Fixed assets and Depreciation MCQs 1)What is depreciation?A)  Cost of a fixed asset B)  Cost of a fixed asset’s repair C)  The residual value of a fixed asset D)  Portion of a fixed asset’s cost consumed during the current accounting period

2)Under which depreciation method the amount of depreciation expenses remains same throughout the useful life of a fixed assetA)  Straight line method B)  Reducing balance method C)  Number of units produced method D)  Machine hours method

3)A company purchased a vehicle for $6000. I will be used for 5 years and its residual value is expected to be $1000. What is the annual amount of deprecation using straight line method of depreciation? A)  $1000 B)  $2000 C)  $3000 D)  $3300

4)What is the accumulated deprecation?A)  Sum of all depreciation expenses of a fixed asset B)  Depreciation expenses C)  Cost of depletion of assets D)  Future value of fixed asset

5)Which of the following is the normal balance of an accumulated depreciation account? A)  Debit balance B)  Credit balance C)  Nil balance

6)How trial balance shows the accumulated depreciation?A)  as a debit item B)  as a credit item C)  It doesn’t show

7)Which of the following is a double entry for depreciation expenses?A)  Accumulated depreciation debit and depreciation expenses Credit B)  Depreciation expenses Debit and accumulated depreciation Credit C)  Cash Debit and depreciation expenses Credit D)  Depreciation expenses Debit and cash Credit

8)An alternative term used for accumulated depreciation expenses?A)  Provision for depreciation B)  Cumulative depreciation C)  Targeted depreciation D)  Depletion

9)Which of the following is/are a kind of depreciation expenses?A)  Amortization B)  Depletion C)  Both of them

10)A fixed asset was bought for $5000. Its accumulated depreciation is $3000 and rate of depreciation is 20%. Calculate its depreciation expenses for the current accounting period using reducing balance method?A)  $600 B)  $2000 C)  $300 D)  $400

11)In depreciation calculation, the useful life of a fixed asset is: A)  a certain figure B)  an estimate C)  a predetermined figure for all fixed assets

12)Depreciable amount + Residual value of a fixed asset =? A)  Depreciation expenses B)  Accumulated depreciation C)  Cost of the fixed asset D)  Future economic benefits of a fixed asset

13)Cost of a fixed asset – Accumulated depreciation expenses of the fixed asset=?A)  Book value of a fixed asset B)  Market value of a fixed asset C)  Historical cost of a fixed asset D)  Recoverable amount of a fixed asset

14)The estimate about useful life of a fixed asset: A)  Can never be changed B)  Can be changed

15)Which of the following is the correct formula for calculating depreciation using service hours method? A)  Depreciation=(Cost - Scrape value) / Total hours X Actual hours B)  Depreciation=(Cost - Accumulated depreciation) / Total hours X Actual hours C)  Depreciation=(Cost - Accumulated depreciation) / Total hours X Total hours D)  Depreciation=(Cost - Scrape value) / Actual hours X Total hours

16)The purchase price of a software that will be used for more than 12 months should be regarded as: A)  a revenue expenditure B)  a capital expenditure C)  a long term expenseD)  an accounting period expense

17)XYZ firm has imported a machine from abroad. Which of the following is NOT the element of machine’s cost? A)  Purchase price of machine B)  Import duty C)  Demurrage charges D)  Refundable tax

18)A company purchased a new machine for $500,000 and machine’s test run was started to make sure that machine works properly. There was expense of $5000 incurred on test run, however the sale proceeds of test production were $2000. You are required to find out the total cost of machine? A)  $500,000 B)  $505,000 C)  503,000 D)  495,000

19)Which of the following fixed assets is not depreciated in the ordinary circumstances? A)  Plant and machinery B)  Building C)  Land D)  Equipments

20)In the calculation of depreciation, all of the following items are actually estimates except: A)  Useful life B)  Residual value C)  Historical cost D)  Salvage value

21)Which of the following accounting concepts or principles require the calculation of depreciation of the fixed assets?A)  Prudence concept B)  Accrual concept C)  Consistency concept D)  Matching concept

22)A car was purchased for $5500. Its residual value was estimated to be $500 while its monthly depreciation expenses are $100 using straight line method. Which of the following is the annual rate of depreciation?A)  20% B)  24% C)  2% D)  25%

23)Under which method of depreciation the amount of depreciation expenses remains constant throughout the useful life of a fixed asset A)  Reducing balance method B)  Unit of activity method C)  Straight line method D)  None of these

