Last Updated on: 11th February 2025, 01:12 pm

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1. Depreciation is charged on

(a)    Fixed assets.

(b)    Current assets.

(c)    Both fixed and current assets.

(d)    None of the above.

1. Fixed assets. This is correct because depreciation applies to tangible assets like buildings, machinery, and equipment that lose value over time due to usage or obsolescence.
2. Current assets. This is incorrect because current assets, such as cash, inventory, and accounts receivable, are used or converted quickly and do not require depreciation.
3. Both fixed and current assets. This is incorrect because depreciation applies only to long-term assets and not to assets that are consumed or sold within the accounting period.
4. None of the above. This is incorrect because depreciation is a standard accounting practice applied to fixed assets.

Depreciation is charged on Fixed assets. So, option (a) is correct

2. Which of the following asset generally assumed not to depreciate?

(a)    Machinery

(b)    Building

(c)    Land.

(d)    All of the above.

1. Machinery. This is incorrect because machinery undergoes wear and tear and loses value over time due to continuous use.
2. Building. This is incorrect because buildings deteriorate due to weather conditions, maintenance needs, and aging, requiring depreciation.
3. Land. This is correct because land typically has an indefinite useful life and does not suffer physical deterioration or obsolescence.
4. All of the above. This is incorrect because machinery and buildings depreciate while land does not.

Land is considered to have indefinite life. So, it is not depreciated. So, option (c) is correct

3. Under the annuity method of depreciation, the charge is

(a)    Increasing every year.

(b)    Decreasing every year.

(c)    Fixed for all years.

(d)    Fluctuating from year to year.

1. Increasing every year. This is incorrect because the depreciation charge remains constant, while the interest component decreases over time.
2. Decreasing every year. This is correct because the interest portion decreases as it is calculated on the reducing balance, leading to a lower total charge.
3. Fixed for all years. This is incorrect because although the depreciation amount is fixed, the overall charge reduces due to the declining interest component.
4. Fluctuating from year to year. This is incorrect because the pattern is predictable, with a fixed depreciation amount and a reducing interest charge.

Depreciation charge is same for each year but the interest charge decreases each year (as interest is computed on reducing balance). So, the net charge for depreciation gradually decreases. So, option (b) is correct.

4. Under the diminishing balance method, the amount of depreciation is calculated on

(a)    The written-down value of the asset.

(b)    The market value of the asset.

(c)    The original cost of the asset.

(d)    The expected realizable value of the asset.

1. The written-down value of the asset. This is correct because depreciation under this method is based on the asset’s reduced value after deducting previous depreciation.
2. The market value of the asset. This is incorrect because depreciation is not calculated based on fluctuating market values but on accounting records.
3. The original cost of the asset. This is incorrect because original cost is used in the straight-line method, not in the diminishing balance method.
4. The expected realizable value of the asset. This is incorrect because the realizable value is used for disposal considerations, not for depreciation calculations

Under Diminishing or Reducing Balance Method the depreciation amount is calculated on written down value. So, the amount reduces every year. So, option (a) is correct.

5. Depreciation charges are

(a)    Cash expenses.

(b)    Financial expenses.

(c)    Non-cash expenses.

(d)    Non-operating expenses.

1. Cash expenses. This is incorrect because depreciation is a non-cash expense and does not involve actual outflow of money.
2. Financial expenses. This is incorrect because financial expenses refer to interest costs, loan charges, and similar outflows, while depreciation is a cost allocation.
3. Non-cash expenses. This is correct because depreciation only reduces the book value of an asset and does not involve cash transactions.
4. Non-operating expenses. This is incorrect because depreciation is an operating expense, as it relates to business assets used for revenue generation

Depreciation charge is diminution in value of fixed assets due to use, which is charged to P & L a/c every year, There is no cash outflow and so it is a non-cash expenditure. So, option (c) is correct.

6. Book value means

(a)    Expected sale price.

(b)    Current market price if purchased now.

(c)    Value as shown in the books of account.

(d)    Original acquisition price.

