Q.Show the differences between Capital Reserve and Revenue Reserve. Or X Ltd. purchased a machine on 1st July, 2016 for ₹1,50,000. On 1st September, 2016 purchased another machine for ₹50,000. On 30th June, 2017, first machine was sold for ₹1,20,000 due to its bad performance. The company charges depreciation @ 10% p.a. under Diminishing Balance Method.
Prepare Machinery Account for the years ended 31st December, 2016 and 31st December, 2017.

Showing the 12 most recent of 19 on this concept.

1. CBSE 2026Set ANNUAL1 markMCQ
   Q.Depreciation is related to -

   (a) Current assets

   (b) Fixed assets

   (c) Investments

   (d) Cash

   ›Reveal solutionSolution

   Correct option: (b) Fixed assets.

   Depreciation is the gradual, permanent fall in the value of a fixed asset due to use, wear and tear or obsolescence. So d …

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2. CBSE 2026Set ANNUAL1 mark
   Q.Fill in the blank: Temporary rise or fall in the price of assets is called ________.

   ›Reveal solutionSolution

   Answer: Fluctuation.

   A temporary (short-term) rise or fall in the market price of an asset is called fluctuation. Unlike depreciation (a permanent fall), fluctuation is tempo …

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3. CBSE 2025Set MARCH1 mark
   Q.Cost of the asset ₹ 80,000 Scrap value ₹ 10,000 Useful life period – 10 years Find the Annual Depreciation.

   ›Reveal solutionSolution

   Annual depreciation under the straight line method = ₹7,000.

   Straight Line Method formula:

   Annual Depreciation = (Cost of asset − Scrap value) ÷ Useful life

   Item	Amount (₹)
   Cost of the asset	80,000
   Less: Scrap value	10,000
   Depreciable amount	70,000
   Useful life	10 years
   …

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4. CBSE 2025Set ANNUAL1 markMCQ
   Q.Depreciation is related to -

   (a) Current Assets

   (b) Fixed Assets

   (c) Investment

   (d) Cash

   ›Reveal solutionSolution

   Correct option: (b) Fixed Assets.

   Depreciation is the permanent, gradual decrease in the value of a fixed (tangible) asset due to use, wear and tear, passage of time or obsolesce …

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5. CBSE 2024Set MARCH1 mark
   Q.Decrease in the value of fixed assets is called __________

   ›Reveal solutionSolution

   Answer: depreciation.

   The permanent, gradual decline in the value of a fixed asset (machinery, furniture, building) due to use, wear and tear, obsolescence or lapse of time is called depreciation. It is charged as an expense ea …

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6. CBSE 2024Set ANNUAL1 markMCQ
   Q.Depreciation is a process of

   (a) valuation of asset

   (b) allocation of cost of asset

   (c) amortization of loan

   (d) duplication of asset

   ›Reveal solutionSolution

   Depreciation is the systematic allocation of a fixed asset's cost over its useful life.

   A fixed asset is used over many accounting periods. Matching requires that each period bear its share of the asset's cost.

   • Depreciation allocates (cost − scrap value) across the asset's useful life. …

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7. CBSE 2024Set ANNUAL1 markMCQ
   Q.Under straight-line method of depreciation, the amount of annual depreciation

   (a) increases every year

   (b) decreases every year

   (c) remains constant every year

   (d) increases some year and then decreases

   ›Reveal solutionSolution

   Straight-line depreciation is equal every year because it is based on original cost.

   In the straight-line method the annual depreciation = (Cost − Scrap value) ÷ Useful life, a figure fixed at the start.

   • Because the base (original cost) never changes, the charge is identical every year. …

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8. CBSE 2023Set ANNUAL1 mark
   Q.Answer within 1 sentence: What is depreciation?

   ›Reveal solutionSolution

   Depreciation = the gradual, permanent decline in a fixed asset's value, charged as an annual expense.

   Depreciation spreads the cost of a long-lived asset (less its scrap value) over its useful life, matching the cost against the revenue the asset helps earn. Causes include regular use (wear and tear), passage of time, and obsolescence. It is a non-cash operating expense debited to the Profit & Loss Account — a core concept of the CHSE Odisha +2 Class-12 Commerce Accou …

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9. CBSE 2022Set MARCH1 markMCQ
   Q.The amount of depreciation charged under Diminishing balance method ________.

   (a) increases every year

   (b) remains constant every year

   (c) equals to its scrap value

   (d) decreases every year

   ›Reveal solutionSolution

   Under the Diminishing Balance Method the amount of depreciation decreases every year — option (d). Core Kerala Plus One (DHSE) Accountancy depreciation concept.

   In the diminishing (written-down) balance method, depreciation is charged at a fixed percentage on the book value at the beginning of each year (i.e. the reducing balance), not on the original cost. Because the book value keeps falling as depreciation accumulates, the rupee amount of depreciation calculated on it also keeps falling.

   Example (10% on ₹1,00,000):

   | Year | Opening book value (₹) | Depreciation @10% (₹) | Closing book value (₹) |

   |---|---|---|---| …

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10. CBSE 2022Set ANNUAL1 markMCQ
    Q.Under straight-line method of depreciation, the amount of annual depreciation

    (a) increases every year

    (b) decreases every year

    (c) increases in some years and decreases in some other years

    (d) remains constant in every year

    ›Reveal solutionSolution

    Straight-line method charges equal depreciation each year, so the annual amount stays constant.

    • SLM = (Cost - Scrap value) / Useful life, computed on the original cost.
    • Because the base (original cost) and rate do not change, the annual charge is the same every year — a straight line when plotted. …

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11. CBSE 2022Set ANNUAL1 markMCQ
    Q.The method of depreciation applicable to a mine is

    (a) machine hour method

    (b) depletion method

    (c) diminishing balance method

    (d) straight-line method

    ›Reveal solutionSolution

    A mine depletes as minerals are extracted, so the depletion (output) method applies.

    • A mine/quarry is a wasting asset; its value reduces as the natural resource is exhausted.
    • The depletion method charges depreciation per unit extracted = (Cost - Scrap)/Estimated total output x units extracted in the year. …

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12. CBSE 2022Set ANNUAL1 markMCQ
    Q.Under diminishing balance method of depreciation, the amount of annual depreciation

    (a) increases every year

    (b) decreases every year

    (c) increases in some years and decreases in some other years

    (d) remains constant in each year

    ›Reveal solutionSolution

    Diminishing-balance depreciation is charged on the reducing book value, so it decreases each year.

    • Under the WDV/diminishing-balance method, the same rate is applied to the book value at the start of each year.
    • Since the book value keeps falling (after each year's charge), the depreciation amount is highest in year one and decreases every year. …

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