Commerce Accountancy · Economics

Journal Entries and Depreciation

596 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

----------- is a data wise record of all transactions

  1. Journal

  2. Ledger

  3. Trail Balance

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

The journal is the book of original (prime) entry where all business transactions are recorded chronologically as they occur, before being classified and posted to ledger accounts.

Multiple choice

The books of T Ltd. revealed the following information: Opening inventory is Rs. 6,00,000 Purchases during the year 2014-15 are Rs. 34,00,000 Sales during the year 2014-15 are Rs. 48,00,000 On March 31, 2015, the value of inventory as per physical inventory taking was Rs. 3,25,000. The company's gross profit on sales has remained constant at 25%. The management of the company suspects that some inventory might have been pilfered by a new employee.

What is the estimated cost of missing inventory?

  1. Rs. 75,000

  2. Rs. 25,000

  3. Rs. 1,00,000

  4. Rs. 1,50,000

  5. Rs. 50,000
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Gross profit = 48,00,000*25% = Rs. 12,00,000 Closing inventory = Opening stock + Purchases + Gross profit - Sales  Closing inventory = 6,00,000 + 34,00,000 + 12,00,000 - 48,00,000 Closing stock = Rs. 4,00,000 Value of missing inventory = Closing inventory as per books - Value of closing inventory (according to physical verification)                                                  = 4,00,000 - 3,25,000 = Rs. 75,000

Multiple choice

C Ltd. recorded the following information as on March 31, 2016: Inventory as on April 1, 2015 is Rs. 80,000 Purchases are Rs. 1,60,000 Sales are Rs. 2,00,000 It is noticed that goods worth Rs. 30,000 were destroyed due to fire. Against this, the insurance company accepted a claim of Rs. 20,000. The company sells goods at cost plus 33 1/3%.

What will be the value of closing inventory for the year ended 31 March, 2016 after taking into account the given information?

  1. Rs. 10,000

  2. Rs. 30,000

  3. Rs. 1,00,000

  4. Rs. 60,000

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

Gross profit margin is 33 1/3% on cost (25% on sales). Gross profit = 50,000 Closing inventory = Opening stock + Purchases + Gross profit - Sales - Goods destroyed in fire Putting respective values in the above equation, we get  Closing inventory = 80,000 + 1,60,000 + 50,000 - 2,00,000 - 30,000 = Rs. 60,000

Multiple choice

E Ltd, a dealer in second hand cars, has the following five vehicles of different models and makes in their inventory at the end of the financial year 2015-2016

         
Car Fiat Ambassador Maruti Esteem Maruti 800 Zen
Cost 90,000 1,15,000 2,75,000 1,00,000 2,10,000
Net realisable value 95,000 1,55,000 2,65,000 1,25,000 2,00,000

What is the value of inventory to be included in the balance sheet of the company as on March 31, 2016?

  1. Rs. 7,62,500

  2. Rs. 7,70,000

  3. Rs. 7,90,000

  4. Rs. 8,70,000

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

Inventory is valued at cost or net realisable value, whichever is lower. Applying the above principle in question, we get Closing inventory = 90,000 + 1,15,000 + 2,65,000 + 1,00,000 + 2,00,000 Closing inventory = Rs. 7,70,000

Multiple choice

Consider the following data pertaining to H Ltd. for March 2016: Opening inventory is Rs. 1,80,000 Closing inventory is Rs. 90,000 The company made purchases amounting to Rs. 3,30,000 on credit during the month. The company paid an amount of Rs. 3,50,000 to the suppliers during the month. The goods are sold at 25% above cost.

What is the amount of sales for March 2016?

  1. Rs. 4,12,500

  2. Rs. 5,25,000

  3. Rs. 90,000

  4. Rs. 3,15,000

  5. Rs. 5,50,000
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Cost of goods sold = Opening stock + Purchases - Closing stock COGS = 1,80,000 + 3,30,000 - 90,000 COGS = Rs. 4,20,000 Gross profit = 4,20,000*25% = Rs. 1,05,000 Cost of goods sold + Gross profit = Sales 4,20,000 + 1,05,000 = Sales Hence, sales = 5,25,000

Multiple choice

On April 7, 2016, i.e. a week after the end of the accounting year 2010-11, a company undertook physical inventory verification. The value of inventory as per physical inventory verification was found to be Rs. 35,000. The following details pertaining to the period April 01, 2016, to April 07, 2016 are given as follows:1. Goods costing Rs. 5,000 were sold during the week.

  1. Goods received from consignor amounting to Rs. 4,000 were included in the value of inventory.
  2. Goods earlier purchased, but returned during the period amounted to Rs. 1,000.
  3. Goods earlier purchased and accounted, but not received were for Rs. 6,000.

After considering the above, what will be the amount of inventories held as on March 31, 2016?

  1. Rs. 27,000

  2. Rs. 19,000

  3. Rs. 43,000

  4. Rs. 51,000

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

The total amount of inventory is arrived at in the following manner: Total inventory = 35,000 + 5,000 - 4,000 + 1,000 + 6,000 = Rs. 43,000 Goods sold worth Rs. 5,000 will be added back. Goods received from the consignor will be deducted. Goods earlier purchased, but returned will be added back. Goods earlier purchased, but not received will be added back.

