Commerce Accountancy · Economics

Journal Entries and Depreciation

650 Questions

Journal entries and depreciation are core accountancy topics involving the systematic recording of financial transactions and the calculation of asset value reduction over time. Students must solve problems related to bad debts, provision calculations, and error rectification. These questions are essential for candidates appearing in commerce and accounting competitive exams.

Bad debts provisionAsset depreciation calculationPurchase return errorsTrial balance rectificationDebenture issuance

Journal Entries and Depreciation Questions

Multiple choice

What is the effect on the net asset if cash received from debtors is Rs. 75,000?

  1. It will increase by 75,000.

  2. It will decrease by 75,000.

  3. There will be no change.

  4. It will decrease by Rs. 75,000 - 25,000= 50,000.

  5. None of the above
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

This is the correct option. Debtors have decreased and cash has increased, but total value of assets and liabilities remains the same.

Net asset = Total assets - total liabilities

Multiple choice

An asset was purchased for Rs. 6,60,000. Cash paid is Rs. 1,20,000 and the balance bill is drawn for 3 months. For giving effect to this transaction, fixed assets will be debited by which of the following?

  1. Rs. 1,20,000

  2. Rs. 6,60,000

  3. Rs. 5,40,000

  4. No effect

  5. Rs. 7,80,000
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Fixed assets will increase by Rs. 6,60,000. So, fixed assets will be debited by Rs. 6,60,000 |||| |---|---|---| |Particulars|Debit (Rs)|Credit(Rs)| |Fixed asset A/C Dr                                       |6,60,000| | |     To Cash         | |1,20,000| |     To Bills                 payable| |5,40,000|

Multiple choice

As per the Insurance Act, 1938(as amended),an insurer has to obtain a report from a licensed surveyor if the loss exceeds

  1. Rs. 15000

  2. Rs. 20000

  3. Rs. 25000

  4. Rs. 50000
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

It is not mandatory for an insurer to appoint a surveyor for each and every loss reported by a policy of general insurance. Only where the estimated loss exceeds Rs.20,000/-, the insurers are mandated to appoint a licensed surveyor to assess and settle the loss.

Multiple choice

Under Compulsory Public Liability Policy, the amount of compensation payable per person for actual damage to property is up to

  1. Rs. 2000

  2. Rs. 6000

  3. Rs. 8000

  4. Rs. 25,000
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The Public Liability Insurance Act, 1991 imposes liability on no fault basis on those who handle hazardous substances, if a third party is injured or his property is damaged during the course of such handling. The names of hazardous substances and the quantity of each, is listed in the Act. The amount of compensation payable per person is fixed and for actual damage to property, it is up to Rs. 6000.

Multiple choice

Under Personal Accident cover for Owner-driver, the capital sum insured for commercial vehicles is

  1. Rs. 50,000

  2. Rs. 1,00,000

  3. Rs. 2,00,000

  4. Rs. 3,00,000
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Personal Accident cover for Owner-driver : (a) the owner-driver is the registered owner of the vehicle insured. (b) the owner-driver is the insured named in this policy. (c) the owner-driver holds an effective driving license. (d) capital sum insured Rs.1 lac (two wheelers) capital sum insured Rs.2 lacs.(private cars and commercial vehicles.)

Multiple choice

The purchased and issued amounts of material Y in the month of March 2008, are as follows ||| |---|---| |Mar 4-|Purchased 600 units @ Rs. 40 per unit| |Mar - 20|Purchased 900 units @ Rs. 45 per unit| |Mar - 25|Issued 800 units| Calculate the value of closing stock when FIFO method is used.

  1. Value of Closing Stock is Rs. 31,400

  2. Value of Closing Stock is Rs. 31,500

  3. Value of Closing Stock is Rs. 64,500

  4. Value of Closing Stock is Rs. 33,000
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

 It is Rs 31,500 - Mar 4 - Purchase 600 units @ Rs 40 per unit - 600 units X  Rs 40 =  Rs 24,000   Mar 20 - Purchase 900 units @ Rs 45 per unit - 900 units X Rs 45 = Rs 40,500   Mar 25 - Issue 800 units   As First In, First Out method is used , 600 units will be valued at Rs 40 per unit.                                                               200 units will be valued at Rs 45 per unit                                                                600 units X Rs 40 = Rs 24,000                                                                200 units X Rs 45 = Rs  9,000              Closing Stock  = Total Purchase Price - Total Issue Price                                = ( 24,000 + 40,500 ) - ( 24,000 + 9,000 )                                =  64,500 - 33,000 = Rs 31,500

Multiple choice

Directions: Choose the synonyms of the words written in bold letters.

The firm had accrued debts of over six lakh rupees.

  1. accumulated

  2. achieved

  3. habitual

  4. used to
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Accrued refers to something that has accumulated or been added to over a period of time, especially debts or benefits. Accumulated is the correct synonym as it conveys the idea of gradual collection or buildup. The other options don't match this meaning.

Multiple choice

A stayed in the hotel of B for one week. He organized a party for his friends on 0.1.11.2014 the bill of which amounted to Rs. 40,000/-. He vacated his room on 05.11.2014 and settled all his bills except the bill of the party. B can sue A for the payment of Rs. 40,000/- within:

  1. 1 year from 01.11.2014

  2. 1 year from 05.11.2014

  3. 3 years from 01.11.2014

  4. 3 years from 05.11.2014
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Under the Limitation Act, the limitation period for a simple contract (like payment for hotel services) is 3 years from when the cause of action accrues. The cause of action arises when the debt becomes due, which is the date of the party (01.11.2014) when services were rendered, not the date of vacating the room. Therefore, the 3-year period runs from 01.11.2014.

Multiple choice

Mr. A sold his motorcycle to Mr. B at a price of Rs. 5,00,000. Mr. B made part payment on the delivery of the motorcycle and promised to pay the rest of the amount in a month's time from the date of delivery. One month has passed but Mr. A has not recieved the complete payment. Which of the following remedies can be suggested to Mr. A?

  1. Mr. A can exercise his right of lien.

  2. Mr. A may sue him for the price of the goods.

  3. Mr. A can exercise the right to resell the goods.

  4. Mr. A can exercise the right to stop the goods in transit.

  5. Mr. A can exercise the right to sue Mr. B for the damages.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

This right is available to unpaid seller against buyer. Therefore, Mr. A can sue Mr. B for the price of the motorcycle.