Account class 11 Depreciation

1. Depreciation is the process of apportionment of the cost of the asset over its useful life.

2. Depreciation decrease only the book value of the asset, not the market value.

3. Written down value method is followed so that the total burden on profit and less account in respect of depreciation and repairs but together remain almost equal each year.

4. Under diminishing method , depreciation is charged on the cost price of fixed asset.

5. Under diminishing balance method, depreciation is charged on original cost of the asset minus estimate scrap value.

6. Depreciation is provided only on fixed asset except land.

7. The main objective of providing depreciation is to calculate true profit.

8. Depreciation is the process of valuation of an asset.

9. Depreciation cannot be provided in case of loss in a financial year.

10. Depreciation is the decline in the market value of tangible fixed asset.

11. In diminishing balance method of depreciation , the rate percent of depreciation gets reduced every year.

12. There is no difference between written down value method and diminishing balance method of depreciation.

13. In case of diminishing balance method, the asset gets reduced to zero level.

14. It is not necessary to provide depreciation on plant and machinery when its market value is higher than its book value.

15. Depreciation is a non cash expenditure.

16. Providing depreciation reduces the amount of profit available for dividend.

17. Providing depreciation ensure sufficient cash for the replacement of an asset.

18. When depreciation is credited to a ‘provision for depreciation’ account, the fixed asset appears always at cost price in the books.

19. What is amount of difference between the closing balances of two machines after two year is both machines were purchased on the same date with the same amount i.e., for Rs 1,00,000? Machine I is depreciated by 20% p.a. on straight line method and machine II is depreciated by 20% p.a. on diminishing balance method ;

20. Ambuja Cement Ltd. purchased a machine on 1/1/2009 for Rs 1,20,000. Installation expenses were Rs 10,000. Its residual value after 10 year is Rs 5000. On 1/03/2009 expenses on its repair were incurred to the extent of Rs 2000. Depreciation is provided under straight line method. Books are closed on 31st march every year. The amount of depreciation for the current year will be ;

21. The balance of machine on 31st march 2009 is Rs 97,200. The machine was purchased on 1st April 2007. Depreciation is charged @ 10% p.a. by diminishing balance method.  The cost price of the machine as on 1st April 2007 would be ;

22. Depreciation is provided on ;

23. Original cost of an asset is Rs 1,26,000; Salvage value is Rs 6000; Useful life is 6 years. The rate of depreciation under straight line method will be ;

24. In the book of D Ltd. the machinery account shows a debit balance of Rs 60,000 as on April 1,2010 and provision for depreciation A/c at Rs 24,000. The machinery was sold on September 30, 2010 for Rs 30,000. The company charges depreciation @20% p.a. on diminishing balance method, profit /loss on sale of the machinery is ;

25. What will be the percentage of depreciation under SLM in the following case ;

Original cost of machine Rs 1,50,000

Salvage value after 9 year Rs 15,000

Repair charges in 2 year Rs 10,000

26. Which of the following is not a feature of written down value method of depreciation?

27. Which of the following best describes the “Depreciation”?

28. A machine was purchased on 1st April 2009 for Rs 5,00,000 and on 1st October, 2009 a new machine is added for Rs 2,00,000. Calculate the balance of machine account, if depreciation is charged at 20% p.a. on written down value method method for the year ending march 31, 2010.