Depreciation methods
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1. Which depreciation method charges a fixed percentage on the reducing balance of an asset?
A. Straight Line Method
B. Written Down Value Method ✓
C. Sum of Years Digits
D. Units of Production
Written Down Value (WDV) method charges depreciation as a fixed percentage on the reducing (written down) balance each year, resulting in higher depreciation in earlier years.
2. If NPV of a project is positive, it means:
A. Project should be rejected
B. Project earns less than cost of capital
C. Project earns more than cost of capital ✓
D. Project has zero return
Positive NPV means the project generates returns above the required rate (cost of capital). The project adds value and should be accepted.
3. Current Ratio is calculated as:
A. Fixed Assets / Current Liabilities
B. Current Assets / Current Liabilities ✓
C. Quick Assets / Current Liabilities
D. Total Assets / Total Liabilities
Current Ratio = Current Assets / Current Liabilities. It measures short-term liquidity. A ratio of 2:1 is generally considered ideal.
4. TDS on salary is deducted under which section of Income Tax Act?
A. Section 192 ✓
B. Section 194A
C. Section 194C
D. Section 195
Section 192 deals with TDS on salary. 194A is for interest other than securities, 194C is for contractor payments, and 195 is for payments to non-residents.
5. Break-Even Point is reached when:
A. Profit equals loss
B. Total revenue equals total cost ✓
C. Fixed cost equals variable cost
D. Sales exceed budget
Break-Even Point (BEP) is where Total Revenue = Total Cost (Fixed + Variable). At BEP, there is neither profit nor loss. BEP in units = Fixed Cost / Contribution per unit.