Online Test — Depreciation, Provisions and Reserves
15 Questions • 15 min • Chapter MCQ
15:00
Question 1 of 15
Depreciation is the gradual fall in the value of a:
Current asset
Fixed asset
Liability
Debtor
Explanation: Depreciation applies to fixed assets.
Question 2 of 15
Which asset is usually NOT depreciated?
Machinery
Land
Furniture
Vehicle
Explanation: Land has unlimited life and is usually not depreciated.
Question 3 of 15
An asset becoming outdated by new technology is:
Wear and tear
Obsolescence
Depletion
Disposal
Explanation: Becoming outdated is obsolescence.
Question 4 of 15
Writing off natural resources (mines) is called:
Amortisation
Depletion
Obsolescence
Reserve
Explanation: Wasting natural resources are written off by depletion.
Question 5 of 15
Writing off intangible assets (goodwill, patents) is called:
Depletion
Amortisation
Provision
Reserve
Explanation: Intangibles are written off by amortisation.
Question 6 of 15
Under SLM, depreciation each year is:
The same amount
A reducing amount
An increasing amount
Zero
Explanation: SLM charges an equal amount every year.
Question 7 of 15
The SLM formula is (Cost − Scrap) ÷ :
Rate
Useful life
Sale price
Profit
Explanation: Annual depreciation = (Cost − Scrap) ÷ Useful life.
Question 8 of 15
Machine Rs 60,000, scrap Rs 6,000, life 6 years. SLM depreciation =
Rs 9,000
Rs 10,000
Rs 6,000
Rs 12,000
Explanation: (60,000 − 6,000) ÷ 6 = 9,000.
Question 9 of 15
Under WDV, the fixed percentage is charged on the:
Original cost
Reducing book value
Scrap value
Sale price
Explanation: WDV applies the rate to the diminishing book value.
Question 10 of 15
Rs 1,00,000 at 10% WDV: depreciation for year 2 is:
Rs 10,000
Rs 9,000
Rs 8,100
Rs 11,000
Explanation: Year 1: 10,000 (value 90,000); Year 2: 10% of 90,000 = 9,000.
Question 11 of 15
Book value Rs 25,000, sold for Rs 30,000. Result:
Profit Rs 5,000
Loss Rs 5,000
Profit Rs 30,000
No effect
Explanation: Sold above book value → profit of Rs 5,000.
Question 12 of 15
A provision is a:
Charge against profit
Appropriation of profit
Asset
Capital
Explanation: A provision is a charge made even if there is a loss.
Question 13 of 15
A reserve is an:
Charge against profit
Appropriation of profit
Expense
Liability to outsiders
Explanation: A reserve is an appropriation of profit.
Question 14 of 15
Provision for doubtful debts is an example of a:
Reserve
Provision
Asset
Capital
Explanation: It is a provision for a known expense of uncertain amount.
Question 15 of 15
A general reserve is created:
Only if there is profit
Even if there is a loss
From capital
From loans
Explanation: Reserves are appropriations, made only when profit exists.