1. Depreciation is a process of _________.

A. valuation.

B. reduction.

C. allocation.

D. appreciation.

ANSWER: C

2. The main objective of providing depreciation is _______.

A. to calculate true profit.

B. to calculate financial position.

C. to reduce tax burden.

D. to reduce profit.

ANSWER: A

3. Depreciation arises because of_____.

A. fall in the market value of an asset.

B. physical wear and tear.

C. fall in the value of money.

D. rise in the value of money.

ANSWER: B

4. Under the straight line method of charging depreciation, depreciation ____.

A. increases every year.

B. decreases every year.

C. is constant.

D. fluctuate every year.

ANSWER: C

5. Under the diminishing balance method depreciation is calculated on____.

A. original value.

B. written down value.

C. scrap value.

D. market value.
ANSWER: B

6. The amount of depreciation charged on machinery will be debited to_____.

A. machinery account.

B. depreciation account.

C. cash account.

D. bank account.

ANSWER: B

7. Examples of non-trading concerns are ________.

A. Commercial banks

B. Civil hospital

C. Joint stock company

D. Private educational institutions

ANSWER: B

8. The accounts of non-trading concerns are generally maintained according to _______.

A. Mercantile accounting system

B. Cash accounting system

C. Double entry book keeping system

D. Single entry system

ANSWER: C

9. Depreciation is provided on ________.

A. current asset .

B. fixed assets.

C. fictitious assets.

D. investment.

ANSWER: B

10. The permanent, continuing and gradual shrinkage in the book value of a fixed asset is called
_______.

A. depreciation .

B. appreciation.
C. reduction.

D. computation.

ANSWER: A

11. Depreciation is charged on the_________.

A. market value.

B. Depreciable value.

C. purchase value.

D. sale value.

ANSWER: B

12. Depreciation is charged on_________.

A. continuous basis.

B. temporary basis.

C. daily basis.

D. monthly basis.

ANSWER: A

13. Loss of usefulness occasioned by improved production methods is known as_______.

A. physical deterioration.

B. obsolescence.

C. disuse.

D. inadequacy.

ANSWER: B

14. Mines, quarries, oilfields and forest are example of _______.

A. fixed assets.

B. current assets.

C. wasting assets.

D. intangible assets.

ANSWER: C

15. Depreciation applies to________.

A. current assets.
B. wasting assets.

C. intangible assets.

D. fixed assets.

ANSWER: D

16. The main source of income for non-trading concern is _________.

A. Subscription

B. Sales

C. Dividend on investment

D. entrance fee

ANSWER: A

17. The control of non-trading concern rest in the hand of

A. Directors

B. Managing agents

C. Governing body

D. Promoters

ANSWER: C

18. Estimated sale value of the asset at the end of its economic life is known as _____.

A. purchase value.

B. market value.

C. written down value.

D. residual value.

ANSWER: D

19. Provision for depreciation account appears on the _______.

A. Asset side.

B. Liability side.

C. P & L account debit side.

D. P & L account credit side.

ANSWER: B

20. If the asset is sold, the provision for depreciation relating to the asset sold is transferred to _______.
A. asset account.

B. liability account.

C. P & L account.

D. trading account.

ANSWER: A

21. The asset account appears in the books at original cost when a ______.

A. P & L account is maintained.

B. balance sheet is maintained.

C. provision for depreciation account is maintained.

D. provision for depreciation account is not maintained.

ANSWER: C

22. The value of asset can be reduced to zero under this method _____.

A. straight line method .

B. written down value method.

C. annuity method.

D. depreciation fund method.

ANSWER: A

23. The balance in the asset account will not be reduced to zero under this method _____.

A. straight line method .

B. written down value method.

C. annuity method.

D. depreciation fund method.

ANSWER: B

24. Income tax authorities recognize this method ______.

A. straight line method .

B. written down value method.

C. annuity method.

D. depreciation fund method.

ANSWER: B
25. Under which method of depreciation, the earlier year of the life of the asset, profits are more _____.