1. Expected sale price. This is incorrect because the book value represents the recorded amount of the asset in financial statements, not its market or resale price.
2. Current market price if purchased now. This is incorrect because market price fluctuates based on demand, while book value is systematically reduced through depreciation.
3. Value as shown in the books of account. This is correct because the book value is derived from the asset’s cost, adjusted for depreciation.
4. Original acquisition price. This is incorrect because the original price does not reflect depreciation and reduction in value over time.

Book value means the amount shown in the books of accounts. So, option (c) is correct.

7. Which method of depreciation would you recommend for coal mines?

(a)    Diminishing balance method.

(b)    Fixed installment method.

(c)    Sum of year’s digits.

(d)    Depletion method.

1. Diminishing balance method. This is incorrect because it is used for assets that lose value gradually rather than being consumed.
2. Fixed installment method. This is incorrect because it is used for assets with predictable and even depreciation over their lifespan.
3. Sum of year’s digits. This is incorrect because it accelerates depreciation in the initial years, which is not suitable for natural resources.
4. Depletion method. This is correct because mines lose value as resources are extracted, making depletion the appropriate accounting treatment.

In case of coal mines, the asset is depleted (as coal is taken out and the coal reserve reduces), depletion method of depreciation is normally used for such assets. So, option (c) is correct.

8. The depreciation value after two years of an asset costing Rs.10, 000 depreciated at 10% on fixed installment is Rs. ———— and on reducing balance method is ———–.

(a)    Rs.8, 100 and Rs.8, 000.

(b)    Rs.9, 000 and Rs.8, 000.

(c)    Rs.8, 000 and Rs.8, 100.

(d)    Rs.8, 000 and Rs.9, 000.

1. Rs.8100 and Rs.8000. This is incorrect because it reverses the correct values for each method.
2. Rs.9000 and Rs.8000. This is incorrect because the fixed installment method results in a value lower than Rs.9000.
3. Rs.8000 and Rs.8100. This is correct because straight-line depreciation results in Rs.8000 and reducing balance results in Rs.8100.
4. Rs.8000 and Rs.9000. This is incorrect because the reducing balance method does not leave a value as high as Rs.9000.

9. A machinery was purchased on 1-1-2006. It was delivered on 1-4-2006. The installation was completed on 1-7-2006. The trial run was completed on 30-9-2006 and was put to use from 1-12-2006. The effective period for calculation of depreciation for the year 2006 is

(a)    10 months

(b)    9 months

(c)    1 month

(d)    3 months

1. 10 months. This is incorrect because the machine was not in use for 10 months.
2. 9 months. This is incorrect because depreciation starts from the date the machine is ready for use.
3. 1 month. This is correct because depreciation should be calculated from December 1, when the machine was put to use.
4. 3 months. This is incorrect because the machine was not used for three months in that year.

The effective period for calculation of depreciation starts from the date when the machine is ready

for use. So, deprecation should be computed from 1.12.06, i.e,  from 1 month for the year 2006. So, option (c) is correct.

10. In case of mineral resources:

(a)    Depreciation is provided as per SLM

(b)    Depreciation is provided as per WDV

(c)    Depreciation not provided instead depletion is charged

(d)    None of the above.

1. Depreciation is provided as per straight-line method. This is incorrect because straight-line depreciation does not reflect resource depletion.
2. Depreciation is provided as per written-down value method. This is incorrect because the reducing balance method does not apply to depleting resources.
3. Depreciation is not provided; instead, depletion is charged. This is correct because natural resources like minerals are accounted for using depletion instead of depreciation.
4. None of the above. This is incorrect because depletion is the correct accounting method for mineral resources

In case of mineral resources, depletion is charged. So, option (c) is correct.

11. The estimated value of depreciable assets after its useful life is called

(a)    Actual value

(b)    Replacement value

(c)    Disposal (Residual) value

(d)    Current value.

1. Actual value. This is incorrect because the actual value of an asset depends on market conditions at a given time, whereas the estimated value after useful life is predetermined.
2. Replacement value. This is incorrect because the replacement value refers to the cost of acquiring a similar new asset, not the value at the end of the current asset’s life.
3. Disposal (Residual) value. This is correct because it refers to the expected amount recoverable when the asset is no longer useful.
4. Current value. This is incorrect because the current value can fluctuate and is not necessarily the same as the residual value.

