Depreciation MCQ Quiz With Answers

Test your knowledge with this multiple choice question (MCQ) test on depreciation. If you can answer every question correctly, it will be excellent preparation for your exams, interviews, and professional work.

If you find any questions difficult, visit the depreciation chapter on our website to find out the necessary details about depreciation (see the Financial Accounting section).

1. The main aim of providing depreciation is:

To calculate net profit
To show previous profit
To satisfy the tax department
To reduce tax

2. Depreciation arises due to:

Wear and tear
Reduction in the value of assets
Increase in the value of liabilities
Reduction in capital

3. Depreciation is a process of:

Allocation
Valuation
Both (1) and (2)
None of the above

4. Under the straight line method of providing depreciation, it:

Increases every year
Decreases every year
Remains constant every year
None of the above

5. Depreciation to machinery is debited to:

Profit and loss a/c
Machinery a/c
Depreciation a/c
Expenses and loss a/c

6. The total amount of depreciation of an asset cannot exceed its:

Scrap value
Market value
Depreciation value
None of these

7. Depreciation is necessary to calculate:

Net profit
Net financial position
Tax
None of the above

8. Depreciation of plant is recorded in the:

Profit and loss a/c
Trading a/c
Assets a/c
Balance sheet

9. The difference between gross investment and net investment is:

Depreciation
Acceleration
Deceleration
Capital investment

10. Currency depreciation occurs when:

The value of the currency falls
The value of the currency rises
Inflation falls
The balance of payment improves

11. Which of the following items provides the important function of shielding part of income from taxes?

Inventory
Supplies
Machinery
Depreciation

12. The effect of inflation on the price competitiveness of a country's products may be offset by:

Appreciation of the currency
Revaluation of the currency
Depreciation of the currency
Lower inflation abroad

13. Depreciation decreases:

Liabilities
Cash
Capital
Bank

14. Which of the following would not lead to an increase in net cash flow?

Higher selling price
Reduced material costs
Larger sales volume
Lower depreciation charge

15. In a recession:

Unemployment is likely to be low
Prices are likely to increase
Growth is negative
Growth is slow

16. Which of the following is not a cash outflow?

New equipment
Cash drawings
Depreciation
Commission paid

17. Depreciation occurs due to:

Fall in the market value of an asset
Physical wear and tear
Fall in the value of money
None of the above

18. Under the diminishing balance method, depreciation:

Increases every year
Decreases every year
Remains constant every year
None of the above

19. Under the fixed installment method, depreciation is calculated on:

Original cost
Balance amount
Scrap value
None of the above

20. Under the diminishing balance method, depreciation is calculated on:

Scrap value
Original value
Book value
None of the above

21. Loss on sale of plant and machinery should be written off against:

Share premium
Depreciation fund account
Sales account
Profit and loss account

22. Assets with a limited useful life are termed:

Limited assets
Depreciation assets
Unlimited assets
None of the above

23. The process of becoming out of date or obsolete is termed:

Physical deterioration
Depletion
Obsolescence
Amortization

24. Which of these terms is used to write off in reference to tangible fixed assets?

Depreciation
Depletion
Amortization
Both (2) and (3)

25. The economic factor that causes depreciation is:

Time
Obsolescence and inadequacy
Wear and tear
Money valuation

You may also check:

Depreciation short questions

Depreciation fill in the blanks

Depreciation MCQs

Written by True Tamplin, BSc, CEPF®

Reviewed by Subject Matter Experts

Depreciation MCQs FAQs

True Tamplin, BSc, CEPF®

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Written by True Tamplin, BSc, CEPF®

Reviewed by Subject Matter Experts

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