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Page 1 CPT Section A: Fundamentals of Accounting Chapter-5 Part 5: Miscellaneous Concepts of Depreciation CA. Poonam Patni Depreciation Accounting Page 2 CPT Section A: Fundamentals of Accounting Chapter-5 Part 5: Miscellaneous Concepts of Depreciation CA. Poonam Patni Depreciation Accounting Page 3 CPT Section A: Fundamentals of Accounting Chapter-5 Part 5: Miscellaneous Concepts of Depreciation CA. Poonam Patni Depreciation Accounting MCQ1: XYZ Ltd. Purchased a machine for Rs. 1,20,000 on 01.01.2012. Installation expenses were Rs. 10,000. Life of the asset is 5 years. Residual value is Rs. 2,000. Depreciation is charged as per SLM @ 10%. What is the amount of annual Depreciation. a) Rs.13,000 b) Rs. 17,000 c) Rs. 21,000 d) Rs. 25,000 =1,20,000 + 10,000 =1,30,000 X 10% = 13,000 Page 4 CPT Section A: Fundamentals of Accounting Chapter-5 Part 5: Miscellaneous Concepts of Depreciation CA. Poonam Patni Depreciation Accounting MCQ1: XYZ Ltd. Purchased a machine for Rs. 1,20,000 on 01.01.2012. Installation expenses were Rs. 10,000. Life of the asset is 5 years. Residual value is Rs. 2,000. Depreciation is charged as per SLM @ 10%. What is the amount of annual Depreciation. a) Rs.13,000 b) Rs. 17,000 c) Rs. 21,000 d) Rs. 25,000 =1,20,000 + 10,000 =1,30,000 X 10% = 13,000 MCQ2: Which of the following is not correct in respect to fixed asset. a) They are acquired for using them in the conduct of business operations. b) They are not meant for resale to earn profit. c) They can easily be converted into cash. d) Depreciation at specified rates is to be charged on most of the fixed asset. Page 5 CPT Section A: Fundamentals of Accounting Chapter-5 Part 5: Miscellaneous Concepts of Depreciation CA. Poonam Patni Depreciation Accounting MCQ1: XYZ Ltd. Purchased a machine for Rs. 1,20,000 on 01.01.2012. Installation expenses were Rs. 10,000. Life of the asset is 5 years. Residual value is Rs. 2,000. Depreciation is charged as per SLM @ 10%. What is the amount of annual Depreciation. a) Rs.13,000 b) Rs. 17,000 c) Rs. 21,000 d) Rs. 25,000 =1,20,000 + 10,000 =1,30,000 X 10% = 13,000 MCQ2: Which of the following is not correct in respect to fixed asset. a) They are acquired for using them in the conduct of business operations. b) They are not meant for resale to earn profit. c) They can easily be converted into cash. d) Depreciation at specified rates is to be charged on most of the fixed asset. MCQ 3: Which of the following expenses is not included in the acquisition cost of a plant & equipment.Read More
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FAQs on MCQ - Depreciation Accounting - 2 - Accounting for CA Foundation
| 1. What is depreciation accounting? |  |
Ans. Depreciation accounting refers to the process of allocating the cost of an asset over its useful life. It is a systematic way of recognizing and recording the decrease in value of an asset due to wear and tear, obsolescence, or any other factors. Depreciation is important for accurately reflecting the true value of assets in financial statements.
| 2. How is depreciation calculated? | |
Ans. Depreciation can be calculated using various methods such as straight-line method, reducing balance method, or units of production method. The most commonly used method is the straight-line method, where depreciation is evenly spread over the useful life of the asset. To calculate depreciation using the straight-line method, divide the cost of the asset by its useful life.
| 3. What is the purpose of depreciation accounting? | |
Ans. The purpose of depreciation accounting is to properly match the cost of an asset with the revenue it generates over its useful life. By allocating the cost of an asset over its useful life, depreciation helps in determining the true profitability and financial position of a business. It also ensures that assets are not overstated on the balance sheet.
| 4. Can depreciation be reversed? | |
Ans. Depreciation is a non-reversible process. Once an asset's value is reduced through depreciation, it cannot be reversed or increased back to its original value. However, if the asset's value increases due to factors like revaluation or improvement, the increase is recorded separately and not as a reversal of depreciation.
| 5. How does depreciation affect taxes? | |
Ans. Depreciation has a tax impact as it is considered an expense and reduces the taxable income of a business. By deducting depreciation expenses, businesses can lower their taxable income and consequently reduce their tax liability. However, it is important to follow the tax regulations and depreciation methods prescribed by the tax authorities to ensure compliance.
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