📘 Depreciation – 100 MCQs

1–20: Basics of Depreciation

1. Depreciation refers to:
   A. Increase in asset value
   B. Decrease in asset value due to wear and tear
   C. Cash loss
   D. Profit
   Answer: B
2. Depreciation is charged on:
   A. Current assets
   B. Fixed assets
   C. Liabilities
   D. Revenue
   Answer: B
3. Depreciation is a:
   A. Capital expenditure
   B. Revenue expenditure
   C. Non-cash expense
   D. Income
   Answer: C
4. Depreciation is provided to:
   A. Increase profit
   B. Show true profit
   C. Reduce liabilities
   D. Increase assets
   Answer: B
5. Which asset is depreciated?
   A. Land
   B. Machinery
   C. Cash
   D. Stock
   Answer: B
6. Depreciation arises due to:
   A. Appreciation
   B. Usage
   C. Sale
   D. Profit
   Answer: B
7. Depreciation is charged for:
   A. One year only
   B. Entire life of asset
   C. Half year only
   D. No period
   Answer: B
8. Depreciation is based on:
   A. Cost principle
   B. Matching principle
   C. Dual aspect
   D. Realisation
   Answer: B
9. Depreciation reduces:
   A. Liability
   B. Asset value
   C. Capital
   D. Income
   Answer: B
10. Depreciation is recorded in:
    A. Balance Sheet
    B. Trading A/c
    C. Profit & Loss A/c
    D. Cash Book
    Answer: C
11. Depreciation is:
    A. Cash payment
    B. Cash receipt
    C. Non-cash charge
    D. Liability
    Answer: C
12. Which asset is NOT depreciated?
    A. Building
    B. Plant
    C. Land
    D. Furniture
    Answer: C
13. Depreciation is applicable to:
    A. Wasting assets
    B. Fixed assets
    C. Both A & B
    D. None
    Answer: C
14. Depreciation is:
    A. Optional
    B. Mandatory
    C. Illegal
    D. Rare
    Answer: B
15. Depreciation ensures:
    A. Profit maximization
    B. Correct profit measurement
    C. Tax evasion
    D. Capital gain
    Answer: B
16. Depreciation is charged even if:
    A. Profit occurs
    B. Loss occurs
    C. Asset unused
    D. All of these
    Answer: D
17. Depreciation is related to:
    A. Assets
    B. Liabilities
    C. Income
    D. Capital
    Answer: A
18. Depreciation is calculated on:
    A. Historical cost
    B. Market value
    C. Replacement cost
    D. Scrap value
    Answer: A
19. Depreciation is a:
    A. Provision
    B. Reserve
    C. Fund
    D. Liability
    Answer: A
20. Depreciation is charged to:
    A. Capital
    B. Profit & Loss
    C. Balance Sheet
    D. Cash
    Answer: B

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21–50: Methods of Depreciation

21. Straight Line Method is also called:
    A. Fixed method
    B. Diminishing method
    C. Declining method
    D. Reducing method
    Answer: A
22. Written Down Value method is also called:
    A. Fixed method
    B. Reducing balance method
    C. Straight method
    D. Linear method
    Answer: B
23. Under SLM, depreciation is:
    A. Variable
    B. Constant
    C. Increasing
    D. Decreasing
    Answer: B
24. Under WDV, depreciation is:
    A. Constant
    B. Increasing
    C. Decreasing
    D. Zero
    Answer: C
25. SLM is suitable for:
    A. Machines
    B. Buildings
    C. Vehicles
    D. All
    Answer: B
26. WDV is suitable for:
    A. Buildings
    B. Machinery
    C. Land
    D. Cash
    Answer: B
27. Formula of SLM:
    A. Cost × Rate
    B. (Cost – Scrap)/Life
    C. WDV × Rate
    D. None
    Answer: B
28. WDV is calculated on:
    A. Original cost
    B. Reduced value
    C. Scrap
    D. Market
    Answer: B
29. Depreciation under WDV reduces due to:
    A. Increase in cost
    B. Decrease in asset value
    C. Increase in scrap
    D. Sale
    Answer: B
30. Residual value means:
    A. Initial cost
    B. Final value
    C. Scrap value
    D. Market value
    Answer: C
31. Depreciation rate is:
    A. Fixed always
    B. Variable
    C. Based on method
    D. None
    Answer: C
32. SLM ignores:
    A. Time
    B. Residual value
    C. Usage
    D. Profit
    Answer: C
33. WDV method gives:
    A. Equal depreciation
    B. Higher initial depreciation
    C. Lower initial depreciation
    D. Zero
    Answer: B
34. Depreciation under SLM remains:
    A. Same every year
    B. Changing
    C. Increasing
    D. Zero
    Answer: A
35. WDV method is also called:
    A. Reducing method
    B. Fixed method
    C. Straight method
    D. Linear
    Answer: A
36. In SLM, asset value becomes:
    A. Zero
    B. Scrap value
    C. Negative
    D. Doubled
    Answer: B
37. In WDV, asset value never becomes:
    A. Zero
    B. Negative
    C. Scrap
    D. Fixed
    Answer: A
38. Which method is simple?
    A. WDV
    B. SLM
    C. Both
    D. None
    Answer: B
39. Which method is realistic?
    A. SLM
    B. WDV
    C. Both
    D. None
    Answer: B
40. Depreciation rate under WDV is applied on:
    A. Cost
    B. Reduced value
    C. Scrap
    D. Profit
    Answer: B

