Depreciation, Provisions, and Reserves MCQs with Detailed Answers
MCQs For Accountancy Class 11 Chapter 7 cover the concepts of depreciation, provisions, and reserves. These topics are essential for understanding the value of assets and the complexities of financial accounting. Practicing MCQs helps students prepare thoroughly for school and competitive exams and enhances their real-world business skills.
| Concept | Definition | Examples |
|---|---|---|
| Depreciation | A reduction in the value of fixed assets over time due to use, wear and tear, or obsolescence. | Machinery, Buildings losing value annually |
| Provisions | Amounts set aside from profits for known liabilities with uncertain amounts or timings. | Provision for Bad Debts, Provision for Tax |
| Reserves | Profits set aside to strengthen the financial position, not meant for specific liabilities. | General Reserve, Capital Reserve |
MCQs For Accountancy Class 11 Chapter 7: Depreciation, Provisions, and Reserves
This section features exam-focused MCQs for accountancy class 11 chapter 7 with detailed answers and explanations. These are useful for last-minute revision, school exams, and competitive assessments.
Depreciation MCQs
- Under which depreciation method does the amount remain the same each year?
- (a) Straight-line method
- (b) Reducing balance method
- (c) Machine hours method
- (d) Number of units produced method
- Depreciation helps in determining ________.
- (a) Increases the value of the asset
- (b) Revenue generation
- (c) Accurate level of profit
- (d) Increase the burden of tax
- Which of the following is a cause of depreciation?
- (a) Wear and tear
- (b) Obsolescence
- (c) Passage of time
- (d) All of the above
- Depreciation is charged on:
- (a) Fixed tangible assets
- (b) Current assets
- (c) Both current and fixed assets
- (d) None of the above
Provisions and Reserves MCQs
- Which of the following is an example of a capital reserve?
- (a) Workmen’s Compensation Fund
- (b) General Reserve
- (c) Premium received on issue of shares
- (d) None of these
- Dividend Equalisation Reserve is a:
- (a) General Reserve
- (b) Specific Reserve
- (c) Secret Reserve
- (d) None of these
- If the amount of a known liability cannot be determined with accuracy:
- (a) Reserve is created
- (b) Contingent liability is created
- (c) Provision is created
- (d) Definite liability is created
MCQ Answer Key: Accountancy Class 11 Chapter 7
| Question | Correct Answer | Explanation |
|---|---|---|
| 1 | (a) Straight-line method | Applies equal depreciation annually throughout asset's life. |
| 2 | (c) Accurate level of profit | Depreciation expenses match revenue, reflecting true profit. |
| 3 | (d) All of the above | All listed factors cause depreciation of assets. |
| 4 | (a) Fixed tangible assets | Depreciation applies only to tangible fixed assets. |
| 5 | (c) Premium received on issue of shares | This is credited to capital reserve, not revenue reserve. |
| 6 | (b) Specific Reserve | Dividend Equalisation Reserve is set aside for a specific purpose. |
| 7 | (c) Provision is created | Provision is made when liability exists but amount is uncertain. |
Concept Explanation: Depreciation, Provisions, and Reserves MCQs
Depreciation, provisions, and reserves are basic yet vital topics in accountancy. Depreciation allows for cost allocation of assets over time. Provisions cover expected losses, while reserves strengthen a firm’s finances. Understanding these keywords is often tested in final accounts in exams and business practice.
Common Methods of Calculating Depreciation
- Straight Line Method (SLM)
- Written Down Value (Diminishing Balance) Method
- Units of Production Method
Read about these in detail here: Straight Line and Written Down Method
Key Differences: Provisions vs. Reserves
- Provision is for a known liability or loss, reserve is for future strengthening.
- Provisions reduce profit, reserves are appropriations of profit.
Explore further: Difference Between Provision and Reserve.
Download Accountancy Class 11 Chapter 7 MCQ PDF & More Practice
For mobile practice, students can download comprehensive MCQ sheets or try online accountancy quizzes. Visit Vedantu’s resource centre for ready-to-download PDFs and TS Grewal Chapter 7 Solutions for extra MCQ and reasoning practice.
Depreciation, Provisions, and Reserves: Use Cases in Exams & Business
Understanding these concepts is essential for excelling in school board exams, competitive tests like the CA Foundation, and applying accounting rules in real businesses. MCQs strengthen your recall and help avoid errors in practical questions.
At Vedantu, we simplify Commerce concepts for confident learning. Internal resources like Accounting Concept of Depreciation and DK Goel Solutions for Chapter 7 are excellent next steps.
In summary, MCQs for Accountancy Class 11 Chapter 7 help you master the calculation and application of depreciation, build clarity on provisions and reserves, and avoid common exam pitfalls. Practice with Vedantu to achieve exam success and practical business confidence.
FAQs on Accountancy Class 11 Chapter 7 MCQs: Depreciation, Provisions & Reserves
1. What are some important MCQs from Class 11 Accountancy Chapter 7?
Chapter 7 of Class 11 Accountancy focuses on Depreciation, Provisions, and Reserves. Important MCQs test your understanding of depreciation methods (straight-line, written-down value), provision calculations, the distinction between provisions and reserves, and their impact on financial statements. Expect questions on journal entries and practical applications.
2. Which method of depreciation gives equal annual depreciation?
The straight-line method of depreciation provides equal annual depreciation expense. This method allocates the asset's cost evenly over its useful life. Other methods, like the written-down value method, result in declining depreciation charges over time.
3. What is the key difference between provision and reserve?
A key difference lies in their purpose. Provisions are created for known liabilities of uncertain amounts (e.g., bad debts, warranty claims), while reserves are appropriations of profits set aside for specific future needs (e.g., expansion, contingencies). Provisions reduce profit, while reserves do not directly impact profit.
4. How is depreciation shown in financial statements?
Depreciation is shown in the income statement as an expense, reducing net profit. The accumulated depreciation is presented as a deduction from the asset's carrying amount (cost less accumulated depreciation) in the balance sheet.
5. Where can I download Chapter 7 accountancy MCQs with answers in PDF?
Vedantu provides downloadable PDFs containing MCQs for Accountancy Class 11 Chapter 7 with answers. Check the website's resources and study material sections for downloadable resources. These chapter-wise MCQ sheets are ideal for revision and self-assessment.
6. How does provision affect profit calculation?
Provisions are expenses that reduce the net profit. They represent a charge against profit for potential future liabilities. Creating a provision for potential bad debts, for instance, will directly lower the reported profit for the period.
7. What is depreciation in accountancy?
Depreciation is the systematic allocation of the cost of a tangible asset over its useful life. It reflects the decrease in value of an asset due to wear and tear, obsolescence, or other factors. Several methods exist for calculating depreciation, such as the straight-line and written-down value methods.
8. What are provisions and reserves?
Provisions are amounts set aside to cover anticipated losses or liabilities, while reserves are appropriations of profits retained for future use. They differ significantly in their accounting treatment and implications for financial reporting.
9. How is depreciation calculated?
Depreciation calculation depends on the chosen method. The straight-line method uses the formula: (Cost - Salvage Value) / Useful Life. The written-down value method applies a depreciation rate to the asset's net book value each year.
10. Which method is used for depreciation?
The choice of depreciation method depends on factors like the asset's nature, its usage pattern, and company policy. Common methods include the straight-line method and the written-down value method. The selection impacts the annual depreciation expense reported.
11. What are examples of reserves?
Examples of reserves include general reserves, capital reserves (arising from capital transactions), revenue reserves (from operating activities), and specific reserves (e.g., for expansion, replacements, contingencies).
