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

The overdraft as per pass book is Rs. 3,245. A debit balance of Rs. 2,380 was recorded as Rs. 3,280 in the cash book and a debit entry of Rs. 3,500 was recorded on the credit side by error. Find the balance as per cash book.

  1. Rs. 4,645

  2. Rs. 1,855

  3. Rs. 11,115

  4. Rs. 9,345
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

(A) 3,245 - 900 - 7,000 = Rs. 4,645 (B) 3,245 + 900 - 7,000 = Rs. 1,855 (C) 3,245 + 900 + 7,000 = Rs. 11,115 (D) The entries are to be recorded from cash book angle. Overdraft balance Rs. 3,245 - 900 + 7,000 = Rs. 9,345 

Multiple choice

A machine was purchased two years ago for Rs. 2,00,000. It is depreciated at the rate of 20% p.a. by straight line method and presently its market value is Rs. 1,00,000. According to cost concept, it should be recorded in the books at

  1. Rs. 2,00,000

  2. Rs. 1,00,000

  3. Rs. 1,20,000

  4. Rs. 1,60,000
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Cost of machine = Rs. 2,00,000 Depreciation for 2 years at the rate of 20% p.a. = Rs. 80,000 Thus, present value = Rs. 1,20,000 Market value should be ignored according to realisation concept.

Multiple choice

Depreciation charged on machinery is Rs. 40,000. The correct entry is
  1. Machinery A/c Dr 40,000
    To Depreciation A/c 40,000
  2. Depreciation A/c Dr 40,000
    To Machinery A/c 40,000
  3. Cash A/c Dr 40,000
    To Machinery A/c 40,000

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

Depreciation is a loss and so it would be debited. Machinery is credited, since it is a decrease in asset, and it is considered that it goes out from business.

Multiple choice

A cheque received from a debtor, Rahul, is of Rs. 9,800 in full settlement of Rs. 10,000. The correct entry is

  1. Rahul's A/c Dr 10,000
    To Cash A/c 9,800
    To Discount A/c 200
  2. Cash A/c Dr 10,000
    To Rahul's A/c 10,000
  3. Bank A/c Dr 9800
    Discount A/c 200
    To Rahul's A/c 10,000

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

Cheque is received, so we would debit bank. Discount allowed (10,000 - 9,800 = 200) is debited, since it is a loss. Rahul has paid by cheque, so he would be credited.

Multiple choice

A school is planning to purchase a bus worth Rs. 5,00,000 after 4 years. They have planned to make savings right from this year. Calculate the yearly savings they are required to make to purchase the bus, if the return on investment is 12%. (Take annuity table value up to 3 places.)

  1. Rs. 1,03,210

  2. Rs. 1,04,624

  3. Rs. 1,20,000

  4. Rs. 1,21,630
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The value of annuity of Re. 1 every year @12% for 4 years is 4.779. Thus, 5,00,000/4.779 = Rs. 1,04,624

Multiple choice

X Ltd. purchased goods for Rs. 5 Iakh and sold 9/10th of the value of goods for Rs. 6 Iakh. Net expenses during the year were Rs. 25,000. The company reported its net profit as Rs. 75,000. Which of the following concepts is violated by the company?

  1. Conservatism Concept

  2. Realization

  3. Matching

  4. Accrual
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The company has sold 9/10th of goods, i.e. costing 5,00,000 x 9/10 = Rs. 4,50,000 plus expenses Rs. 25,000. Thus, cost of sales is Rs. 4,75,000. S.P = Rs. 6,00,000. Profit = Rs. 1,25,000. According to matching concept, profit should be calculated by comparing the current expenditures with current revenues.

Multiple choice

A has discounted a 3 month’s bill @ 10% p.a. from bank and has been given a credit of Rs. 11,700 but the bill was dishonoured and a notary charge of 50 was paid by bank. The amount by which A’s account will be debited by bank is

  1. 13,050

  2. 11,050

  3. 12,050

  4. 12,250
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Let the actual amount of bill be Rs. x. Discount @ 10% p.a. for 3 months will be x/40 and net amount realised will be x - x/40 = 39/40. Now, 39/40 of x = 11,700 Thus, the amount of bill is Rs. 12,000, but on maturity being dishonoured, it will be debited along with charges of Rs. 50. Thus, the correct answer will be Rs. 12,050.

Multiple choice

Ram and Shyam were friends and in need of funds. On 1.1.2006, Ram drew a bill for Rs. 2,00,000 for six months on Shyam. On 4.1.2006, Ram got the bill discounted at 10% p.a. and remitted 40% of the proceeds to Shyam. The cheque sent to Shyam is for

  1. Rs. 80,000

  2. Rs. 72,000

  3. Rs. 76,000

  4. Rs. 70,000
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Total discount of bill is 2,00,000 x 6/12 x 10/100 = Rs. 10,000. 40% of discount will be Rs. 4,000. Thus, out of 40% amount due, i.e. Rs. 80,000, Rs. 4,000 will be subtracted. Correct Answer: Rs. 76,000