Disposal or Residual value is the amount which is expected to be received when the assets is sold after being removed from service i.e. its useful life.  So, option (c) is correct.

12. Depreciation is primarily provided due to:

(a)    Reduce tax burden.

(b)    Replacement of fixed asset in future.

(c)    Comply with legal requirements.

(d)    All of the above.

1. Reduce tax burden. This is incorrect because while depreciation lowers taxable income, its primary purpose is not tax reduction but cost allocation.
2. Replacement of fixed asset in future. This is correct because depreciation allows businesses to accumulate funds for replacing assets when they become obsolete.
3. Comply with legal requirements. This is incorrect because while depreciation is required for financial reporting, its primary function is not legal compliance.
4. All of the above. This is incorrect because not all the options are equally valid reasons for providing depreciation

Depreciation is provided for retaining enough funds for replacement of the asset at the end of its useful life. So, option (b) is correct.

13. Depreciation starts on a machine from the Date:

(a)    It is purchased.

(b)    It is put to use.

(c)    It is installed.

(d)    Any of the above.

1. It is purchased. This is incorrect because merely purchasing an asset does not mean it is in use and generating revenue.
2. It is put to use. This is correct because depreciation starts when the asset is available and used for business operations.
3. It is installed. This is incorrect because installation does not necessarily mean it is operational.
4. Any of the above. This is incorrect because only the date it is put to use determines depreciation commencement.

Depreciation starts on a machine from the date it is put to use. So, option (b) is correct.

14. In the books of D. Ltd. the machinery account shows a debit balance of Rs.60, 000 as on April 1^st, 2003. The machinery was sold on September 30, 2004 for Rs.30, 000. The company charges depreciation @ 20% p.a. (FY April to March) on diminishing balance method. What will be the Profit or Loss on sale of machinery?

(a)    Rs.13, 200 Profit.

(b)    Rs.13, 200 Losses.

(c)    Rs.6, 800 Profit.

(d)   Rs.6, 800 Losses.

1. Rs. 13,200 Profit. This is incorrect because the company incurred a loss, not a profit.
2. Rs. 13,200 Loss. This is correct because after accounting for depreciation, the loss on sale is Rs. 13,200.
3. Rs. 6,800 Profit. This is incorrect because the sale did not result in a profit.
4. Rs. 6,800 Loss. This is incorrect because the calculated loss is Rs. 13,200.

Calculation for Profit or Loss on sale of machinery

W.D.V. of the machinery as on 31.3.2004 [60000-(12000+4800)]	43,200
Less: Sale price	30,000
Loss on sale of machinery	13,200

So, option (b) is the right answer of this question

15. An asset was purchased for Rs.25, 000 and was depreciated under Reducing Balance Method at the rate of 10% p.a. What is the value of the asset at the end of three years?

(a)    Rs.25,000

(b)    Rs.20,250

(c)    Rs.18,225

(d)    None of the above.

1. Rs. 25,000. This is incorrect because depreciation reduces the book value each year.
2. Rs. 20,250. This is incorrect because this is the value at the end of two years, not three.
3. Rs. 18,225. This is correct because applying the reducing balance method results in this final value after three years.
4. None of the above. This is incorrect because the correct answer is available among the choices.

Calculation for Depreciation:

Original Cost	25,000
Less: Depreciation for 1st year @ 10% p.a.	2,500
Balance amount of the machine	22,500
Less: Depreciation for 2nd year @ 10% p.a.	2,250
Balance amount of the machine	20,250
Less: Depreciation for 3rd year @ 10% p.a.	2,025
Balance amount of the asset at the end of 3rd year.	18,225

So, option (c) is correct

16. Original cost of an assets Rs.2, 50,000, scrap value Rs.10, 000. Depreciation for 2^nd year @ 10% p.a. under W.D.V. method will be: /4

(a)    Rs.21,600

(b)    Rs.24,000

(c)    Rs.22,500

(d)    None of the above.

