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

Directions: Choose the correct option for the given question.Rs. Sundry Debtors 15,000 Bills Receivable (B/R) 12,500 Cash at Bank 17,500 Stock 15,000 Profit 20,000 Creditors 25,000 Bills Payable (B/P) 15,000 Sales 1,00,000 What is the Acid Test Ratio?

  1. 1·5 : 1

  2. 1·125 : 1

  3. 16 2/3%

  4. 50%
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Acid Test Ratio (Quick Ratio) = Quick Assets / Current Liabilities. Quick assets = Sundry Debtors + Bills Receivable + Cash at Bank = 15000 + 12500 + 17500 = Rs. 45000. Current liabilities = Creditors + Bills Payable = 25000 + 15000 = Rs. 40000. Ratio = 45000/40000 = 1.125:1. Stock is excluded as it's less liquid.

Multiple choice

Directions: Choose the correct option for the given question.

On 1.4.2007, a firm's capital was Rs. 2,00,000, assets Rs. 2,40,000 and liabilities Rs. 40,000. It sold goods costing Rs. 10,000 for Rs. 12,000. What will be the position of accounting equation after this transaction has been recorded in accounts ?(Assets = Capital + Liabilities)

  1. Rs. 2,42,000 = Rs. 2,02,000 + Rs. 40,000

  2. Rs. 2,52,000 = Rs. 2,12,000 + Rs. 40,000

  3. 2,30,000 = Rs. 2,00,000 + Rs. 30,000

  4. 2,22,000 = Rs. 1,82,000 + Rs. 40,000
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Initially: Assets = Capital + Liabilities (2,40,000 = 2,00,000 + 40,000). Selling goods costing 10,000 for 12,000 increases assets by 2,000 (net effect: inventory decreases by 10,000, cash increases by 12,000). Capital increases by profit of 2,000. New position: Assets 2,42,000 = Capital 2,02,000 + Liabilities 40,000.

Multiple choice

If the total asset amount of a firm is Rs. 2,50,000 and net worth is Rs. 1,80,000, calculate creditor amount.

  1. Rs. 60,000

  2. Rs. 70,000

  3. Rs. 50,000.

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

 As total assets are equal to capital plus creditors, we can deduct net worth or capital from total assets to calculate creditors.                       ||||| |---|---|---|---| |Creditors = Total Assets - Capital| | | | | 2,50,000 - 1,80,000 = 70,000| | | | | So, creditors are Rs. 70,000| | | | | | | | | Hence, creditors are Rs 70,000 . Net worth is capital.

Multiple choice

If the rent received is Rs. 4,500 and 2/5th of that is received in advance for the next year, how much rent would be shown in the balance sheet and on which side?

  1. Rs. 1,000 in liabilities side

  2. Rs. 1,800 in asset side

  3. Rs. 1,800 in liabilities side

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

 As mentioned earlier, it would be shown in the liabilities side as it is the income received in advance for the next year.  2/5 X 4,500 = 1,800.

Multiple choice

The adline “Flying the kids on a vacation to Goa Rs. 38,000 ________ an album full of memories: priceless. Fill in the blank from the given credit card options.

  1. Visa Credit Card

  2. Master Card

  3. American Express

  4. Citibank Card
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The blank should be filled with 'Master Card' as this follows the famous MasterCard 'Priceless' campaign format - 'There are some things money can't buy. For everything else, there's MasterCard.' The structure mentions the vacation cost (Rs. 38,000) followed by the priceless album of memories, which is classic MasterCard advertising.

Multiple choice

If the dolar rate is changed from Rs37.50 to Rs36.50 there is an

  1. Appreciation of the rupee

  2. Depreciation of the rupee

  3. Neither a Nor b

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

When the amount of rupees required to buy one dollar decreases (from 37.50 to 36.50), the value of the rupee has increased relative to the dollar, which is called appreciation.

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