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JAIIB AFM Unit 3 — Depreciation and Its Accounting: Free MCQs with Explanations

By Swarnakshi Jha (ex-banker) · Updated 20 September 2026 · Paper 3 of the November 2026 cycle (28 November 2026)

This page is a free slice of our JAIIB AFM question bank for Unit 3 — Depreciation and Its Accounting (Module A — Basic Accounting and Finance). The Mock Centre holds 73 questions on this unit alone, every one with a why-right / why-wrong explanation; below are the facts examiners keep returning to, five of those questions to try, and the traps that cost marks.

AFM · Module A73 MCQs in the Mock Centre5 free belowPaper on 28 November 2026

Key facts examiners test from this unit

  1. Depreciation = allocation of cost over useful life — a process of allocation, NOT valuation; no link to market value.
  2. Causes: wear & tear, efflux of time, obsolescence, accidents, fall in market price; land & old paintings appreciate.
  3. Factors: cost, residual/scrap value, estimated useful life (use expected life, not physical-running life).

5 free practice questions — tap an option

Five basic questions from this unit. Answers lock on the first tap, exactly as in the exam, and a short explanation opens underneath. The Mock Centre adds the moderate and tough questions, why every other option is wrong, the concept capsule and the exam tip — with your score and revision dates tracked.

Question 1 of 5
The decrease in the value of an asset under depreciation is:
Why (b): The reduction in value is GRADUAL and CONTINUOUS — not sudden, not one-time, not reversible.
Question 2 of 5
Under the Straight Line Method, the depreciation charged each year is:
Why (c): Under SLM the asset loses an EQUAL amount each year — constant depreciation, suiting assets with constant performance (plant & machinery).
Question 3 of 5
"Except for ______, all tangible assets have a limited useful life."
Why (b): Except for land, all tangible assets have a limited useful life — which is why land is not depreciated (and may even appreciate, like old paintings).
Question 4 of 5
Under Ind AS 16, the 'depreciable amount' of an asset is:
Why (a): Depreciable amount = cost (or the amount substituted for cost) minus residual value. This is what gets allocated over the useful life.
Question 5 of 5
The Provision for Depreciation account method differs from directly crediting the asset because:
Why (a): Under the provision method the asset stays at cost and the accumulated Provision for Depreciation is deducted to show net value — the P&L charge is identical either way.
0 of 5 answered.

Traps in this unit

Confusable AConfusable BThe difference
Efflux of timeObsolescenceMere passage of time vs new invention/permanent demand change
DepreciationAmortisationTangible assets (Ind AS 16) vs intangible assets (Ind AS 38)
Practise all 73 questions on Unit 3. The free demo opens a slice of every subject with the same explanations; the AFM Online-only pass unlocks all 1,681 AFM questions, the full and module mocks, Smart Revision and the Readiness Score for one year (₹1,299). Not sure where you stand? Take the free 10-question test first.
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Independent study aid — not affiliated with, endorsed by, or sponsored by the Indian Institute of Banking & Finance (IIBF). Exam pattern, dates, fees and passing criteria are set by IIBF — always confirm the current rules at iibf.org.in. Regulatory figures verified as of September 2026; verify from official sources before relying on them in practice.