Frequently Asked Depreciation MCQs and Explanations
MCQs on depreciation are multiple choice questions that test your understanding of how assets lose value over time due to use, wear, and age. This topic is essential for students preparing for Commerce exams like Class 11, Class 12, CA Foundation, and for practical business knowledge. Depreciation knowledge is also important for understanding business accounts and financial statements in daily life.
| Method of Depreciation | Key Feature | Where Used |
|---|---|---|
| Straight Line Method (SLM) | Equal amount of depreciation each year | Buildings, Furniture |
| Written Down Value (WDV) Method | Depreciation on reducing balance | Machinery, Vehicles |
| Units of Production Method | Based on usage or output | Machines, Plants |
| Depletion Method | Based on extraction | Mines, Oil Wells |
MCQs on Depreciation
MCQs on depreciation help students identify different methods, calculations, and journal entries related to asset accounting. Practicing these questions supports quick revision, boosts exam confidence, and strengthens concepts for competitive and academic success.
Key Concepts for Depreciation MCQs
- Depreciation means the reduction in the value of a tangible asset over time.
- The straight line method charges a fixed amount of depreciation each year.
- The written down value (diminishing balance) method calculates depreciation on the book value after each year.
- Provision for depreciation is a reserve created for future asset replacement.
- Journal entries for depreciation debit the Depreciation Account and credit the respective Asset Account.
Practice MCQs on Depreciation with Answers
-
Depreciation is charged on:
- (a) Fixed assets
- (b) Current assets
- (c) Liabilities
- (d) Capital
-
Which method calculates the same depreciation every year?
- (a) Written down value method
- (b) Straight line method
- (c) Depletion method
- (d) Revaluation method
-
Depreciation is classified as:
- (a) Revenue expenditure
- (b) Capital expenditure
- (c) Deferred revenue expenditure
- (d) None of these
-
The main objective of providing depreciation is:
- (a) Reduce profit
- (b) Show true value of assets
- (c) Reduce tax
- (d) Create reserves
-
Under the WDV method, depreciation is calculated on:
- (a) Original cost
- (b) Book value at the beginning of the year
- (c) Both (a) and (b)
- (d) Scrap value
-
Which of these is NOT a cause of depreciation?
- (a) Passage of time
- (b) Wear and tear
- (c) Obsolescence
- (d) Appreciation of value
-
When depreciation is not provided, profit is:
- (a) Understated
- (b) Overstated
- (c) Correctly stated
- (d) Not affected
-
Provision for depreciation account is:
- (a) Asset
- (b) Expense
- (c) Liability
- (d) None of these
-
Which of the following assets is NOT depreciated?
- (a) Land
- (b) Building
- (c) Vehicle
- (d) Machinery
-
The depreciation method required by most tax laws is:
- (a) Straight line
- (b) Written down value
- (c) Depletion
- (d) None
For a complete set of MCQs with detailed explanations, visit our dedicated pages on the Methods of Depreciation or download free PDFs below.
PDF Download and Online Quiz for Depreciation MCQs
- Download a free set of MCQs for quick practice in PDF format.
- Take interactive online quizzes for instant answers and explanations.
- Check DK Goel Solutions (Depreciation Chapter) and TS Grewal Solutions (Class 11) for more MCQ practice.
Tips for Success in Depreciation MCQs
- Revise depreciation formulas and method differences regularly.
- Understand journal entries—depreciation always reduces asset value.
- Practice calculation-based MCQs using both SLM and WDV formulas.
- Be clear on terms: provision vs. reserve, depreciation vs. amortization.
- Check solved examples and explanations from standard textbooks like DK Goel and TS Grewal.
Why Learn Depreciation MCQs?
Depreciation MCQs enhance your skills in analyzing accounts, preparing financial statements, and understanding real-world asset management. This helps students excel in school board exams (CBSE/ISC), competitive tests, and future business roles. At Vedantu, we simplify Commerce topics for better learning and career confidence.
Related Topics for Further Practice
- Accounting Concept of Depreciation
- Straight Line and Written Down Value Method
- Final Accounts
- Cost of Assets for Calculating Depreciation
- Difference Between Depreciation Expense and Accumulated Depreciation
- Units of Production Method
In summary, MCQs on depreciation cover key methods, calculations, and concepts needed for exam success. Understanding both theory and practical questions helps students perform better in tests and real business scenarios. Strengthen your Commerce foundation with Vedantu’s expert resources and practice material.
