation charged on machinery is debited to ____________. 

Question. Under fixed installment method, depreciation is calculated by deducting the _____value, from the original cost of the asset.

Question. For getting depreciable cost, ________value should be deducted from Original Cost of an Asset.

Question. In Straight line method, annual amount of depreciation remains _____in comparison to diminishing balance method.

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 —————.

Question. Under Straight Line Method, an asset can be depreciated upto the net _____ value or ______ value.

Question. The depreciable cost of an asset is Rs. 85,000 and the acquisition cost of the asset was Rs. 1,00,000, then the scrap value of the asset will be Rs. ______.

Question. After charging depreciation for 3 years @10%p.a under WDV method, the book value of machinery is 87,480. The original cost of that machinery is __________. 

Question. The existence and the amount of _______ reserve is not disclosed in the Balance Sheet. 

Question. Provision is a ________ against profit.

Question. Depletion is done in case of _______________.

Question. The amount of depreciation charged under diminishing balance method is ——————–. 

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 ___________.

Question. Installation, freight and trport expenses are a part of ___________of the asset. 

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

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.______ .

Question. At the time of charging depreciation, ____ account is debited and ____ account is credited.

Question. Provision is charged to __________ Account.

Question. The amount of reserve when invested in outside securities is termed as ___________. 

True/ False

Question. Good debtors are those from whom collection of debts is certain.

Question. In Diminishing balance method of depreciation the rate of depreciation gets reduced every year.

Question. The Combined cost on the account of depreciation and repairs remain more or less equal throughout the period under written down value method.

Question. When Accumulated depreciation account is opened the asset account need not be disturbed in any way and it continues to show at its original cost.

Question. Patents do not depreciate.

Question. Depreciation is the decline in the market value of tangible fixed assets.

Question. Capital Reserve is created out of Capital Profit.

Question. Provision and Reserves used interchangeably.

Question. Written Down Value method is more suitable for assets which get depreciated on account of expiry of the working life of the asset.

Question. The main aim of charging depreciation is to calculate true profit or loss.

Question. Depreciation is a known cash expenditure

Question. Written down value method is approved by Income Tax Authorities.

Question. Specific Reserve is the reserve created not for a specific purpose and can be utilized for any purpose.

Question. Workmen compensation Reserve is shown in the profit and loss account.

Question. A reserve can be either a general or specific reserve.

Question. Reserve is credited to the profit and loss appropriation account.

Question. Profit on sale of fixed assets is credited to Asset account.

Question. Providing depreciation reduces the amount of profit available for dividend.

Match The Following

Question.

i) Depreciation arises because of	a. obsolescence
ii) In straight line method the depreciation is calculated on	b. Fall in the value of assets
	c. Wear and tear
	d. original cost
	e. Book value

Question.

i) Provision for depreciation needs to be deducted from	a. fixed assets
ii) Provision for doubtful debts needs to be deducted from	b. Sundry Debtors
	c. Sundry Creditors
	d. General Reserve

Question.

i) Amortisation refers to writing off	a. Current Assets
ii) Factor for determining the amount of depreciation	b. Intangible Assets
	c. Estimated life of an asset

Question.

i) Residual value of an asset is also known as	a. Cost of Asset
ii) in original cost method	b. Scrap value of the asset at the end of its useful life
	c. Equal depreciation is charged

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

Question.

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

Question.

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

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

Question.

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

Question.

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

Question.

i) Depreciation is provided on	a. Fixed Asset
ii) Depletion is provided on	b. Current asset
	c. Wasting asset