MULTIPLE-CHOICE QUESTIONS WITH ANSWERS RELATED TO DEPRECIATION UNDER THE INCOME TAX ACT, 1961 AS WELL AS THE COMPANIES ACT, 2013

Which of the following methods of depreciation is commonly used for tangible assets under the Income Tax Act, 1961?
a) Annuity method
b) Sum-of-years’ digits method
c) Unit of time method
d) Written down value method
Answer: d) Written down value method

As per the Companies Act, 2013, which of the following is not considered a tangible asset?
a) Land
b) Machinery
c) Patents
d) Buildings
Answer: c) Patents

Which section of the Income Tax Act, 1961 deals specifically with depreciation?
a) Section 30
b) Section 32
c) Section 35
d) Section 40
Answer: b) Section 32

Which of the following methods allows for a higher depreciation expense in the early years of an asset’s life?
a) Straight-line method
b) Double-declining balance method
c) Unit of production method
d) Sum-of-years’ digits method
Answer: b) Double-declining balance method

Under the Income Tax Act, 1961, what is the rate of depreciation for residential buildings?
a) 5%
b) 10%
c) 15%
d) 20%
Answer: c) 15%

As per the Companies Act, 2013, what is the formula for calculating depreciation under the straight-line method?
a) (Cost of asset – Salvage value) / Estimated useful life
b) Cost of asset / Estimated useful life
c) (Cost of asset + Salvage value) / Estimated useful life
d) (Cost of asset × Salvage value) / Estimated useful life
Answer: a) (Cost of asset – Salvage value) / Estimated useful life

Which of the following acts allows for a change in the method of depreciation?
a) Income Tax Act, 1961
b) Companies Act, 2013
c) Foreign Exchange Management Act, 1999
d) Securities and Exchange Board of India Act, 1992
Answer: a) Income Tax Act, 1961

What is the maximum depreciation rate allowed for assets categorized as “intangible assets” under the Income Tax Act, 1961?
a) 10%
b) 15%
c) 20%
d) 25%
Answer: c) 20%

Under the Companies Act, 2013, where should depreciation expense be recorded?
a) Profit and loss account
b) Balance sheet
c) Cash flow statement
d) Trial balance
Answer: a) Profit and loss account

Which depreciation method is commonly used for assets like vehicles and machinery?
a) Straight-line method
b) Reducing balance method
c) Sum-of-years’ digits method
d) Annuity method
Answer: b) Reducing balance method

As per the Income Tax Act, 1961, which of the following assets has the highest depreciation rate?
a) Computers
b) Office furniture
c) Residential buildings
d) Plant and machinery
Answer: a) Computers

Which of the following acts allows for the revaluation of assets to fair value?
a) Income Tax Act, 1961
b) Companies Act, 2013
c) Foreign Exchange Management Act, 1999
d) Competition Act, 2002
Answer: b) Companies Act, 2013

As per the Companies Act, 2013, what is the treatment of gain/loss on revaluation of assets?
a) Recognized in the profit and loss account
b) Adjusted against retained earnings
c) Recognized in the balance sheet as a separate component of equity
d) Ignored for accounting purposes
Answer: c) Recognized in the balance sheet as a separate component of equity

Which of the following assets is generally not eligible for depreciation?
a) Leasehold improvements
b) Copyrights
c) Leasehold land
d) Motor vehicles
Answer: c) Leasehold land

Under the Companies Act, 2013, what is the term used for the residual value of an asset?
a) Scrap value
b) Salvage value
c) Net realizable value
d) Book value
Answer: b) Salvage value

Which of the following methods is allowed for calculating depreciation as per both the Income Tax Act, 1961 and the Companies Act, 2013?
a) Unit of production method
b) Sum-of-years’ digits method
c) Annuity method
d) Sinking fund method
Answer: a) Unit of production method

As per the Income Tax Act, 1961, what is the treatment of depreciation on assets used for less than 180 days in a financial year?
a) No depreciation allowed
b) Depreciation is charged proportionately for the period of use
c) Full depreciation allowed
d) Depreciation is doubled
Answer: b) Depreciation is charged proportionately for the period of use

Which of the following methods results in a constant depreciation expense each year?
a) Double-declining balance method
b) Sum-of-years’ digits method
c) Annuity method
d) Straight-line method
Answer: d) Straight-line method

Under the Income Tax Act, 1961, what is the rate of depreciation for assets like ships and aircraft?
a) 10%
b) 15%
c) 20%
d) 25%
Answer: d) 25%

Which of the following is a category of assets eligible for depreciation as per both the Income Tax Act, 1961 and the Companies Act, 2013?
a) Land
b) Investments
c) Patents
d) Goodwill
Answer: c) Patents

As per the Companies Act, 2013, what is the method used to calculate depreciation for leased assets?
a) Written down value method
b) Straight-line method
c) Unit of production method
d) Net realizable value method
Answer: b) Straight-line method

Which of the following is not a factor considered in determining the useful life of an asset for depreciation calculation?
a) Physical wear and tear
b) Technological obsolescence
c) Economic feasibility
d) Market value fluctuations
Answer: d) Market value fluctuations

Under the Income Tax Act, 1961, what is the treatment of depreciation on assets used for charitable purposes?
a) No depreciation allowed
b) Depreciation is charged at a reduced rate
c) Full depreciation allowed
d) Depreciation is doubled
Answer: c) Full depreciation allowed

Which of the following acts governs the calculation of depreciation for non-corporate entities in India?
a) Income Tax Act, 1961
b) Companies Act, 2013
c) Partnership Act, 1932
d) Trusts Act, 1882
Answer: a) Income Tax Act, 1961

