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Class 11 Commerce Depreciation, Provisions and Reserves — practice questions

Explore 13 free Depreciation, Provisions and Reserves questions in Class 11 Commerce Accountancy. Open each question or exercise to read its content, reference answers and available explanation.

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Depreciation, Provisions and Reserves questions and exercises with answers

Showing questions 1–13 of 13.

Depreciation is the gradual and permanent decrease in the value of a ___ asset due to use and passage of time:Read the answer and worked solution →Under the straight line method, the amount of depreciation charged each year:Read the answer and worked solution →Under the written down value (diminishing balance) method, depreciation is charged on the:Read the answer and worked solution →The estimated residual value of an asset at the end of its useful life is called its:Read the answer and worked solution →The decline in the value of natural resources such as mines and oil wells is specifically called:Read the answer and worked solution →The writing off of the cost of intangible assets such as goodwill and patents is called:Read the answer and worked solution →A fall in the value of an asset because it becomes out-of-date due to new technology is called:Read the answer and worked solution →An amount set aside out of profits to meet a known liability of uncertain amount is a:Read the answer and worked solution →An amount set aside out of profits to strengthen the financial position of a business is a:Read the answer and worked solution →Creating a provision for depreciation has the effect of ___ the net profit of the business:Read the answer and worked solution →A reserve created for a specific purpose, such as a dividend equalisation reserve, is a:Read the answer and worked solution →Charging depreciation is necessary mainly to:Read the answer and worked solution →Under the straight line method, annual depreciation equals (cost − scrap value) divided by the:Read the answer and worked solution →

Worked practice questions

Depreciation is the gradual and permanent decrease in the value of a ___ asset due to use and passage of time:

  1. fixed (tangible)
  2. fictitious
  3. liquid
  4. current
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Correct answer: A. fixed (tangible)

Depreciation is the permanent fall in the value of a fixed (tangible) asset from use and time.

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Under the straight line method, the amount of depreciation charged each year:

  1. varies with output randomly
  2. remains constant
  3. increases every year
  4. decreases every year
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Correct answer: B. remains constant

Straight line method charges a constant amount each year.

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Under the written down value (diminishing balance) method, depreciation is charged on the:

  1. original cost every year
  2. book value at the beginning of each year
  3. scrap value
  4. market price
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Correct answer: B. book value at the beginning of each year

WDV method charges depreciation on the opening book value, so it falls each year.

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