1. Rs. 21,600. This is incorrect because the depreciation calculation does not result in this value.
2. Rs. 24,000. This is incorrect because depreciation under WDV is not based on the original cost after the first year.
3. Rs. 22,500. This is correct because applying the WDV formula gives this depreciation value.
4. None of the above. This is incorrect because a correct answer is provided.

Original Cost	2,50,000
Less: Depreciation for 1st year @ 10% p.a.	25,000
Balance amount of the machine	2,25,000
Less: Depreciation for 2nd year @ 10% p.a.	22,500
Balance amount of the machine	2,02,500

So, the depreciation for 2^nd year is Rs.22, 500 and hence option (c) is the right answer of this question.

Note: Salvage value is not deducted while computing depreciable base at WDV method.

So, option (c) is correct.

17. On 1^st January, 2008, A Ltd. Purchased a machinery for Rs.50, 000 and spent Rs.3, 500 on its carriage and Rs.2, 500 on its installation. Its useful life is 10 years and scrap value is Rs.6, 000. Depreciation for the year under straight line method will be:

(a)    Rs.4,600

(b)    Rs.5,000

(c)    Rs.5,600

(d)    None of the above

1. Rs. 4,600. This is incorrect because the correct calculation does not yield this value.
2. Rs. 5,000. This is correct because depreciation is calculated as (cost – scrap value) / useful life, which results in Rs. 5,000 per year.
3. Rs. 5,600. This is incorrect because the total depreciable cost does not support this figure.
4. None of the above. This is incorrect because the correct answer is available in the options.

Original Cost		50,000
Add: Carriage	3,500
Installation	2,500	6,000
Cost of the machine		56,000
Less: Scrap value		6,000
Depreciable amount		50,000
Depreciation on SLM @ 1/10		5,000

So, option (b) is correct

18. A Plant of Rs.3, 000 was sold for Rs.4, 200. Depreciation provision to date was Rs.400 and commission paid to selling agent was Rs.350 and labour charges paid for removing the plant was Rs.100 Profit on sale of plant will be:

(a)    Rs.1,200

(b)    Rs.1,000

(c)    Rs.1,150

(d)    None of these

1. Rs. 1,200. This is incorrect because the calculated profit is different.
2. Rs. 1,000. This is incorrect because it underestimates the actual profit.
3. Rs. 1,150. This is correct because deducting depreciation and expenses results in a net profit of Rs. 1,150.
4. None of these. This is incorrect because a correct answer is available.

Calculation for sale of plant:

Book value of the plant = 3000 – 400 = 2600

Net reaslisation of plant = 4200 – (350+100) = 3750

So, profit on sale of machinery =  3750 – 2600 = 1150

So, option (c) is correct

19. A purchased a mine for Rs.5, 00,000. Minerals in the mine were expected to be 10, 00,000 tones. In the first year, 1, 00,000 tones of minerals were used. What is the depreciation for the first year?

(a)    Rs.40,000

(b)    Rs.50,000

(c)    Rs.60,000

(d)    None of these

1. Rs. 40,000. This is incorrect because the per-ton depreciation rate results in a higher value.
2. Rs. 50,000. This is correct because depreciation per ton is Rs. 0.50, and multiplying by 1,00,000 tons gives Rs. 50,000.
3. Rs. 60,000. This is incorrect because the total extraction does not justify this amount.
4. None of these. This is incorrect because a correct answer is available

Depreciation rate (r) = Cost of the asset /estimated quantity likely to be available

i.e. Rs.5,00,000 /10,00,000 / ton =  Re.50 / ton

Depreciation = r x production of the year (i.e. minerals extracted)

                            =.50 x 1,00,000 tons = Rs.50, 000.

So, option (b) is correct

20. Original cost = Rs.1, 50,000, Estimated life = 5 years, Expected salvage value = Rs.3, 000. Rate of depreciation p.a. =?