As per the Companies Act, 2013, what is the treatment of depreciation on assets revalued upwards?
a) Adjusted against reserves
b) Recognized as income
c) Ignored for accounting purposes
d) Recognized in the profit and loss account
Answer: a) Adjusted against reserves

Which of the following assets has a specified useful life for depreciation calculation under the Income Tax Act, 1961?
a) Goodwill
b) Copyrights
c) Trademarks
d) Leasehold improvements
Answer: d) Leasehold improvements

Under the Companies Act, 2013, what is the treatment of depreciation on assets held for sale?
a) No depreciation allowed
b) Full depreciation charged
c) Depreciation charged until the asset is sold
d) Depreciation is halved
Answer: a) No depreciation allowed

Which of the following is a factor considered in determining the residual value of an asset?
a) Purchase price
b) Salvage value
c) Book value
d) Market value
Answer: b) Salvage value

As per the Income Tax Act, 1961, what is the rate of depreciation for assets classified under the “new plant and machinery” category?
a) 10%
b) 15%
c) 20%
d) 25%
Answer: c) 20%

Which of the following assets typically has the lowest depreciation rate?
a) Buildings
b) Furniture
c) Computers
d) Vehicles
Answer: a) Buildings

Under the Companies Act, 2013, what is the treatment of depreciation on assets under construction?
a) No depreciation allowed
b) Depreciation charged after the asset is completed
c) Depreciation charged based on estimated useful life
d) Full depreciation charged immediately
Answer: a) No depreciation allowed

Which of the following methods is used to calculate depreciation for assets like mines and quarries?
a) Straight-line method
b) Unit of production method
c) Sum-of-years’ digits method
d) Declining balance method
Answer: b) Unit of production method

Under the Income Tax Act, 1961, what is the rate of depreciation for assets categorized as “furniture and fittings”?
a) 10%
b) 15%
c) 20%
d) 25%
Answer: b) 15%

As per the Companies Act, 2013, what is the term used for the estimated time period over which an asset is expected to be used?
a) Useful life
b) Residual value
c) Scrap value
d) Economic life
Answer: a) Useful life

Which of the following acts allows for the transfer of accumulated depreciation on assets when a company is amalgamated?
a) Income Tax Act, 1961
b) Companies Act, 2013
c) Insolvency and Bankruptcy Code, 2016
d) Securities and Exchange Board of India Act, 1992
Answer: b) Companies Act, 2013

Under the Income Tax Act, 1961, what is the treatment of depreciation on assets held for lease?
a) No depreciation allowed
b) Depreciation charged at a reduced rate
c) Full depreciation allowed
d) Depreciation is halved
Answer: c) Full depreciation allowed

Which of the following is a method used to calculate depreciation based on the estimated usage of an asset?
a) Straight-line method
b) Declining balance method
c) Sum-of-years’ digits method
d) Unit of production method
Answer: d) Unit of production method

Under the Companies Act, 2013, what is the treatment of depreciation on assets revalued downwards?
a) Adjusted against reserves
b) Recognized as income
c) Ignored for accounting purposes
d) Recognized in the profit and loss account
Answer: d) Recognized in the profit and loss account

Which of the following assets is typically not eligible for depreciation?
a) Land
b) Plant and machinery
c) Furniture
d) Computers
Answer: a) Land

As per the Income Tax Act, 1961, what is the rate of depreciation for assets like road transport vehicles?
a) 10%
b) 15%
c) 20%
d) 25%
Answer: d) 25%

Which of the following acts governs the calculation of depreciation for tax purposes in India?
a) Companies Act, 2013
b) Income Tax Act, 1961
c) Goods and Services Tax Act, 2017
d) Securities Exchange Board of India Act, 1992
Answer: b) Income Tax Act, 1961

Under the Income Tax Act, 1961, which method of depreciation is not allowed?
a) Straight-line method
b) Written down value method
c) Units of production method
d) Declining balance method
Answer: c) Units of production method

Which of the following assets is not eligible for depreciation as per the Income Tax Act, 1961?
a) Buildings
b) Machinery
c) Land
d) Furniture
Answer: c) Land

As per the Companies Act, 2013, which method of depreciation is mandatory for companies to use?
a) Straight-line method
b) Written down value method
c) Units of production method
d) Declining balance method
Answer: a) Straight-line method

Under the Companies Act, 2013, what is the minimum useful life for an asset to claim depreciation?
a) 3 years
b) 5 years
c) 8 years
d) 10 years
Answer: b) 5 years

Which of the following acts allows for accelerated depreciation?
a) Income Tax Act, 1961
b) Companies Act, 2013
c) Foreign Exchange Management Act, 1999
d) Reserve Bank of India Act, 1934
Answer: a) Income Tax Act, 1961

As per the Income Tax Act, 1961, what is the rate of depreciation for computers and computer software?
a) 10%
b) 15%
c) 20%
d) 25%
Answer: b) 15%

Which of the following assets has the highest rate of depreciation as per the Income Tax Act, 1961?
a) Furniture
b) Plant and Machinery
c) Intangible assets
d) Buildings
Answer: c) Intangible assets

Under the Companies Act, 2013, if an asset is sold during the year, how is depreciation calculated?
a) No depreciation is charged
b) Depreciation is charged proportionately for the months the asset was held
c) Full year’s depreciation is charged
d) Depreciation is calculated based on the remaining useful life
Answer: b) Depreciation is charged proportionately for the months the asset was held

Which of the following acts allows for revaluation of assets?
a) Income Tax Act, 1961
b) Companies Act, 2013
c) Securities and Exchange Board of India Act, 1992
d) Competition Act, 2002
Answer: b) Companies Act, 2013