Worksheet Solutions: Depreciation, Provisions and Reserves | Accountancy Class 11 - Commerce PDF Download

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MCQs

Q24: ____ 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
Ans: (b)

Q25: 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)
Ans: (d)

Q26: 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
Ans: (a)

Q27: ____ 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
Ans: (c)

Q28: 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
Ans: (a)

Q29: 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
Ans: (c)

Q30: 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
Ans: (d)

Q31: Creation of reserve reduces taxable profits of the business.
(a) True
(b) False
(c) Can’t say
(d) Partially true
Ans: (b)

Q32: ____ is a reserve which does not appear in the balance sheet.
(a) General reserve
(b) Specific reserve
(c) Secret reserve
(d) Capital reserve
Ans: (c)

Q33: Secret reserve is called such as it is not known to outside stakeholders.
(a) True
(b) False
(c) Can’t say
(d) Partially true
Ans: (a)

Q34: Making excessive provision for doubtful debts builds up the secret reserve in the business.
(a) True
(b) False
(c) Can’t say
(d) Partially true
Ans: (a)

Match The Following

Ans: 1-a ;2-c

Q2: 

Ans: 1-b; 2-a

Q3: 

Ans: 1-a; 2-c

Q4:

Ans: 1-a; 2-b

Q5: 

Ans: 1-d; 2-b

Q6:

Ans: 1-a; 2-b

Q7: 

Ans: 1- b; 2-c

Q8: 

Ans:1-b; 2-a

MCQs

Q1: Direction Read the following case study and answer question on the basis of the same.
Ans: M/s XYZ purchased a plant for Rs 5,00,000 on 1st April, 2017, and spent Rs 50,000 for its installation. The salvage value of the plant after its useful life of 10 years is estimated to be Rs 10,000.The owner of the firm has certain dilemmas regarding the concept of depreciation. You are required to advise him regarding the same by answering the following questions.

Q2: 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
Ans: (a)

Q3: 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
Ans: (d)

Q4: 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
Ans: (d)

Q5: 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
Ans: (d)

Q6: What will be the amount of depreciation charged annually using straight line method?
(a) Rs50,000
(b) Rs54,000
(c) Rs55,000
(d) None of these
Ans: (b)

Direction Read the following case study and answer questions on the basis of the same.
On 1st April, 2017, X Ltd. purchased a machinery for Rs 12,00,000. On 1st October, 2019 a part of the machinery purchased on 1st April, 2017 for Rs 80,000 was sold for Rs 45,000 and a new machinery at the cost of Rs 1,58,000 was purchased and installed on the same date. The company has adopted the method of providing 10% p.a. depreciation on the diminishing balance of the machinery. X Ltd. maintains provision for depreciation and machinery disposal account. You are required to answer the following questions.
Q1: 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
Ans: (c)

Q2: What is the balance carried in the machinery account in March, 2018?
(a) Rs12,00,000
(b) Rs10,80,000
(c) Rs9,60,000
(d) None of these
Ans: (a)

Q3: What is the accumulated depreciation on the machinery worth Rs 80,000 that was sold?
(a) Rs8,000
(b) Rs7,200
(c) Rs18,440
(d) None of these
Ans: (c)

Q4: What is the gain or loss on the sale of machinery worth Rs 80,000?
(a) Rs16,560 profit
(b) Rs16,560 loss
(c) Rs35,000 loss
(d) Rs35,000 profit
Ans: (b)

Q5: Provision for depreciation will be shown as a current asset by X Ltd. in the balance sheet.
(a) True
(b) False
(c) Partially true
(d) Can’t say
Ans: (b)