Multiple choice

O Ltd. maintains the inventory records under perpetual system of inventory. Consider the following data pertaining to the inventory of O Ltd. held for March, 2016.

     
Date
Particulars
Quantity
Cost per unit (Rs.)
March 1 Opening Inventory 15 400
March 4 Purchases 20 450
March 6 Purchases 10 460

If the company sold 32 units on March 24, 2016, what will be the value of closing inventory under FIFO method for March 2016?

  1. Rs. 5,200

  2. Rs. 5,681

  3. Rs. 5,800

  4. Rs. 5,950

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

As FIFO method of inventory valuation is followed, the closing inventory includes: 3 units @ Rs. 450 per unit 10 units @ Rs. 460 per unit So, the value of closing inventory: Closing inventory = (3 * 450) + (10 * 460) = Rs. 5,950

Multiple choice

S Ltd. follows perpetual inventory system. On March 31 of every year, the company undertakes physical inventory verification. On March 31, 2016, the value of inventories as per the records differed from the values of the inventory as per physical inventory.

On scrutiny, the following differences were noticed:

  1. Goods purchased for Rs. 10,000 were received and included in the physical inventory, but no entry was made in the books.
  2. Goods costing Rs. 30,000 were sold and entered in the books, but the inventory was yet to be delivered.
  3. Goods worth Rs. 5,000 were returned to the suppliers, but were omitted from the record.

If the inventory is valued in the books at Rs. 1,50,000, what is the value of the physical inventory?

  1. Rs. 1,11,000

  2. Rs. 1,89,000

  3. Rs. 1,85,000

  4. Rs. 1,59,000

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

Amount of goods purchased and included in the physical inventory will be added in the value of the inventory in the books. Also, the amount of goods sold and entered in the books, but not delivered, are to be added in the amount of physical inventory. Further, the goods returned, but omitted to be recorded, are to be deducted from the amount of inventory. So, physical inventory = (1,50,000 + 10,000 + 30,000 - 5,000) = Rs. 1,85,000

Multiple choice

Consider the following information pertaining to G & Sons. as on March 31, 2016: Opening inventory was Rs. 15,00,000. Purchases during the year were Rs. 45,00,000. Sales during the year were Rs. 50,00,000. As per physical inventory taken on March 31, 2016, the closing inventory was Rs. 20,90,000. Gross profit on sales has remained constant at 25%. The management of the firm suspects that some inventory might have been taken away by a new employee.

What will be the estimated cost of missing inventory on the close of the financial year and the cost of goods sold during the year?

  1. Rs. 2,65,000 and Rs. 37,50,000

  2. Rs. 2,10,000 and Rs. 39,10,000

  3. Rs. 1,75,000 and Rs. 50,00,000

  4. Rs. 1,60,000 and Rs. 37,50,000

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

Gross profit = 50,00,000 x 25% = Rs. 12,50,000 Closing inventory = Opening stock + Purchases + Gross profit - Sales Closing inventory = 15,00,000 + 45,00,000 + 12,50,000 - 50,00,000 Closing inventory = Rs. 22,50,000 Amount of missing inventory = 22,50,000 - 20,90,000 = Rs. 1,60,000 Cost of goods sold = Opening stock + Purchases - Closing stock COGS = 15,00,000 + 45,00,000 - 22,50,000 = Rs. 37,50,000

Multiple choice

Consider the following data pertaining to credit purchases made by K Ltd, a dealer in electronic goods, for March 2016:

       
Date Particulars Number of units Rate per unit (Rs.) Trade discount
March 01 Black and white TVs 50 3,000 10%
Colour TVs 10 6,000 10%
March 09 Tape recorders 10 1,000 10%
Two-in-one 10 1,500 10%
March 19 Audio cassettes 100 30 5%

At the time of making payment on March 31, 2016, the suppliers allow a cash discount of 10% on the above purchases. What will be the amount of purchases for March 2016?

  1. Rs. 2,14,350

  2. Rs. 2,38,000

  3. Rs. 1,92,915

  4. Rs. 2,38,600

  5. None of these
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The amount of trade discount shall be deducted from the amount of each purchase. Hence, the amount of purchases (after deducting trade discount): Purchases = 1,35,000 + 54,000 + 9,000 + 13,500 + 2,850 = Rs. 2,14,350

Multiple choice

Veer Ltd. issued Rs. 2,00,000, 6% debentures at 10% discount redeemable after 5 years at 5% premium. Calculate the amount to be debited to loss on issue of debentures account.

  1. Rs. 30,000

  2. Rs. 20,000

  3. Rs. 10,000

  4. None of these
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Amount received on issue = Rs. 1,80,000 Amount on redemption = Rs. 2,10,000 Thus, loss = 2,10,000 - 1,80,000 = Rs. 30,000 Option (2) is incorrect because it is applicable if only loss on issue of Rs. 20,000 is considered and Rs. 10,000 premium on redemption is ignored. Option (3) is incorrect because it is applicable only if loss Rs. 10,000 for premium on redemption is considered and Rs. 20,000 discount on issue is ignored. Option (4) is incorrect because it is applicable if loss on issue of Rs. 20,000 and Rs. 10,000 premium on redemption are ignored.