Depreciation and Amortisation

42 Practice MCQs available for CA Foundation

Paper

Paper 1: Accounting

Exam Weightage

20-25%

Key Topics

Reconciliation, Valuation, Depreciation

This chapter covers Reconciliation, Valuation, Depreciation and is part of Paper 1: Accounting in the CA Foundation exam.

Exam Strategy Tip

This topic carries 20-25% weightage. Focus on understanding core concepts rather than memorizing.

Key Terms

Depreciation

Allocation of the cost of a tangible fixed asset over its useful life due to wear and tear, efflux of time, or obsolescence.

Amortization

The systematic write-off of the cost of an intangible asset (like patents, trademarks, or goodwill) over its useful economic life, analogous to depreciation for tangible assets.

National Income

The total monetary value of all goods and services produced by the residents of a country in a given period (usually one year), including income earned abroad but excluding income earned by foreigners within the country. It equals GNP minus depreciation.

Net National Product (NNP)

The net output of an economy after accounting for depreciation (consumption of fixed capital). Formula: NNP = GNP − Depreciation. NNP at Factor Cost (National Income) = NNP at Market Price − Net Indirect Taxes.

Comparison Tables

SLM vs WDV Depreciation: CA Foundation AccountsStraight Line Method (SLM) vs Written Down Value (WDV): Accounting Guide

