Chapter depreciation-provisions-and-reserves: Depreciation, Provisions and Reserves Assertion-Reason Questions | accountancy Class 11 CBSE

Assertion-Reason

Easy difficulty • Check the statement and reason

Easy

Question 1

Logic Check

Assertion (A): Depreciation is a non-cash expense. Reason (R): Depreciation does not involve any actual cash outflow; it is merely a process of writing off the capital expenditure already incurred.

Reasoning Options

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Assertion-Reason

Medium difficulty • Check the statement and reason

Medium

Question 2

Logic Check

Assertion (A): Under the Straight Line Method, the total charge on account of depreciation and repairs is not equal year after year. Reason (R): Under SLM, the annual depreciation charge is fixed, but repair expenses increase in later years of the asset's life.

Reasoning Options

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Assertion-Reason

Medium difficulty • Check the statement and reason

Medium

Question 3

Logic Check

Assertion (A): The Written Down Value method is recognised by the Income Tax Act. Reason (R): Under WDV, a larger amount of depreciation is charged in early years, reducing taxable profits, which is accepted by the Income Tax Act.

Reasoning Options

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Assertion-Reason

Hard difficulty • Check the statement and reason

Hard

Question 4

Logic Check

Assertion (A): Provision for Doubtful Debts is an appropriation of profit. Reason (R): Provisions are created after calculating net profit to strengthen the financial position of the business.

Reasoning Options

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Assertion-Reason

Medium difficulty • Check the statement and reason

Medium

Question 5

Logic Check

Assertion (A): Capital Reserve can be distributed as dividend to shareholders. Reason (R): Capital Reserve is created from capital profits which do not arise from normal operating activities of the business.

Reasoning Options

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Assertion-Reason

Medium difficulty • Check the statement and reason

Medium

Question 6

Logic Check

Assertion (A): Depreciation must be charged even if the market value of an asset has increased. Reason (R): Depreciation is based on the cost of the asset consumed in the business, not on its market value.

Reasoning Options

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Assertion-Reason

Medium difficulty • Check the statement and reason

Medium

Question 7

Logic Check

Assertion (A): Under the Written Down Value method, the book value of an asset can never become zero. Reason (R): Depreciation under WDV is calculated on the reducing book value at a fixed percentage, so the value keeps reducing but never reaches zero.

Reasoning Options

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Assertion-Reason

Easy difficulty • Check the statement and reason

Easy

Question 8

Logic Check

Assertion (A): A general reserve can be used for dividend distribution. Reason (R): General Reserve is created from revenue profits which are freely available and can be utilised for any purpose including dividend distribution.

Reasoning Options

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Assertion-Reason

Medium difficulty • Check the statement and reason

Medium

Question 9

Logic Check

Assertion (A): Depletion and depreciation receive similar accounting treatment. Reason (R): Although depletion concerns exhaustion of natural resources and depreciation concerns tangible fixed assets, both result in expiry of service potential and are treated similarly in accounts.

Reasoning Options

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Assertion-Reason

Hard difficulty • Check the statement and reason

Hard

Question 10

Logic Check

Assertion (A): Creation of reserve reduces taxable profits of the business. Reason (R): Reserve is created from profit after tax and is an appropriation of profit, not a charge against profit.

Reasoning Options

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Assertion-Reason

Medium difficulty • Check the statement and reason

Medium

Question 11

Logic Check

Assertion (A): When provision for depreciation account is maintained, the asset account is disturbed every year by the depreciation amount. Reason (R): Under the provision for depreciation method, depreciation is accumulated in a separate account without changing the original cost in the asset account.

Reasoning Options

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Assertion-Reason

Easy difficulty • Check the statement and reason

Easy

Question 12

Logic Check

Assertion (A): Straight Line Method is suitable for leasehold buildings. Reason (R): Leasehold buildings have a contractually determined life and uniform usage, making it easy to distribute cost equally over the period.

Reasoning Options

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Assertion-Reason

Medium difficulty • Check the statement and reason

Medium

Question 13

Logic Check

Assertion (A): Provision for Depreciation reduces taxable profits. Reason (R): Provision for depreciation is a charge against profit and is deducted before calculating taxable income.

Reasoning Options

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Assertion-Reason

Easy difficulty • Check the statement and reason

Easy

Question 14

Logic Check

Assertion (A): The Dividend Equalisation Reserve is a specific revenue reserve. Reason (R): It is created from revenue profits for the specific purpose of maintaining a stable rate of dividend and cannot be used freely for other purposes.

Reasoning Options

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Assertion-Reason

Easy difficulty • Check the statement and reason

Easy

Question 15

Logic Check

Assertion (A): Depreciation can be charged on current assets like stock and debtors. Reason (R): Depreciation is charged only on depreciable fixed assets that are expected to be used for more than one accounting period and have a limited useful life.

Reasoning Options

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Assertion-Reason

Medium difficulty • Check the statement and reason

Medium

Question 16

Logic Check

Assertion (A): Secret Reserve does not appear in the Balance Sheet. Reason (R): Secret Reserve is created to strengthen the financial position of the business visibly for the benefit of shareholders.