FAQs on Depreciation MCQs for Quick Revision and Practice
1. What is depreciation? Give an example MCQ.
Depreciation is the systematic allocation of the cost of a tangible asset over its useful life. It reflects the decline in an asset's value due to wear and tear, obsolescence, or other factors. Example MCQ: A company purchased equipment for $10,000. Using the straight-line method with a 5-year useful life and no salvage value, what is the annual depreciation expense? (a) $500 (b) $1,000 (c) $2,000 (d) $10,000. Answer: (c) $2,000.
2. Which method is best for calculating depreciation?
There's no single 'best' depreciation method; the optimal choice depends on the specific asset and company circumstances. The straight-line method is simple to understand and apply, making it suitable for many situations. However, the written down value method (declining balance method) may be more realistic for assets that depreciate faster early in their lives. Consider factors like asset type, industry standards, and tax implications when selecting a method. Multiple choice questions (MCQs) often test your understanding of various methods, so familiarize yourself with them all.
3. Where can I download multiple choice questions on depreciation PDF?
Many educational websites and resources provide downloadable PDFs containing MCQs on depreciation. Search online for "depreciation MCQs PDF," "depreciation quiz PDF," or similar terms. You can also find practice materials in textbooks and online study platforms. Ensure the source is reputable and aligns with your syllabus to ensure exam relevance.
4. Are MCQs on depreciation useful for Class 11 & 12 board exams?
Yes, MCQs on depreciation are highly beneficial for Class 11 and 12 board exams, especially in Accountancy. They help you assess your understanding of key concepts, including different depreciation methods (straight-line, written down value, etc.), calculations, and accounting treatment. Regular practice with MCQs improves your exam readiness and helps identify areas needing further revision.
5. How is depreciation treated in final accounts MCQs?
In final accounts, depreciation is an expense that reduces the profit of the business. It's shown in the profit and loss account. MCQs may test your ability to calculate depreciation and its effect on the profit and loss account and the balance sheet (showing the net book value of the asset). Be prepared for questions related to adjusting entries and preparing the final accounts after depreciation calculations.
6. What is the difference between provision for depreciation and accumulated depreciation in MCQs?
Provision for depreciation is a term sometimes used interchangeably with accumulated depreciation. However, it's important to note that it reflects the total depreciation charged on an asset up to a specific point in time. This is a contra-asset account that reduces the asset's value on the balance sheet. It is the cumulative amount of depreciation expense recorded since the asset was acquired. Therefore, the main difference lies in terminology, and both terms describe the same concept in accounting.
7. Can impairment of assets be tested in depreciation MCQs?
Yes, impairment of assets can be included in depreciation MCQs. Impairment refers to a significant decline in an asset's value that goes beyond normal depreciation. MCQs might present scenarios where an asset's value drops suddenly due to unforeseen circumstances, requiring an impairment loss to be recognized in addition to regular depreciation. Understanding the difference between depreciation and impairment is crucial for accurate accounting.
8. How does depreciation impact profit & loss accounts in multiple choice format?
Depreciation is recorded as an expense in the profit and loss account. It reduces the reported net profit. MCQs often test your ability to calculate the impact of depreciation on net profit, requiring you to adjust the profit figure based on the calculated depreciation expense for the period. Understanding this is vital for interpreting financial statements.
9. Are all non-current assets subject to depreciation MCQs?
Generally, yes, most non-current assets (also known as fixed assets) are subject to depreciation. However, there are exceptions, such as land, which is typically not depreciated because it's assumed to have an indefinite life. MCQs may test your knowledge of which assets are depreciable and which are not, and why. This aspect often involves conceptual understanding and the application of accounting standards.
10. What are advanced calculation-based MCQs in depreciation?
Advanced calculation-based MCQs on depreciation may involve scenarios with: multiple assets, changes in useful life or salvage value during the asset's life, different depreciation methods applied to different parts of the asset, or partial year depreciation calculations. They may also include situations that require the application of more complex accounting concepts like revaluation of assets or asset disposals along with depreciation. These MCQs demand a deeper understanding of accounting principles and computational skills.
11. What are the key points in depreciation accounting MCQ?
Key points for depreciation accounting MCQs include understanding the different depreciation methods (straight-line, written down value, units of production), calculating depreciation expense, preparing journal entries, and reflecting depreciation in the financial statements (profit and loss account and balance sheet). Also, be aware of the concepts of accumulated depreciation and net book value. Understanding the impact of depreciation on profitability and financial position is key.