A. straight line method.

B. written down value method.

C. annuity method.

D. depreciation fund method.

ANSWER: A

26. If debit side of receipt and payment account exceeds credit, it represents __________.

A. Cash at bank

B. Bank overdraft

C. Deficit balance

D. Surplus balance

ANSWER: A

27. Diminishing balance method is also called _________.

A. written down value method .

B. annuity method.

C. depreciation fund method.

D. Fixed installment method.

ANSWER: A

28. Deficit balance can be shown in balance sheet as

A. Liability

B. Assets

C. Owner’s equity

D. None of above

ANSWER: B

29. If debit side of income and expenditure account is greater it is termed as

A. Excess of income over expenditure

B. Net income

C. Surplus balance

D. Deficit balance
ANSWER: D

30. Under annuity method the amount of depreciation is found out from _____.

A. log tables.

B. sinking fund tables.

C. annuity tables.

D. present value tables.

ANSWER: C

31. Depreciation fund is also called ______.

A. reserve fund.

B. compensation fund.

C. workers fund.

D. sinking fund.

ANSWER: D

32. Under depreciation fund method, the amount of depreciation is calculated with reference to
________.

A. log tables

B. sinking fund tables

C. annuity tables

D. present value tables

ANSWER: B

33. Under depreciation fund method depreciation is charged to ______.

A. profit and loss account.

B. trading account.

C. balance sheet.

D. p & l appropriation account.

ANSWER: A

34. Reciept and payment account includes _________.

A. Revenue items

B. Capital items
C. Both capital and revenue items

D. None of above

ANSWER: C

35. The receipts and payments account of a non-profit organization is a __________.

A. Nominal account

B. Real account

C. Income statement account

D. Financial statement

ANSWER: B

36. The difference between the book value at the beginning and at the end (revaluation amount) is
__________.

A. depreciation.

B. appreciation.

C. reduction.

D. computation.

ANSWER: A

37. An advance receipt of subscription from a member of the non-profit organization is considered as an
__________.

A. Expense

B. Liability

C. Equity

D. Asset

ANSWER: B

38. Income and expenditure account is based on _________.

A. Cash accounting

B. Accrual accounting

C. Government accounting

D. Management accounting

ANSWER: B
39. Expenses which can be directly identified with or incurred for particular department are called
__________.

A. direct expenses. .

B. indirect expenses.

C. monthly expenses.

D. weekly expenses.

ANSWER: A

40. Expenses Which cannot be identified with a particular department are called_______.

A. direct expenses.

B. indirect expenses.

C. monthly expenses.

D. weekly expenses.

ANSWER: B

41. Selling expenses should be divided among the different department on the basis of _______.

A. light points.

B. H.P of machine.

C. sales ratio.

D. floor area.

ANSWER: C

42. Rent and rates should be divided among the different departments on the basis of ____.

A. light points.

B. H.P of machine.

C. sales ratio .

D. floor area.

ANSWER: C

43. Fire insurance and repairs on assets should be divided among the different departments on the basis
of _________.

A. light points.

B. H.P of machine.
C. value of each assets.

D. floor area.

ANSWER: C

44. Repairs to buildings, maintenance of premises should be divided among the different departments
on the basis of _________.

A. light points.

B. H.P of machine.

C. sales ratio.

D. floor area.

ANSWER: D

45. Lighting expenses should be divided among the different departments on the basis of _________.

A. light points.

B. H.P of machine.

C. sales ratio.

D. floor area.

ANSWER: A

46. Carriage inward expenses should be divided among the different departments on the basis of
___________.

A. light points.

B. purchase value.

C. sales ratio.

D. floor area.

ANSWER: B

47. Power expenses should be divided among the different departments on the basis of _____.

A. light points.

B. H.P of machine.

C. sales ratio .

D. floor area.

ANSWER: B
48. Workmen’s amenities and welfare expenses should be divided among the different departments on
the basis of ____________.

A. number of worker in each department.

B. number of machines in each department.

C. wages of each department.

D. floor area occupied by each department.

ANSWER: A

49. ESI, PF payable by employer should be divided among the different departments on the basis of
________.

A. number of worker in each department.

B. number of machines in each department.

C. wages of each department.

D. floor area occupied by each department.

ANSWER: C

50. Factory manger’s salary should be divided among the different departments on the basis of
_____________.

A. time devoted to each department.

B. time spent in each department.

C. time assigned to each department.

D. time wasted in each department.

ANSWER: A