All 42 Questions

4736
The following details are available of raw material of a manufacturing unit : 1-5-2024 Opening Inventory 100 units @ Rs. 15 per unit 2-5-2024 Purchases 300 units @ Rs. 18 per unit 5-5-2024 Issued for consumption 250 units 16-5-2024 Purchases 500 units @ Rs. 21 per unit 21-5-2024 Issued for consumption 100 units 25-5-2024 Issued for consumption 450 units The manufacturer also incurred the following expenses: ◆ Freight of 300 and unloading charges of 150 at the time of every purchase respectively. ◆ Warehouse rent of ₹ 2,000 per month. ◆ Administrative Expenses of ₹ 1,500 per month. You are required to find out the value of inventory as on May 31, 2024 if the company follows: (a) Weighted Average method for inventory valuation. (b) First in First Out method for inventory valuation. [Jan. 2025, Marks 5]
Subjective
4737
Meaning of depreciation
Subjective
4738
Sum of Years of Digits Method
Subjective
4739
Depletion method
Subjective
4740
Discuss the factors taken into consideration for calculation of depreciation. [Nov. 2020, 5 Marks]
Subjective
4741
Amortisation [Dec. 2021, 1 Mark]
Subjective
4742
Diminishing Balance Method [Dec. 2023, 1 Mark]
Subjective
4743
Land is also a depreciable asset.
Subjective
4744
Depreciation is a cash expenditure like other normal expenses.
Subjective
4745
Depreciation is an amortised expenditure.
Subjective
4746
Depreciation cannot be provided in case of loss, in a financial year. [MTP Jan. 2025]
Subjective
4747
Depreciable amount refers to the difference between historical cost and the market value of an asset.
Subjective
4748
Depreciation is a non-cash expense and does not result in any cash out- flow. [Nov. 2018, 2 Marks]
Subjective
4749
Depreciation is non-cash and non-operating expense which is to be provided for if there are profits. [Dec. 2023, 2 Marks]
Subjective
4750
Sum of the year's digit method is an example of accelerated method of charging depreciation. [Dec. 2023, 2 Marks]
Subjective
4751
A Firm purchased an old Machinery for 37,000 on 1st January, 2015 and spent 3,000 on its overhauling. On 1st July 2016, another machine was purchased for 10,000. On 1st July 2017, the machinery which was purchased on 1st January 2015, was sold for 28,000 and the same day a new machinery costing 25,000 was purchased. On 1st July, 2018, the machine which was R purchased on 1st July, 2016 was sold for 2,000. Depreciation is charged @ 10% per annum on straight line method. The firm changed the method and adopted diminishing balance method with effect from 1st January, 2016 and the rate was increased to 15% per annum. The books are closed on 31st December every year. Prepare Machinery account for four years from 1st January, 2015. [May 2019, 10 Marks]; [RTP Jan. 2025, Modified]
Subjective
4752
The following balances appear in the books of Dheeraj Enterprises: Machinery account as on 1-4-2021 12,00,000 Provision for depreciation account as on 1-4-2021 4,65,000 On 1st October 2021 the Machinery which was purchased on 1st April, 2018 for 2,00,000 was sold for ₹ 1,10,000 and on the same date another Machinery was purchased for ₹ 4,80,000. The firm has been charging depreciation @ 10% p.a. on written down value of the Machinery every year. Prepare the Machinery account, Provision for Depreciation account and Machinery disposal account for the year ending 31st March 2022. [June 2023, 10 Marks]
Subjective
4753
From the following transactions of a concern, prepare the Machinery Account for the year ending 31st Dec. 2022: 01-01-21 Purchased a second-hand, Machinery for Rs. 2,00,000 01-01-21 Spent 50;000 on repairs for making it serviceable 30-06-21 Purchased additional new machinery for 3,50,000 30-06-21 Installation charges of new machine 15,000 01-04-22 Repairs & maintenance of Machinery 30,000 30-06-22 Sold second hand Machinery purchased 01-01-21 for 55,000. 31-12-22 Depreciate the Machinery at 10% per annum by WDV Method [Dec 2023, 5 Marks]
Subjective
4754
On 1st April, 2022, LMP Co. which depreciates its machinery @ 10% p.a. on diminishing balance method, had 9,72,000 to the debit of Machinery Amount. On 1st October, 2022, part of machinery purchased on 1st April, 2020 for 80,000 was sold for 45,000. Also, a new machinery at a cost of ₹ 1,50,000 was purchased on 1st October, 2022 and installed on the same date and installation charges being ₹ 8,000. The company changed the method of depreciation from diminishing balance method to straight line method with effect from 1st April, 2020 and adjusted the difference on 31st March, 2023. The rate of depreciation remains the same. Show the Machinery Account and ascertain the amount chargeable to Profit and Loss Account as depreciation in 2022-23. [June 2024, 8 Marks]
Subjective
4755
POR associates bought a computer set on 01.04.2020 for 2,00,000 and charged depreciation @ 20% p.a. on diminishing balance method. They made further additions as follows: Date Amount 01.04.2021 1,50,000 01.04.2023 1,00,000 On 01.04.2023 it was decided to change the method to straight line basis and charge depreciation assuming the expected life of all the computers to be 8 years from 01.04.2023. Prepare Computers A/c for year ending 31.03.2024. [Sept. 2024, 5 Marks]
Subjective
4756
S Chand & Associates purchased a machine for ₹ 3,00,000 on 1.1.2021 Another machine costing 4,50,000 was purchased on 1.7.2022. On 31.12.2023 the machine purchased on 1.1.2021 was sold for 1,50,000. The company provides depreciation at 15% on Written Down Value Method. The company closes its accounts on 31st December every year. Prepare - (i) Machinery Account, (ii) Machinery Disposal Account, and (iii) Provision for Depreciation Account. [MTP Jan. 2025]
Subjective
5069