(a)    19.6%

(b)    20%

(c)    19.8%

(d)    20.8%

1. 19.6 percent. This is correct because applying the straight-line depreciation formula gives this rate.
2. 20 percent. This is incorrect because it does not account for the salvage value.
3. 19.8 percent. This is incorrect because the correct percentage is slightly lower.
4. 20.8 percent. This is incorrect because the correct percentage is lower.

Rate of depreciation = (Original cost – Salvage value) / Estimated life.

i.e. Rs. (1, 50,000 – 3,000)  / 5  = 29,400

Hence, % of depreciation = (Rs.29,400 /1,50,000) x 100% = 19.6%. 

So, option (a) is correct.

21. Lease for 5 year Rs.10, 000. Rate of interest 5% Reference to annuity table 0.230975. The depreciation per year is

(a)    Rs.1,000

(b)    Rs.115.48

(c)    Rs.230.97

(d)    Rs.2,309.75

1. Rs. 1,000. This is incorrect because annuity depreciation is calculated using a specific factor from the annuity table.
2. Rs. 115.48. This is incorrect because the factor from the annuity table results in a higher depreciation amount.
3. Rs. 230.97. This is incorrect because the correct depreciation per year is different.
4. Rs. 2,309.75. This is correct because multiplying the annuity factor 0.230975 by Rs. 10,000 gives Rs. 2,309.75.

Depreciation of Re.1 in one year under annuity table is 0.230975

So the depreciation of Rs.10, 000 in one year is 0.230975 x Rs.10, 000 = Rs.2,309.75.

Hence, option (d) is correct.

22. Machinery cost Rs.40, 000. Scrap value Rs.10, 000. Life 5 years. Rate of interest 5%. Reference to sinking fund table 0.180975. The depreciation per year will be

(a)    Rs.6,000

(b)    Rs.2,000

(c)    Rs.7,239

(d)    None of these

1. Rs. 6,000. This is incorrect because the depreciation calculation does not yield this value.
2. Rs. 2,000. This is incorrect because the correct annual depreciation is significantly higher.
3. Rs. 7,239. This is correct because using the sinking fund table factor 0.180975 results in an annual depreciation of Rs. 7,239.
4. None of these. This is incorrect because the correct answer is available.

Depreciation of Re.1 in one year  under sinking fund table is 0.180975

So the depreciation of Rs.40, 000 in one year is 0.180975 x Rs.40, 000 = Rs.7239

Hence, option (c) is correct.

23. On 1^st January, 2008 A Ltd. purchased a machinery of Rs.6, 000 and also purchased a second hand machinery as on 1^st July, 2008 of Rs.5, 000. Both the machinery were sold on 31^st April, 2009 for Rs.5, 000 and Rs.4, 200 respectively. The company charges depreciation @ 20% p.a. on diminishing balance method. What will be the profit or loss on sale of both machinery?

(a)    No profit, no loss for both machinery.

(b)    For 1^st machine ‘profit’ and for 2^nd machine ‘loss’.

(c)    For 1^st machine ‘profit’ and for 2^nd machine ‘no profit no loss’.

(d)    Loss for both the machinery.

1. No profit, no loss for both machines. This is incorrect because one machine resulted in a profit and the other broke even.
2. For the first machine, profit, and for the second machine, loss. This is incorrect because the second machine was sold at its book value, so no loss occurred.
3. For the first machine, profit, and for the second machine, no profit no loss. This is correct because depreciation resulted in a book value lower than the selling price for the first machine, generating a profit. The second machine was sold at its book value.
4. Loss for both machines. This is incorrect because at least one machine was sold at a profit.

Year	Calculation	Depreciation for Machine 1	Depreciation for Machine 2
2008	Rs.6,000 x 20/100 x 1 year	1,200
2008	Rs.5,000 x 20/100 x 6 months		500
2009	Rs.(6,000 – 1,200) x 20/100 x 4 months	320
2009	Rs.(5,000 – 500) x 20/100 x 4 months		300

Calculation for profit and loss on sale of machinery:

Particulars	M 1	M 2
Cost of machine	6,000	5,000
Less: Depreciation for 2008 and 2009	1,520	800
W.D.V. on 31st April, 2009	4,480	4,200
Less: Sale value	5,000	4,200
Profit / Loss on sale of machine.	(520)	NIL

So, For 1^st machine ‘profit’ and for 2^nd machine ‘no profit no loss’ and hence option (c) is the right answer.

