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 book keeping and accountancy adjustments in preparation of financial statements outstanding and prepaid expenses outstanding expenses need for adjustment, closing stock and outstanding expenses

Prepaid insurance has an opening balance of Rs. 2,300. During the period, insurance of Rs. 1,200 expired. The adjusting entry would contain a credit _____________.

  1. to prepaid insurance for Rs. 1,200

  2. to insurance expenses for Rs. 1,200

  3. to unexpired insurance for Rs. 1,100

  4. to insurance expense for Rs. 1,100
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

To record the expiration of prepaid insurance, you must reduce the asset (Prepaid Insurance) and recognize the expense (Insurance Expense). Therefore, you credit Prepaid Insurance for the amount that expired (1,200).

Multiple choice book keeping and accountancy reserve and fund meaning and characteristics of reserves reserves provisions and reserves

X sends out 500 bags to Y costing Rs 400 each at an invoice price of Rs 450 each. Consignor's expenses Rs 4,000, consignee's expenses, freight Rs 1000, selling Rs 2,000. 400 bags was sold.
The amount of Consignment Stock Reserve will be

  1. Rs 5000

  2. Nil

  3. Rs 10,000

  4. Rs 10,200
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The stock reserve is calculated on the unsold goods (100 bags) at the difference between invoice price (450) and cost price (400). Reserve = 100 bags * (450 - 400) = 5000.

Multiple choice organisation of commerce and management sources of business finance - 2 debentures / bonds debentures non-institutional sources - long-term

Arpana Pvt Ltd provide following information:
Sales = 10,00,000
Variable cost = 7,00,000
Fixed cost = 2,00,000
Debentures at $10\%$ = 5,00,000
What is the operating leverage of the company? 

  1. 2

  2. 3

  3. 4

  4. 5
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Operating leverage = $\frac{Contribution}{EBIT}$
=  $\frac{Rs.3,00,000}{Rs.1,00,000}$
= 3

Multiple choice commerce discharge and breach of a contract remedies for breach of contract performance, discharge, breach and remedies of contract business law and contract act

Kedar promised to pay Rs. 5000 to car repairer for the incurred expenses but later Kedar refused to pay the agreed amount. Which of the following is true?

  1. Car repairer cannot claim the expenses.

  2. The car repairer can claim Rs. 5000.

  3. Car repairer cannot claim Rs. 500 as compensation.

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

Since the repairer performed the service and Kedar agreed to pay, the repairer is legally entitled to the agreed amount of 5000.

Multiple choice commerce discharge and breach of a contract remedies for breach of contract performance, discharge, breach and remedies of contract business law and contract act

Rohan promises to make a gift of RS. 10,000 towards the repairs of a temple. The trustees of the temple on the faith of his promise incurs liabilities. Rohan does not pay. Can the trustees recover the promised amount from Rohan?

  1. The trustee cannot recover anything from Rohan.

  2. The trustee can recover to the extent of liabilities from Rohan.

  3. The trustee can recover Rs. 10,000 from Rohan.

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

Under the principle of promissory estoppel, if a person makes a promise and the other party acts upon it to their detriment (incurring liabilities), the promisor is bound to fulfill the promise to the extent of those liabilities.

Multiple choice elements of accounts introduction of financial statement of company general instructions for preparation of balance sheet tools of financial statements uses, importance, and limitation of financial statements

An equipment was purchased on 1st January, 2012 for Rs. 25,000 and is to be depreciated at 30% based on reducing balance method. If the company closes its books of account on 31st March every year, what would be the net book value-of the equipment as at 31 * December, 2013 ______________.

  1. Rs. 12,250

  2. Rs. 17,750

  3. Rs. 10,000

  4. Rs. 12,545.
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Value of Equipment as on 1st Jan $2012=  Rs. 25,000$
Less: Depreciation for the year  $2012   = 7,500$
Total                                                     $ = 17,500$
Less: Depreciation for the year 2013(17,500 x 30%) $= 5,250$
Net Book value of the Equipment $ = Rs. 12,250$

Multiple choice accountancy statement of changes in financial position preparation of cash flow statement cash flow statement finance

Which of the following is an example of capital expenditure?

  1. Purchased a pencil sharpener at a cost of Rs.2

  2. Installing an escalator at cost of Rs.5,600 in a three storey building which had previously been used without escalator

  3. Painted delivery truck at a cost of Rs.450 after two years of use

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

Capital expenditure is a money spent by a business or organization on acquiring or maintaining fixed assets, such as land, buildings, and equipment.

Installing an escalator is a capital expenditure as it is a non-recurring expenditure.

Multiple choice elements of accounts ledger and posting meaning of bill of exchange index of ledger, forms of ledger and process of posting posting of entries in ledger

A firm which keeps its books of accounts on single entry system has opening balance and closing balance of Bills Receivable as Rs. 9,000 and Rs. 11,000 respectively. Bills collected during the financial period amount to Rs. 20,000. Bills receivable received during the financial period amount to.

