Accounting MCQs / Q&A

The entry for creating a Provision for bad debts is_____________?

A. Debit Provision for Bad Debts A/c and credit Debtors A/c
B. Debit Debtors A/c and credit Provision for Bad Debts A/c
C. Debit Provision for Bad Debts A/c and credit Profit & Loss A/c
D. Debit Profit and Loss A/c and credit Provision for Bad Debts A/c.

Provision for bad debt is a charge against profit and therefore, the entry for creating
provision for bad debts is done by debiting P&L A/c and crediting provision for bad debts
account.

Bad debts recovered account will be transferred to______________?

A. Debtor‘s Account
B. Profit and Loss Account
C. Provision for Doubtful Debt Account
D. Either (b )or C. above

When Bad debts are recovered the entry is
Cash A/c …………………………………………………… Dr.
To Bad debts recovered A/c
This A/c can either be transferred to P& L A/c or Provisions for Doubtful Debts A/c.

____________is also known as Appraisal system of depreciation?

A. Inventory system
B. Survey system
C. Annuity system
D. Insurance

Which of the following is not depreciated?

A. Building
B. Land
C. Plant and Machinery
D. Office equipment

Which of the following is an external cause of depreciation?

A. Routine repair and maintenance
B. Misuse
C. Obsolescence
D. Wear and tear

Depreciation is calculated on the____________?

A. Cost price of asset
B. Market price
C. Cost+ Transport+ Installation expenses
D. Cost or market values whichever is less

Which of the following statements is correct about Depreciation?

A. Depreciation cannot be provided in case of loss in a financial year
B. Depreciation is a charge against profit
C. Depreciation is provided in the books only when there is profit
D. Depreciation is an appropriation of profit

Depreciation is provided as a charge against profits. It is not an appropriation of profit. It
is provided irrespective of whether the business is making a loss or a profit. Hence statement B. is a
true statement.

Which of the following factors are primarily considered to determine the economic life of an asset?

A. Passage of time, asset usage, and obsolescence
B. Tax regulations and SEBI guidelines
C. Tax regulations and asset usage
D. SEBI guidelines and Asset usage

The accounting process of gradually converting the unexpired cost of fixed assets into expenses over a series of accounting periods is_________?

A. Depreciation
B. Physical deterioration of the asset
C. Decrease in market value of the asset
D. Valuation of an asset at a point of time

Which of the following statements is true with regard to written down value method of depreciation?

i. The rate at which the asset is written off reduces year after year
ii. The amount of depreciation provided reduces from year to year
iii. The rate of depreciation as well as the amount of depreciation reduce year after year
iv. The value of the asset gets reduced to zero over a period of time
A. Only (i) above
B. Only (ii) above
C. Both (i) and (ii) above
D. (i),(ii) and (iii) above