Reasoning Options

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Assertion-Reason

Easy difficulty • Check the statement and reason

Easy

Question 17

Logic Check

Assertion (A): Cost of an asset includes installation, freight, and transportation charges. Reason (R): As per AS-6, cost of a fixed asset is the total cost spent in connection with its acquisition, installation, and commissioning.

Reasoning Options

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Assertion-Reason

Medium difficulty • Check the statement and reason

Medium

Question 18

Logic Check

Assertion (A): Under the Straight Line Method, the asset can be depreciated down to its net scrap value or even to zero. Reason (R): The SLM distributes the full depreciable cost equally over the useful life, allowing the asset value to reach scrap or zero.

Reasoning Options

ByteNotes

Assertion-Reason

Medium difficulty • Check the statement and reason

Medium

Question 19

Logic Check

Assertion (A): Amortisation and depreciation receive the same accounting treatment. Reason (R): Both amortisation and depreciation represent expiry of usefulness of assets — amortisation for intangible assets and depreciation for tangible fixed assets — and both are charged against profits.

Reasoning Options

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Assertion-Reason

Hard difficulty • Check the statement and reason

Hard

Question 20

Logic Check

Assertion (A): Provision for Doubtful Debts is shown on the liabilities side of the Balance Sheet as a current liability. Reason (R): Provision for Doubtful Debts is created for estimated loss from debtors and can alternatively be shown as a deduction from Sundry Debtors on the asset side.

Reasoning Options

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Chapter sections

Chapter depreciation-provisions-and-reserves: Depreciation, Provisions and Reserves | Assertion-Reason

Assertion (A): Depreciation is a non-cash expense. Reason (R): Depreciation does not involve any actual cash outflow; it is merely a process of writing off the capital expenditure already incurred.

Assertion (A): Under the Straight Line Method, the total charge on account of depreciation and repairs is not equal year after year. Reason (R): Under SLM, the annual depreciation charge is fixed, but repair expenses increase in later years of the asset's life.

Assertion (A): The Written Down Value method is recognised by the Income Tax Act. Reason (R): Under WDV, a larger amount of depreciation is charged in early years, reducing taxable profits, which is accepted by the Income Tax Act.

Assertion (A): Provision for Doubtful Debts is an appropriation of profit. Reason (R): Provisions are created after calculating net profit to strengthen the financial position of the business.

Assertion (A): Capital Reserve can be distributed as dividend to shareholders. Reason (R): Capital Reserve is created from capital profits which do not arise from normal operating activities of the business.

Assertion (A): Depreciation must be charged even if the market value of an asset has increased. Reason (R): Depreciation is based on the cost of the asset consumed in the business, not on its market value.

Assertion (A): Under the Written Down Value method, the book value of an asset can never become zero. Reason (R): Depreciation under WDV is calculated on the reducing book value at a fixed percentage, so the value keeps reducing but never reaches zero.

Assertion (A): A general reserve can be used for dividend distribution. Reason (R): General Reserve is created from revenue profits which are freely available and can be utilised for any purpose including dividend distribution.

Assertion (A): Depletion and depreciation receive similar accounting treatment. Reason (R): Although depletion concerns exhaustion of natural resources and depreciation concerns tangible fixed assets, both result in expiry of service potential and are treated similarly in accounts.

Assertion (A): Creation of reserve reduces taxable profits of the business. Reason (R): Reserve is created from profit after tax and is an appropriation of profit, not a charge against profit.

Assertion (A): Straight Line Method is suitable for leasehold buildings. Reason (R): Leasehold buildings have a contractually determined life and uniform usage, making it easy to distribute cost equally over the period.

Assertion (A): Provision for Depreciation reduces taxable profits. Reason (R): Provision for depreciation is a charge against profit and is deducted before calculating taxable income.

Assertion (A): The Dividend Equalisation Reserve is a specific revenue reserve. Reason (R): It is created from revenue profits for the specific purpose of maintaining a stable rate of dividend and cannot be used freely for other purposes.

Assertion (A): Depreciation can be charged on current assets like stock and debtors. Reason (R): Depreciation is charged only on depreciable fixed assets that are expected to be used for more than one accounting period and have a limited useful life.

Assertion (A): Secret Reserve does not appear in the Balance Sheet. Reason (R): Secret Reserve is created to strengthen the financial position of the business visibly for the benefit of shareholders.

Assertion (A): Cost of an asset includes installation, freight, and transportation charges. Reason (R): As per AS-6, cost of a fixed asset is the total cost spent in connection with its acquisition, installation, and commissioning.

Assertion (A): Under the Straight Line Method, the asset can be depreciated down to its net scrap value or even to zero. Reason (R): The SLM distributes the full depreciable cost equally over the useful life, allowing the asset value to reach scrap or zero.

Assertion (A): Amortisation and depreciation receive the same accounting treatment. Reason (R): Both amortisation and depreciation represent expiry of usefulness of assets — amortisation for intangible assets and depreciation for tangible fixed assets — and both are charged against profits.

Assertion (A): Provision for Doubtful Debts is shown on the liabilities side of the Balance Sheet as a current liability. Reason (R): Provision for Doubtful Debts is created for estimated loss from debtors and can alternatively be shown as a deduction from Sundry Debtors on the asset side.

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