JAIIB Exam 2025 – AFM Important Questions MCQs Quiz-6

15/02/2025

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JAIIB Exam 2025 AFM Important Questions MCQs Quiz-6

JAIIB Exam Quiz 2025: The JAIIB exam is scheduled for 2025 by IIBF. Here, we are providing JAIIB AFM MCQ-based quizzes on a regular basis. You can attempt the quizzes regularly to prepare for the upcoming JAIIB exam. The quizzes will be provided module-wise and unit-wise. You can attempt the JAIIB AFM quizzes from the links below and improve your preparation by practicing regularly. These quizzes will help you boost your score in the JAIIB exam and guide you to clear the exam on your first attempt.

Q.1 Which of the following statements best defines depreciation?
A) Depreciation is a method of setting aside funds for asset replacement.
B) Depreciation is an accounting adjustment made only when an asset is sold.
C) Depreciation is an attempt to allocate the cost of a longlived asset over its useful economic life as an expense.
D) Depreciation is a process of increasing the value of an asset over time

Q.2 Which of the following is NOT a basic factor considered when calculating depreciation?
A) The cost of the asset
B) The estimated residual or scrap value
C) The estimated number of years of useful life
D) The actual number of years the asset can physically run

Q 3 A company purchases a machine for ₹5,00,000. The estimated residual value at the end of its useful life is ₹50,000, and the expected useful life of the machine is 10 years. Calculate the annual depreciation using the Straight-Line Method (SLM)
a. 50000
b. 45000
c. 40000
d. 35000

Q.4 A company purchases a machine for ₹5,00,000. The depreciation rate is 10% per annum under the Written Down Value (WDV) Method.Calculate the depreciation for the first two years.
a. 405000
b. 395000
c. 95000
d. 85000

Q.5 Which of the following statements is TRUE regarding the Diminishing Balance (Written Down Value) Method of depreciation?
A) Depreciation is calculated on the original cost of the asset each year.
B) The depreciation expense remains constant over the useful life of the asset.
C) A fixed depreciation rate is applied to the book value of the asset each year, leading to higher depreciation in the earlier years.
D) The method is unsuitable for assets that lose efficiency over time.

Q.6 Which of the following is a disadvantage of the Straight- Line Method of depreciation?
A) It is difficult to calculate and understand.
B) The depreciation charge varies every year, making accounting complex.
C) The total charge to the Profit & Loss account may increase in later years due to rising repair costs.
D) Depreciation is applied to the written-down value, leading to a higher initial charge

Q.7 Which of the following is a disadvantage of the Diminishing Balance (Written Down Value) Method?
A) The asset can never be reduced to zero value in the books.
B) The depreciation charge remains constant throughout the asset’s life.
C) It does not consider the effect of repairs and maintenance costs.
D) It is not suitable for assets like computers and vehicles

Q.8 Which of the following statements is TRUE regarding the Units of Production Method of depreciation?
A) Depreciation is calculated based on the passage of time rather than asset usage.
B) It is most suitable for assets whose wear and tear depend on actual usage rather than years of service.
C) The depreciation expense remains constant every year.
D) It does not require maintaining detailed records of asset usage

Q.9 A machine is purchased for ₹5,00,000 with an estimated total production capacity of 1,00,000 units over its lifetime. The estimated residual value at the end of its life is ₹50,000. If the machine produces 20,000 units in the first year, what is the depreciation for that year using the Units of Production Method?
A) ₹90,000
B) ₹1,00,000
C) ₹80,000
D) ₹1,10,000

Q.10 A company purchases a machine for ₹6,00,000 with a residual value of ₹1,00,000 and an estimated useful life of 4 years. Using the Sum of the Years’ Digits (SYD) Method, what is the depreciation for Year 1?
What is the depreciation expense for Year 1?
A) ₹1,50,000
B) ₹2,00,000
C) ₹1,80,000
D) ₹1,60,000

Q.11 Which of the following best describes the purpose of creating a Sinking Fund for asset replacement?
A) To accumulate funds over time by setting aside an amount equal to the annual depreciation expense and investing it in readily saleable securities.
B) To record the book value of the asset after accounting for depreciation.
C) To immediately replace a fixed asset as soon as it becomes obsolete, regardless of available funds.
D) To reduce the depreciation expense recorded in financial statements.

Q.12 Which of the following statements about amortisation is TRUE?
A) Amortisation applies only to tangible fixed assets like machinery and buildings.
B) Amortisation is the process of systematically allocating the cost of an intangible asset over its useful life.
C) Amortisation is recorded only when an intangible asset is sold.
D) Amortisation is used to increase the book value of intangible assets over time.