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51–75: Accounting Treatment

51. Depreciation account is:
    A. Personal
    B. Real
    C. Nominal
    D. Asset
    Answer: C
52. Entry for depreciation:
    A. Debit asset
    B. Debit depreciation
    C. Credit cash
    D. None
    Answer: B
53. Depreciation A/c is debited because:
    A. Expense
    B. Income
    C. Asset
    D. Liability
    Answer: A
54. Asset account is credited for:
    A. Increase
    B. Decrease
    C. Profit
    D. Loss
    Answer: B
55. Provision for depreciation is:
    A. Asset
    B. Liability
    C. Contra asset
    D. Income
    Answer: C
56. Accumulated depreciation is:
    A. Expense
    B. Income
    C. Total depreciation
    D. Liability
    Answer: C
57. Depreciation reduces:
    A. Profit
    B. Cash
    C. Liability
    D. Capital
    Answer: A
58. Depreciation is shown in:
    A. Balance Sheet
    B. P&L
    C. Both
    D. None
    Answer: C
59. Depreciation provision appears on:
    A. Asset side
    B. Liability side
    C. P&L
    D. Trading
    Answer: A
60. Depreciation is charged annually to:
    A. Match cost
    B. Increase profit
    C. Reduce tax only
    D. None
    Answer: A

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76–100: Advanced & Railway Context

76. Railway assets include:
    A. Tracks
    B. Coaches
    C. Engines
    D. All
    Answer: D
77. Depreciation on railway assets ensures:
    A. Replacement
    B. Maintenance
    C. Profit
    D. Loss
    Answer: A
78. Depreciation fund is used for:
    A. Dividend
    B. Replacement
    C. Salary
    D. Tax
    Answer: B
79. Depreciation in Railways is important for:
    A. Asset renewal
    B. Profit only
    C. Cash only
    D. None
    Answer: A
80. Depreciation affects:
    A. Profit
    B. Asset value
    C. Both
    D. None
    Answer: C
81. Depreciation does NOT affect:
    A. Cash
    B. Profit
    C. Asset
    D. Expenses
    Answer: A
82. Depreciation is calculated till:
    A. Sale
    B. Scrap
    C. End of life
    D. All
    Answer: D
83. Depreciation policy should be:
    A. Consistent
    B. Changing
    C. Random
    D. None
    Answer: A
84. Change in depreciation method requires:
    A. Disclosure
    B. Ignoring
    C. Adjustment
    D. Both A & C
    Answer: D
85. Depreciation is governed by:
    A. Accounting standards
    B. Laws
    C. Rules
    D. All
    Answer: D
86. Depreciation on obsolete asset is:
    A. High
    B. Low
    C. Zero
    D. None
    Answer: A
87. Depreciation ensures:
    A. Matching cost with revenue
    B. Overstatement
    C. Understatement
    D. None
    Answer: A
88. Depreciation is not provided on:
    A. Land
    B. Machinery
    C. Furniture
    D. Equipment
    Answer: A
89. Depreciation depends on:
    A. Useful life
    B. Cost
    C. Scrap
    D. All
    Answer: D
90. Depreciation is an example of:
    A. Allocation
    B. Valuation
    C. Adjustment
    D. None
    Answer: A
91. Depreciation helps in:
    A. True financial position
    B. Profit manipulation
    C. Loss increase
    D. None
    Answer: A
92. Depreciation is compulsory in:
    A. Accounting
    B. Tax
    C. Both
    D. None
    Answer: C
93. Depreciation method once adopted:
    A. Should not change
    B. Can change with reason
    C. Must change yearly
    D. None
    Answer: B
94. Depreciation is:
    A. Internal expense
    B. External expense
    C. Cash expense
    D. None
    Answer: A
95. Depreciation is related to:
    A. Cost allocation
    B. Profit
    C. Revenue
    D. Liability
    Answer: A
96. Depreciation reduces:
    A. Asset book value
    B. Cash
    C. Liability
    D. Stock
    Answer: A
97. Depreciation is based on:
    A. Estimate
    B. Exact value
    C. Market
    D. None
    Answer: A
98. Depreciation is recorded periodically to:
    A. Match revenue
    B. Increase profit
    C. Reduce tax only
    D. None
    Answer: A
99. Depreciation affects:
    A. Net profit
    B. Asset value
    C. Both
    D. None
    Answer: C
100. Depreciation is necessary for:
     A. True accounts
     B. Fake accounts
     C. No accounts
     D. None
     Answer: A