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CA Foundation Depreciation and Amortisation — practice questions

Explore 82 free Depreciation and Amortisation questions in CA Foundation Accounting. Open each question or exercise to read its content, reference answers and available explanation.

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Depreciation and Amortisation questions and exercises with answers

Showing questions 1–30 of 82.

Depreciation is best described as:Read the answer and worked solution →Useful life of an asset is:Read the answer and worked solution →Straight Line Method is also known as:Read the answer and worked solution →Which method results in higher depreciation in earlier years?Read the answer and worked solution →Depreciation is charged primarily to:Read the answer and worked solution →Machine cost ₹10,00,000, residual ₹1,00,000, life 10 years. SLM depreciation per year:Read the answer and worked solution →Asset bought 1 March 2022, year ends 31 March 2022, SLM ₹12,000 per year. Depreciation:Read the answer and worked solution →The depreciable amount equals:Read the answer and worked solution →Under provision for depreciation method, asset is shown at:Read the answer and worked solution →Which is NOT a reason for asset value decreasing over time?Read the answer and worked solution →When the second alternative is used, the asset account in the ledger shows:Read the answer and worked solution →Depreciation begins when an asset is:Read the answer and worked solution →Each significant component of an asset should be:Read the answer and worked solution →Machine cost ₹5,00,000, residual ₹50,000, life 5 years. WDV rate = 1 − ⁵√(50,000/5,00,000) × 100. Approx WDV rate:Read the answer and worked solution →Under straight line method, after full useful life the carrying amount equals:Read the answer and worked solution →Machine bought 1 April 2020 for ₹4,00,000, WDV @ 10%. Carrying amount on 31 March 2023:Read the answer and worked solution →On sale of asset for ₹2,00,000 with WDV ₹2,30,000, the loss on sale is:Read the answer and worked solution →Change in method of depreciation from SLM to WDV is treated under AS as:Read the answer and worked solution →Inauguration cost of a new facility is:Read the answer and worked solution →Initial estimate of dismantling cost on installation of asset is:Read the answer and worked solution →Income Tax Act prescribes which method for most assets?Read the answer and worked solution →Increase in useful life from 5 to 8 years is treated as:Read the answer and worked solution →Amortisation applies to:Read the answer and worked solution →Test cost incurred before commercial production starts is:Read the answer and worked solution →Relocation cost of moving an existing asset to a new site is:Read the answer and worked solution →A machine costs Rs 90,000 with scrap value Rs 10,000 and a 5-year life. Yearly straight-line depreciation is?Read the answer and worked solution →An asset bought for Rs 1,20,000 has scrap value Rs 20,000 and a 10-year life. Straight-line yearly charge is?Read the answer and worked solution →An asset costing Rs 50,000 is depreciated at 10% on the written down value. Depreciation in year 2 is?Read the answer and worked solution →Cost Rs 80,000 and accumulated depreciation Rs 32,000. What is the book value of the asset?Read the answer and worked solution →An asset has a 5-year life, cost 1,000 and salvage 100. What is year 1 depreciation under sum-of-years-digits?Read the answer and worked solution →

Worked practice questions

Depreciation is best described as:

  1. Systematic allocation of cost
  2. A cash payment to vendors
  3. An increase in asset value
  4. A tax credit available item
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Correct answer: A. Systematic allocation of cost

1. Depreciation is the systematic allocation of the depreciable amount of an asset over its useful life. 2. Depreciable amount = cost (or revalued amount) − residual value. 3. It is a non-cash, accounting allocation, not a payment or appreciation. _Source: ICAI BoS Foundation Paper 1, Ch 5 "Depreciation & Amortisation", §1.1 ¶3_

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Useful life of an asset is:

  1. The legal life in the deed
  2. Period of expected use
  3. Manufacturer's warranty span
  4. Always exactly ten years
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Correct answer: B. Period of expected use

1. Useful life is the period over which the asset is expected to be available for use, or the units expected to be produced. 2. It depends on actual usage patterns, not legal or warranty terms. 3. Companies Act Schedule II gives indicative lives. _Source: ICAI BoS Foundation Paper 1, Ch 5 "Depreciation & Amortisation", §1.1 def_

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Straight Line Method is also known as:

  1. Reducing balance method
  2. Sum of years method
  3. Fixed instalment method
  4. Units of production method
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Correct answer: C. Fixed instalment method

1. SLM writes off an equal amount each period over the useful life. 2. Because the instalment is fixed, it is also called the Fixed Instalment Method. 3. Reducing balance is a different method (constant rate on WDV). _Source: ICAI BoS Foundation Paper 1, Ch 5 "Depreciation & Amortisation", §3.1_

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