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

Goods sold for cash worth Rs. 5,000 are correctly posted on credit side of 'sales account', but cash account is wrongly debited by Rs. 1,000. It is an

  1. error of commission

  2. error of omission

  3. error of principle

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

It is an error of commission, since this error is made at the time of posting a wrong amount into a account or to the wrong side of an account etc. So in this cash account is debited by Rs 1,000 instead of Rs 5,000.

Multiple choice

Which of the following statements about the use of credit cards in India in 2009-10 is/are correct?

I. The number of credit cards in circulation as of March 2010 showed a decline over the figure in 2008-09. II. The number of credit cards in circulation as of March 2010 showed a rise over the figure in 2008-09. III. The amount spent using credit cards in 2008-09 was more than that spent in 2009-10.

  1. II only

  2. I and II only

  3. II and III only

  4. III and I only

  5. I, II and III
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The number of credit cards in circulation as of March 2010 was 18.31 million, a drop of over 26% over 24.69 million in 2008-09. Six million credit cards or about a quarter of the total number of cards a year ago were cancelled by banks during the last fiscal. Apart from cutting down new issuances, banks also began to cut credit limits for existing customers as part of a de-risking exercise. Accounting rules that required banks to set apart more capital against unused credit limits also forced banks to cull out inactive and risky cards. Some of those measures are reflected in the 4 per cent drop in card spends in 2009-10. Total credit card spends fell to Rs 62,852 crore from Rs 65,356 crore in 2008-09.

Multiple choice

Consider the following transactions: Purchases: 5 April = 900 units @ Rs. 5                 10 April = 300 units @ Rs. 5.50                 12 April = 100 units @ Rs. 4 Issues: 8 April = 600 units and 11 April = 400 units. Find the value of issues on 11 April, as per LIFO method.

  1. Rs. 2,050

  2. Rs. 2,000

  3. Rs. 2,150

  4. Rs. 4,500
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Issue on 11 April i.e. 300 units from 10 April and 100 from 8 April = 300*5.50 + 100*5 = 2150 (A) 100*4 + 300*5.50 = 2050    (B) 400*5 = 2000 (D) 900*5 = 4500 are incorrect answers.

Multiple choice

The physical stock in the business as on 5 April was Rs. 95,750. During 1st to 5th April, there was a purchase of goods for Rs. 15,000, while goods sold for Rs. 20,000 were at a profit of 25% on cost. Find the physical stock as on 31 March.

  1. Rs. 1,00,750

  2. Rs. 90,750

  3. Rs. 94,750

  4. Rs. 96,750
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Stock as on 5th April - Purchases + Cost of sales during the period 1st to 5th April. Cost of sales = 20,000 - 4000 (i.e. 1/5th of 20,000) = Rs. 16,000 Thus, 95750 - 15000 + 16000 = 96750 (A) 95750 - 15000 + 20000 = 100750 (B) 95750 + 15000 - 20000 = 90750 (C) 95750 + 15000 - 16000 = 94750 are incorrect answers.

Multiple choice

It is given that total assets including investment of Rs. 1,00,000 are Rs. 500000 and current liabilities are Rs. 100000. If 25% p.a. on net capital employed is considered as fair return, find goodwill by 2 years purchase of super profit method.

  1. Rs. 90,000

  2. Rs. 1,90,000

  3. Rs. 40,000

  4. Rs. 1,80,000
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

 Capital employed = Assets (excluding investments) - current liabilities                                     = 4,00,000 - 1,00,000 = Rs. 300000 Fair return = 300000*25% = Rs. 75,000 Super profit = Rs. 170000- 75000 = Rs. 95000 Goodwill = 95000* 2 = Rs. 190000

Multiple choice

An entry of sales to customer for Rs. 5000 was posted in the sales book as Rs. 500.

  1. The credit side of trial balance will be overstated by Rs. 4, 500.

  2. The credit side of trial balance will be understated by Rs. 4, 500.

  3. The debit side of trial balance will be understated by Rs. 4, 500.

  4. There will be no difference in the trial balance.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

It is an error of commission. Such errors do not affect the totaling of trial balance.

Multiple choice

If a purchase of goods from supplier of Rs. 1345 has been debited to him with Rs. 4,135, then in the trial balance

  1. debit side will overcast by Rs. 5,480.

