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Maharashtra State Board · HSC Commerce · Class 11 (Std XI)

Class 11 Book Keeping and Accountancy Chapter 7: Depreciation

Short notes, key concepts, quick revision and practice MCQs with answers

Depreciation is the gradual decrease in the value of a fixed asset due to wear and tear, passage of time or obsolescence. It is charged as an expense every year.

Key concepts: Depreciation

Meaning
Permanent, continuing and gradual reduction in the book value of a fixed asset.
Causes
Wear and tear, passage of time, obsolescence, accident, depletion.
Straight Line Method (SLM)
Equal amount every year: (Cost - Scrap value) / Estimated life.
Written Down Value (WDV) Method
A fixed percentage on the reducing balance every year; the charge is higher in early years.
Entries
Depreciation is debited to Depreciation account and credited to the asset account (or provision for depreciation).

Quick revision: important points

Practice MCQs with answers

  1. Depreciation is:

    1. Gradual fall in value of an asset
    2. Rise in value
    3. Cash outflow to suppliers
    4. A tax
    Show answer

    Answer: A. Gradual fall in value of an asset
    It is the reduction in the value of a fixed asset.

  2. Under SLM, depreciation each year is:

    1. Equal
    2. Increasing
    3. Decreasing
    4. Random
    Show answer

    Answer: A. Equal
    Same amount every year.

  3. Cost Rs 1,00,000; scrap Rs 10,000; life 9 years. SLM depreciation per year:

    1. Rs 10,000
    2. Rs 9,000
    3. Rs 11,111
    4. Rs 1,00,000
    Show answer

    Answer: A. Rs 10,000
    (1,00,000 - 10,000)/9 = 10,000.

  4. Under WDV method, depreciation is charged on:

    1. Reducing balance
    2. Original cost only
    3. Sales
    4. Profit
    Show answer

    Answer: A. Reducing balance
    The percentage applies to the book value each year.

  5. Which asset is generally NOT depreciated?

    1. Land
    2. Machinery
    3. Furniture
    4. Vehicle
    Show answer

    Answer: A. Land
    Land does not wear out.

All Class 11 Book Keeping and Accountancy chapters

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