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CodeVID-M11-WS
Depreciation, Provisions and Reserves — Practice Worksheet
Chapter: Depreciation, Provisions and Reserves
Topic: Depreciation, Provisions and Reserves
Maximum Marks: 35
Time: 30 minutes
Name: ____________________ Roll No.: __________ Date: ____________

General Instructions

  • All questions are compulsory.
  • Choose the correct option (A, B, C or D) for each question.
  • The answer key is at the end — try the paper first!
Section A — Multiple Choice (1 mark each) 15 × 1 = 15 marks
1.
Depreciation is the gradual fall in the value of a:
  • A.Current asset
  • B.Fixed asset
  • C.Liability
  • D.Debtor
2.
Which asset is usually NOT depreciated?
  • A.Machinery
  • B.Land
  • C.Furniture
  • D.Vehicle
3.
An asset becoming outdated by new technology is:
  • A.Wear and tear
  • B.Obsolescence
  • C.Depletion
  • D.Disposal
4.
Writing off natural resources (mines) is called:
  • A.Amortisation
  • B.Depletion
  • C.Obsolescence
  • D.Reserve
5.
Writing off intangible assets (goodwill, patents) is called:
  • A.Depletion
  • B.Amortisation
  • C.Provision
  • D.Reserve
6.
Under SLM, depreciation each year is:
  • A.The same amount
  • B.A reducing amount
  • C.An increasing amount
  • D.Zero
7.
The SLM formula is (Cost − Scrap) ÷ :
  • A.Rate
  • B.Useful life
  • C.Sale price
  • D.Profit
8.
Machine Rs 60,000, scrap Rs 6,000, life 6 years. SLM depreciation =
  • A.Rs 9,000
  • B.Rs 10,000
  • C.Rs 6,000
  • D.Rs 12,000
9.
Under WDV, the fixed percentage is charged on the:
  • A.Original cost
  • B.Reducing book value
  • C.Scrap value
  • D.Sale price
10.
Rs 1,00,000 at 10% WDV: depreciation for year 2 is:
  • A.Rs 10,000
  • B.Rs 9,000
  • C.Rs 8,100
  • D.Rs 11,000
11.
Book value Rs 25,000, sold for Rs 30,000. Result:
  • A.Profit Rs 5,000
  • B.Loss Rs 5,000
  • C.Profit Rs 30,000
  • D.No effect
12.
A provision is a:
  • A.Charge against profit
  • B.Appropriation of profit
  • C.Asset
  • D.Capital
13.
A reserve is an:
  • A.Charge against profit
  • B.Appropriation of profit
  • C.Expense
  • D.Liability to outsiders
14.
Provision for doubtful debts is an example of a:
  • A.Reserve
  • B.Provision
  • C.Asset
  • D.Capital
15.
A general reserve is created:
  • A.Only if there is profit
  • B.Even if there is a loss
  • C.From capital
  • D.From loans
Section B — Challenge / Olympiad (2 marks each) 10 × 2 = 20 marks
16.
A machine costs Rs 2,00,000, scrap Rs 20,000, life 9 years (SLM). After 3 years its book value is:
  • A.Rs 1,40,000
  • B.Rs 1,80,000
  • C.Rs 1,00,000
  • D.Rs 60,000
17.
Why does WDV never reduce an asset's book value to exactly zero?
  • A.A fixed % of a shrinking balance always leaves a small remainder
  • B.WDV adds value
  • C.It is illegal to reach zero
  • D.Scrap is added back
18.
An asset (cost 1,00,000, 10% WDV) is sold after 2 years for Rs 78,000. The profit or loss is:
  • A.Loss of Rs 3,000
  • B.Profit of Rs 3,000
  • C.Profit of Rs 78,000
  • D.No profit or loss
19.
A firm wants heavier depreciation in the early years to match heavy early obsolescence. It should choose:
  • A.WDV method
  • B.SLM
  • C.No depreciation
  • D.Revaluation upward
20.
Which statement correctly distinguishes a provision from a reserve?
  • A.A provision is a charge against profit; a reserve is an appropriation of profit
  • B.Both are appropriations
  • C.A reserve is compulsory; a provision is optional
  • D.They are identical
21.
Depreciation is added back when computing 'funds from operations' because it is:
  • A.A non-cash expense
  • B.A cash payment
  • C.A reserve
  • D.An asset
22.
Under SLM the annual rate of depreciation for a machine of Rs 50,000 charged Rs 7,500 a year is:
  • A.15%
  • B.7.5%
  • C.20%
  • D.10%
23.
If a firm forgets to charge depreciation, its profit and assets are:
  • A.Both overstated
  • B.Both understated
  • C.Profit understated, assets overstated
  • D.Unaffected
24.
A 'specific reserve' differs from a 'general reserve' in that it is:
  • A.Created for a particular, named purpose
  • B.Larger
  • C.A charge against profit
  • D.Never disclosed
25.
Charging depreciation up to the date of sale BEFORE computing profit/loss on disposal ensures:
  • A.The book value used is correct on the sale date
  • B.More tax
  • C.A bigger sale price
  • D.No depreciation is needed

Answer Key

Section A — Multiple Choice (1 mark each)
  1. (B) Fixed asset
  2. (B) Land
  3. (B) Obsolescence
  4. (B) Depletion
  5. (B) Amortisation
  6. (A) The same amount
  7. (B) Useful life
  8. (A) Rs 9,000
  9. (B) Reducing book value
  10. (B) Rs 9,000
  11. (A) Profit Rs 5,000
  12. (A) Charge against profit
  13. (B) Appropriation of profit
  14. (B) Provision
  15. (A) Only if there is profit
Section B — Challenge / Olympiad (2 marks each)
  1. (A) Rs 1,40,000
  2. (A) A fixed % of a shrinking balance always leaves a small remainder
  3. (A) Loss of Rs 3,000
  4. (A) WDV method
  5. (A) A provision is a charge against profit; a reserve is an appropriation of profit
  6. (A) A non-cash expense
  7. (A) 15%
  8. (A) Both overstated
  9. (A) Created for a particular, named purpose
  10. (A) The book value used is correct on the sale date
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