  2. debit side will overcast by Rs. 2,790.

  3. credit side will undercast by Rs. 2,790.

  4. debit side will undercast by Rs. 5,480.
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Supplier should have been credited with Rs. 1, 345. When he is debited with Rs. 4, 135, the difference in trial balance will be 1, 345 + 4, 135 = 5, 480 i.e. excess debit.

Multiple choice

A, by letter, offers to sell his car to B for Rs. 2 lakh. The letter is written on 4th March, posted on 5th March and reaches B on 8th March. B accepts the offer and posts a recommendation letter on 10th March, which reaches A on 14th March. A can revoke his offer before

  1. 5th March

  2. 8th March

  3. 14th March

  4. 10th March
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The offer can be rejected anytime before it is accepted. The acceptance is made on 10th March. B can revoke his acceptance anytime before the letter reaches A, i.e. 14th March.

Multiple choice

Sanjeev of Ludhiana, invoiced 250 oil bags costing Rs. 800 each, to Somya of Delhi, at an invoice price, which included 25% profit on cost. The consignor paid  Rs. 30, 000 as carriage expenses. During the transit, ten bags leaked but these were taken as a normal loss. Somya sold 192 bags. Find the consignment stock at the end at an invoice price.

  1. Rs. 56,000

  2. Rs. 65,600

  3. Rs. 50,000

  4. Rs. 59,600
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Total direct cost of 250 bags = 2, 50,000 + 30,000 = Rs.2, 80,000             Less: Normal loss of 10 bags                = Nil Thus, net direct cost of remaining 240-192= 48 bags = 2, 80,000/240*48 = 56,000             Add loading 48*200 per bag           = 9,600, i.e. 65,600 If direct cost of bags is taken as 2, 50,000 only, then closing stock at cost will be Rs. 50, 000 and Rs. 59, 600 at an  invoice price.

Multiple choice

Vinay of Ghaziabad invoiced goods of Rs. 5, 00,000 to Madhav of Pune, which included 20% profit on invoice price. Vinay spent Rs. 25, 000 as transit charges. Madhav spent Rs. 18, 000 as unloading charges and Rs. 20,000 as advertisement. He sold the damaged goods at Rs. 20, 000. His commission was 10% of sales price. The insurance company admitted a claim of Rs. 10, 000. Find the net abnormal loss debited to P&L account.

  1. Rs. 14, 500

  2. Rs. 12, 500

  3. Rs. 16, 500

  4. Rs. 26, 500
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Cost of invoiced goods = Rs. 4, 00,000 Cost of abnormal loss = 1/10th of 4, 00,000 = Rs. 40, 000

  • Proportionate expenses of Vinay                 = Rs. 2, 500
  • Proportionate expenses of Madhav              = Rs. 2, 000             (18,000/3, 60,000)*40,000
  • Commission charged by Madhav                 = Rs. 2, 000 Total net cost debited = Rs. 46, 500 Amount credited = 20,000 + 10,000 = Rs. 30, 000 Net Loss debited to P and L Rs. 16, 500 If Madhav's expenses or commission is ignored then loss is Rs. 14, 500. If both of these are ignored, loss is Rs. 12, 500 If insurance claim is ignored, loss is Rs. 26, 500
Multiple choice

Reetu sent a consignment of 1000 bags to Neena costing Rs. 100 each at invoice price by including 20% of cost price. Neena was entitled to ordinary commission @ 3% and del-credre commission @ 2% of invoice price. She was also entitled to get over-riding commission @ 20% for goods sold above the invoice price. She sold 750 bags for Rs. 1, 05,000. Find out the commission payable to her.

  1. Rs. 7, 500

  2. Rs. 8, 250

  3. Rs. 9, 000

  4. Rs. 8, 000
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Ordinary + Del-credre commission @ 5% of (750*120) = Rs. 4, 500 Special commission @ 20% of (1, 05,000-90,000)       = Rs. 3, 000 Total commission Rs. 7, 500 If basic rates are taken as % of sales, then commission = 5250 + 3000 = 8250 If basic rates are taken as % of total invoice price then commission = 6000+ 3000 = 9000