24. On 1.1.2008, value of furniture Rs.9, 000
Furniture purchased during the year Rs.5, 000
Sale of furniture Rs.2,000
Loss on sale Rs.1,000
On 31.12.2008 furniture stood. Rs.8,000
Find out the depreciation at the end of the year.

(a)    Rs.4,000

(b)    Rs.5,000

(c)    Rs.3,000

(d)    Rs.2,000

1. Rs. 4,000. This is incorrect because it overstates the depreciation.
2. Rs. 5,000. This is incorrect because this does not match the calculated depreciation amount.
3. Rs. 3,000. This is correct because after accounting for purchases, sales, and losses, the depreciation amount comes to Rs. 3,000.
4. Rs. 2,000. This is incorrect because the actual depreciation is higher.

Furniture A/c

Particulars	Rs.	Particulars	Rs.
To balance b/d	9,000	By bank (Sale)	2,000
To Bank A/c (purchase)	5,000	By P/L A/c (loss)	1,000
		By Depreciation [bal fig.]	3,000
		By Balance c/d	8,000
	14,000		14,000

So, the depreciation is Rs.3, 000 and hence, option (c) is correct.

Arithmetically, it may be computed like this

Cost of furniture sold = 2000 (sale value) + 1000 (loss) = 3000

Let depreciation = D

9000 (opening) + 5000 (additions)  – D (depn) – 3000 (cost of sale)  = 8000 (closing)

So, D = 11000 – 8000 = 3000

25.The cost of the asset purchased on 1^st April, 2008 was Rs.24, 000. the depreciation was provided at 10% on Straight Line Method. The asset was sold on 31^st Jan, 2009 for Rs.18, 000. Which of the following statements is/are true?

(a)    Depreciation provided for the year was Rs.2,400

(b)    Loss on the sale of asset was Rs.4,000

(c)    No depreciation will be provided

(d)    Both (a) and (b).

1. Depreciation provided for the year was Rs. 2,400. This is incorrect because depreciation is calculated for 10 months, not a full year.
2. Loss on sale of the asset was Rs. 4,000. This is correct because the difference between the book value and selling price results in a loss.
3. No depreciation will be provided. This is incorrect because depreciation must be charged until the date of sale.
4. Both (a) and (b). This is incorrect because the depreciation calculation provided is not fully accurate.

Depreciation of the machine = Rs.24, 000 x 10% x 10/12 months. = Rs.2,000.

So, the W.D.V. of the asset = Rs.(24,000 – 2,000) = Rs.22,000

Hence the profit or loss of the asset = (sale vale – w.d.v. of the asset)

i.e. Rs. (22,000 – 18,000) = Rs.4, 000 loss

So,  option (b) is correct

26. Machinery was purchased for Rs.50, 000 two years ago. The current book value of the machinery is Rs.36, 125. If the depreciation is charged under written down value method, the rate of depreciation is :

(a)    30%

(b)    25%

(c)    20%

(d)    15%

1. 30 percent. This is incorrect because applying the WDV formula does not result in this rate.
2. 25 percent. This is incorrect because this rate does not match the calculated reduction in value.
3. 20 percent. This is incorrect because the rate is lower than the calculated WDV depreciation.
4. 15 percent. This is correct because using the depreciation formula gives 15 percent.

Rate of Depreciation is 1-( ²√(36,125 / 50,000) = 1-√.7225 = 1=.85= .0.15 = (,15 x100)x 100%) =15%. So, option (d) is correct

27. The written down value or an asset after three years of depreciation on the reducing balance method @ 10% p.a. is Rs.18, 225. Its original value must have been ________.

(a)    Rs.40,000

(b)    Rs.25,000

(c)    Rs.30,000

(d)    None of these

(a) Rs. 40,000. This is incorrect because the initial value was lower.

(b) Rs. 25,000. This is correct because applying the reverse calculation of reducing balance method results in Rs. 25,000.