  1. Rs. 22,000

  2. Rs. 18,000

  3. Rs. 12,000

  4. Rs. 11,000
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Using the formula: Closing Balance = Opening Balance + Bills Received - Bills Collected. Plugging in the values: 11,000 = 9,000 + x - 20,000. Solving for x: 11,000 = x - 11,000, so x = 22,000.

Multiple choice maths percentages finding one number as percentage of another money and metric measures as percentage expressing one quantity as a percentage of another

The value of a machine is Rs. $6,250$. It decreases by $10$% during the first year, $20$% during the second year and $30$% during the third year. What will be the value of the machine after $3$ years?

  1. Rs. $2,650$
  2. Rs. $3,050$
  3. Rs. $3,150$
  4. Rs. $3,510$
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation
Value after $1^{st}$ year $=6250-\dfrac {10}{100}\times 6250$
$=5625\ Rs$
Value after $2^{nd}$ year $=5625-\dfrac {20}{100}\times 5625=\dfrac {80}{100}\times 5625$
$=4500\ Rs$
Value after $3^{rd}$ year $=4500-\dfrac {30}{100}\times 4500=\dfrac {70}{100}\times 4500$
$=Rs\ 3150$


Multiple choice trend analysis tools for financial analysis analysis of financial statements financial statement analysis accountancy

A company discloses the following information in relation to its receivables in the notes to its financial statements.
Gross amount receivable - Rs. 4,800
Provision for doubtful debts - Rs. 360
Net Carrying amount of receivable - Rs. 4,400
Which one of the following is the maximum credit risk that it must also disclose in the notes to comply with IFRS 7?

  1. Rs. 360

  2. Rs. 4,400

  3. Rs. 4,800

  4. No disclosure is required
Reveal answer Fill a bubble to check yourself
D Correct answer
Multiple choice book keeping and accountancy accounting for partnership preparation of profit and loss appropriation account profit and loss appropriation account profit and loss appropriation account and distribution of profits among partners

Rent paid on 1 October, 2004, for the year to 30 September, 2005, was Rs.2,400, rent paid on 1 October, 2005 for the year to 30 September, 2006, was Rs.3,200. Rent payable, as shown in the profit and loss account for the year ended 31 December 2005, would be : 

  1. Rs. 6,000

  2. Rs. 3,200

  3. Rs. 2,600

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

The financial year ends 31 Dec 2005. Rent for 2005 includes 9 months of the 2004-05 period (Jan-Sept: 2,400 * 9/12 = 1,800) and 3 months of the 2005-06 period (Oct-Dec: 3,200 * 3/12 = 800). Total = 1,800 + 800 = 2,600.

Multiple choice elements of book keeping and accountancy ledger and posting explain the concept of ledger and its importance in accounting process. introduction to ledgers ledgers

On 1st April, 2012 in Sethi's Ledger, furniture account showed a balance of Rs. 2,00,000. On 1st October, 2012 Sethi purchased new furniture by paying Rs. 5,000 and giving old furniture whose book value on 1st April, 2012 was Rs. 12,000 to the seller. Sethi provides depreciation on furniture @ 10% per annum on diminishing balance method. The net value of furniture in Sethi's books as on 31st March, 2013 would be:

  1. Rs. 1,85,080

  2. Rs. 1,83,960

  3. Rs. 1,84,780

  4. Rs. 2,04,400
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Cost of new asset purchased
Cash paid $ = 5,000$
Old asset given up $ = 11,400$
(12,000-600) $= 16,400$

Depreciation
(i) $ (2,00,000 - 12,0(0) \times$  10% = 18,800
(ii) 16,400 x 10% x 6/12 = 820
(iii) $18800 + 820$  = 19,620

Balance as per furniture A/c - 2,00,000
Cost of new asset purchased -5,000
Less: depreciation $=$ 19,620
Less: depreciation $=$ 600
12000 x 10% x 6/12
Net value of furniture  $ = $ 184780

Multiple choice book keeping and accountancy adjustments in preparation of financial statements accrued income earned or accrued income need for adjustment, closing stock and outstanding expenses

Subscription received in advance Rs. 500 shall be ______________________.

  1. Added to subscription and shown under assets

  2. Added to subscription and shown under liabilities

  3. Deducted from subscription and shown under assets

  4. Deducted from subscription and shown under liability
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Subscription received in advance is money collected for a future period, creating an obligation for the business. Therefore, it is deducted from the total subscription income for the current period and recorded as a liability on the balance sheet.

Multiple choice book keeping and accountancy adjustments in preparation of financial statements accrued income earned or accrued income need for adjustment, closing stock and outstanding expenses

Star Tour has a Rs. 5,000 account receivable from Mr. X. On February 5, Mr. X makes a partial payment of Rs. 3,000 to Star Tours. The journal entry made on February 5 by Star Tours to record this transaction includes:

  1. A credit to the cash received account of Rs. 3000

  2. A credit to the Accounts receivable account of Rs 3000

  3. A debit to the Account of Rs. 2000

  4. A debit to the accounts receivable account of Rs 2000
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

When a customer pays a partial amount on their account, the cash account is debited and the accounts receivable account is credited to reduce the balance owed by the customer.