24)An increase in the value of fixed asset is referred to as:A)  Depreciation B)  Appreciation C)  Market capitalization D)  Reverse depreciation

25)A fixed asset having book value of $2000 was sold for $1500. Which of the following is the gain or loss on the sale of fixed asset?A)  $500 gain B)  $1500 loss C)  $500 loss D)  $1000 gain

26)Book value of a fixed asset equals to market value or sale proceeds of a fixed asset if: A)  Gain on sale=0 B)  Loss on sale=0 C)  Gain or loss on sale=0 D)  Gain > loss on sale

27)The term ______ is generally used for the depreciation of natural resourcesA)  Amortization B)  Depletion C)  Appreciation D)  Disposal value

28)Which of the following is a biological asset?A)  Land B)  Building C)  Environment D)  Living plants and animals

29)Items of property, plant and equipment can be recognized as assets when their cost can be measured reliably and it is likely that the future economic benefits associated with the assets:A)  Will increase gradually B)  Will diminish with the passage of time C)  will flow to the entity D)  won’t be available

30)Under the revaluation model of fixed assets provided by the international accounting standards, the revaluation of the fixed assets should be carried out: A)  After 10 years B)  on a regular basis C)  Once in 5 years D)  None of them

Financial Accounting1) We can say that the business is in profit, when:A)  Assets exceed Expenditure   B)  Income exceeds LiabilitiesC)  Income exceeds Expenditure D)  Income exceeds Liabilities

2) According to the double entry system of accounting, an account that obtains benefit is:A)  Credit B)  Debit   C)  IncomeD)  No need to show as accounting record

3)  Term "Credit" means_______ by the business.

A)  Receiving of benefits B)  It has no effect on business   C)  Providing of benefitsD)  It depends upon items

4)  When a Liability is reduced or decreased, it is recorded on the:A)  Left or credit side of the account   B)  Right or debit side of the accountC)  Right or credit side of the accountD)  Left or debit side of the account

5)  When Capital is increased by an amount, it is recorded on the:A)  Right or debit side of the account B)  Left or credit side of the account C)  Left or debit side of the accountD)  Right or credit side of the account

6)  What type of expenses are paid out of Gross Profit?A)  General Expenses B)  Financial Expenses C)  Selling Expenses D)  All of the given options

7)  Which of the following shows summary of a company's financial position at a specific date?A)  Profit & Loss Account B)  Cash Flow Statement C)  Balance SheetD)  Income & Expenditure Account

8)  Which of the following is NOT an example of intangible assets? A)  Franchise rights B)  Goodwill C)  PatentsD)  Land

9)  Which of the following is an example of business liability? A)  Land B)  Building C)  Cash D)  Creditors

10)  The unfavorable balance of Profit and Loss account should be:A)  Added in liabilities B)  Subtracted from current assets C)  Subtracted from capital D)  Subtracted from liabilities

Trial balance Mcqs1)Trial balance is prepared to check accuracy ofA) Ledger accounts balances B) Balance sheet balances C) Income statement balancesD) Cash flow statement balances

2)If a transaction is completely omitted from the books of accounts, will it affect the agreement of a trial balance?A) Yes B) No C) Transactions can't be omitted

3)________ is the common base for preparing a trial balanceA) Ledger accounts B) General JournalC) Specialized journals D) Balance sheet

4)Which of the following is true about a trial balance?A) It lists down the balances of accounts B) It lists down the balances of a balance sheetC) It is a kind of financial statement D) It is not a part of accounting cycle

5)Debit balance = Credit balance in a trial balance indicates thatA) No error in recording transactions B) No error in posting entries to ledger accountsC) Account balances are correct D) Mathematically Capital+Liabilities=Assets

6)Trial balance is commonly preparedA) Frequently during the year B) At the end of an accounting periodC) At the end of a month D) At the end of a year

7)Which of the following will affect the agreement of a trial balance?A) Complete omission of a transaction B) Partial omission of a transactionC) Error of principle D) Compensating errors

8)If debit balances = credit balances, trial balance only shows or check the ____________ and it does not of balances indicate that no errors were made during recording and postingA) Arithmetic accuracy B) Errors of commission C) Omissions of economic events D) Understatements

9)Which of the following account with normal balance is shown at the debit side of a trial balance?A) Rent income account B) Creditors account C) Unearned income account D) Cash account

10) Which of the following account with normal balance is shown at the credit side of a trial balance?A) Cash account B) Bank account C) Equipment account D) Accrued expenses account