(c) Rs. 30,000. This is incorrect because the calculated original value is lower.

(d) None of these. This is incorrect because the correct answer is available.

Calculation of original value of the assets  = Rs.18,225 x 100/90 x 100/90 x 100/90  = Rs.25, 000.

So, option (b) is the right answer.

28. 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. 

1. Cost of a fixed asset. This is incorrect because depreciation is the reduction in value, not the asset’s cost.
2. Cost of a fixed asset’s repair. This is incorrect because repairs are maintenance expenses, not depreciation.
3. The residual value of a fixed asset. This is incorrect because residual value refers to the estimated value after the useful life ends.
4. Portion of a fixed asset’s cost consumed during the current accounting period. This is correct because depreciation spreads the asset’s cost over its useful life.

Depreciation is Portion of a fixed asset’s cost consumed during the current accounting period.  So, option (d) is correct

29. What is the accumulated deprecation?
A)  Sum of depreciation expenses of a fixed asset from date of putting the asset into use till date
B)  Depreciation for 1^st year
C)  Cost of depletion of assets 
D)  Future value of fixed asset 

1. Sum of depreciation expenses of a fixed asset from the date of putting the asset into use till date. This is correct because accumulated depreciation is the total depreciation recorded over an asset’s life.
2. Depreciation for the first year. This is incorrect because accumulated depreciation accounts for multiple years.
3. Cost of depletion of assets. This is incorrect because depletion applies to natural resources, not fixed assets.
4. Future value of a fixed asset. This is incorrect because depreciation does not determine future value.

Accumulated Deprecation is sum of depreciation expenses of a fixed asset from date of putting the asset into use till date. So, option (a) is correct

30. Accumulated depreciation Shows 
A)  Debit balance 
B)  Credit balance 
C)  Nil balance 
D)  Residual Value

1. Debit balance. This is incorrect because accumulated depreciation is recorded as a credit.
2. Credit balance. This is correct because accumulated depreciation reduces the book value of the asset and is recorded as a credit in accounting.
3. Nil balance. This is incorrect because depreciation continues accumulating until the asset is fully depreciated.
4. Residual value. This is incorrect because residual value is separate from accumulated depreciation

Accumulated depreciation Shows Credit balance.So, option (B) is correct.

31. A company purchased a new machine for Rs.500,000 and machine’s test run was started to make sure that machine works properly. There was expense of Rs.5000 incurred on test run, however income of test production were Rs.2000. What is the total cost of machine? 
A)  Rs.500,000 
B)  Rs.505,000 
C)  503,000 
D)  495,000

1. Rs. 500,000. This is incorrect because test run costs are added to the asset cost.
2. Rs. 505,000. This is incorrect because the test run income is not accounted for.
3. Rs. 503,000. This is correct because the total cost includes test run expenses minus the test production income.
4. Rs. 495,000. This is incorrect because the total cost is higher.

Toal Cost of machine is 5,00,000 (purchase cost) + [5000 (test Run expenses) – 2000(test run ernaings)\= 5,00,000 + 3,000= 5,03,000. So, option (C) is correct.

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

1. Depreciation. This is incorrect because depreciation refers to a decrease in asset value.
2. Appreciation. This is correct because appreciation means an increase in asset value.
3. Market capitalization. This is incorrect because market capitalization applies to company valuation, not individual asset values.
4. Reverse depreciation. This is incorrect because there is no such accounting term.

An increase in the value of asset is referred to as Appreciation.So, option (B) is correct.

33. The term ______ is generally used for the depreciation of natural resources:
A)  Amortization 
B)  Depletion 
C)  Appreciation
D)  Disposal Value

1. Amortization. This is incorrect because amortization applies to intangible assets.
2. Depletion. This is correct because depletion applies to natural resource extraction.
3. Appreciation. This is incorrect because appreciation refers to an increase in value.
4. Disposal value. This is incorrect because disposal value refers to the asset’s estimated value at the end of its useful life

The term Depletion is generally used for the depreciation of natural resources. Hence Option (B) is correct.