The following details are available of raw material of a manufacturing unit: | Date | Transaction | Units / Rate | | :--- | :--- | :--- | | 1-5-2024 | Opening Inventory | 100 units @ Rs. 15 per unit | | 2-5-2024 | Purchases | 300 units @ Rs. 18 per unit | | 5-5-2024 | Issued for consumption | 250 units | | 16-5-2024 | Purchases | 500 units @ Rs. 21 per unit | | 21-5-2024 | Issued for consumption | 100 units | | 25-5-2024 | Issued for consumption | 450 units | The manufacturer also incurred the following expenses: ◆ Freight of 300 and unloading charges of 150 at the time of every purchase respectively. ◆ Warehouse rent of ₹ 2,000 per month. ◆ Administrative Expenses of ₹ 1,500 per month. You are required to find out the value of inventory as on May 31, 2024 if the company follows: (a) Weighted Average method for inventory valuation. (b) First in First Out method for inventory valuation. [Jan. 2025, Marks 5]
Subjective
5070
Meaning of depreciation
Subjective
5071
Sum of Years of Digits Method
Subjective
5072
Depletion method
Subjective
5073
Discuss the factors taken into consideration for calculation of depreciation. [Nov. 2020, 5 Marks]
Subjective
5074
Amortisation [Dec. 2021, 1 Mark]
Subjective
5075
Diminishing Balance Method [Dec. 2023, 1 Mark]
Subjective
5076
Land is also a depreciable asset.
Subjective
5077
Depreciation is a cash expenditure like other normal expenses.
Subjective
5078
Depreciation is an amortised expenditure.
Subjective
5079
Depreciation cannot be provided in case of loss, in a financial year. [MTP Jan. 2025]
Subjective
5080
Depreciable amount refers to the difference between historical cost and the market value of an asset.
Subjective
5081
Depreciation is a non-cash expense and does not result in any cash out- flow. [Nov. 2018, 2 Marks]
Subjective
5082
Depreciation is non-cash and non-operating expense which is to be provided for if there are profits. [Dec. 2023, 2 Marks]
Subjective
5083
Sum of the year's digit method is an example of accelerated method of charging depreciation. [Dec. 2023, 2 Marks]
Subjective
5084
A Firm purchased an old Machinery for 37,000 on 1st January, 2015 and spent 3,000 on its overhauling. On 1st July 2016, another machine was purchased for 10,000. On 1st July 2017, the machinery which was purchased on 1st January 2015, was sold for 28,000 and the same day a new machinery costing 25,000 was purchased. On 1st July, 2018, the machine which was R purchased on 1st July, 2016 was sold for 2,000. Depreciation is charged @ 10% per annum on straight line method. The firm changed the method and adopted diminishing balance method with effect from 1st January, 2016 and the rate was increased to 15% per annum. The books are closed on 31st December every year. Prepare Machinery account for four years from 1st January, 2015. [May 2019, 10 Marks]; [RTP Jan. 2025, Modified]
Subjective
5085
The following balances appear in the books of Dheeraj Enterprises: Machinery account as on 1-4-2021 12,00,000 Provision for depreciation account as on 1-4-2021 4,65,000 On 1st October 2021 the Machinery which was purchased on 1st April, 2018 for 2,00,000 was sold for ₹ 1,10,000 and on the same date another Machinery was purchased for ₹ 4,80,000. The firm has been charging depreciation @ 10% p.a. on written down value of the Machinery every year. Prepare the Machinery account, Provision for Depreciation account and Machinery disposal account for the year ending 31st March 2022. [June 2023, 10 Marks]
Subjective
5086
From the following transactions of a concern, prepare the Machinery Account for the year ending 31st Dec. 2022: 01-01-21 Purchased a second-hand, Machinery for Rs. 2,00,000 01-01-21 Spent 50;000 on repairs for making it serviceable 30-06-21 Purchased additional new machinery for 3,50,000 30-06-21 Installation charges of new machine 15,000 01-04-22 Repairs & maintenance of Machinery 30,000 30-06-22 Sold second hand Machinery purchased 01-01-21 for 55,000. 31-12-22 Depreciate the Machinery at 10% per annum by WDV Method [Dec 2023, 5 Marks]
Subjective
5087
On 1st April, 2022, LMP Co. which depreciates its machinery @ 10% p.a. on diminishing balance method, had 9,72,000 to the debit of Machinery Amount. On 1st October, 2022, part of machinery purchased on 1st April, 2020 for 80,000 was sold for 45,000. Also, a new machinery at a cost of ₹ 1,50,000 was purchased on 1st October, 2022 and installed on the same date and installation charges being ₹ 8,000. The company changed the method of depreciation from diminishing balance method to straight line method with effect from 1st April, 2020 and adjusted the difference on 31st March, 2023. The rate of depreciation remains the same. Show the Machinery Account and ascertain the amount chargeable to Profit and Loss Account as depreciation in 2022-23. [June 2024, 8 Marks]
Subjective
5088
POR associates bought a computer set on 01.04.2020 for 2,00,000 and charged depreciation @ 20% p.a. on diminishing balance method. They made further additions as follows: Date Amount 01.04.2021 1,50,000 01.04.2023 1,00,000 On 01.04.2023 it was decided to change the method to straight line basis and charge depreciation assuming the expected life of all the computers to be 8 years from 01.04.2023. Prepare Computers A/c for year ending 31.03.2024. [Sept. 2024, 5 Marks]
Subjective
5089
S Chand & Associates purchased a machine for ₹ 3,00,000 on 1.1.2021 Another machine costing 4,50,000 was purchased on 1.7.2022. On 31.12.2023 the machine purchased on 1.1.2021 was sold for 1,50,000. The company provides depreciation at 15% on Written Down Value Method. The company closes its accounts on 31st December every year. Prepare - (i) Machinery Account, (ii) Machinery Disposal Account, and (iii) Provision for Depreciation Account. [MTP Jan. 2025]
Subjective

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