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 company accounts - issue of debentures issue of debentures for consideration other than cash types of debentures issue of debentures at par, premium, discount, collateral security and for consideration other than cash

How many debentures will a company be required to issue for satisfying the purchase consideration of Rs. $28,80,000$, if debentures of Rs. $100$ are issued at a premium of Rs. $20$ per debenture?

  1. $24,000$
  2. $28,800$
  3. $36,000$
  4. $32,000$
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The issue price per debenture is 100 + 20 = 120. The number of debentures issued is the total consideration divided by the issue price: 2,880,000 / 120 = 24,000.

Multiple choice book keeping and accountancy company accounts - issue of debentures issue of debentures for consideration other than cash types of debentures issue of debentures at par, premium, discount, collateral security and for consideration other than cash

The following journal entry appears in the books of X Co. Ltd. The debentures have been issued at.

Dr. (Rs.) Cr. (Rs.)
Bank A/c $96,000$
Loss on issue of debentures A/c $10,000$
To $8\%$ debentures A/c $1,00,000$
To premium on redemption of debentures A/c $6,000$
  1. Discount of $4\%$
  2. Discount of $6\%$
  3. Premium of $6\%$
  4. Discount of $10\%$
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The debentures are issued for 1,00,000. The bank received 96,000. The difference of 4,000 represents the discount. 4,000 / 1,00,000 = 4%.

Multiple choice book keeping and accountancy company accounts - issue of debentures issue of debentures for consideration other than cash types of debentures issue of debentures at par, premium, discount, collateral security and for consideration other than cash

W Ltd. issued $20,000$, $8\%$ debentures of Rs. $10$ each at par, which are redeemable after $5$ years at a premium of $20\%$. The amount of loss on redemption of debentures to be written off every year will be __________.

  1. Rs. $40,000$
  2. Rs. $10,000$
  3. Rs. $20,000$
  4. Rs. $8,000$
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Total loss on redemption is 20% of 20,000 * 10 = 40,000. The debentures are redeemed after 5 years, so the annual loss to be written off is 40,000 / 5 = 8,000.

Multiple choice book keeping and accountancy company accounts - issue of debentures issue of debentures for consideration other than cash types of debentures issue of debentures at par, premium, discount, collateral security and for consideration other than cash

X Ltd. purchased land and building for Y. Ltd for a book value of Rs$4,00,000$. The consideration was paid by issue of $12\%$ Debentures of Rs$100$ each at a discount of $20\%$. The debentures account is credited with -

  1. $Rs 5,20,000$
  2. $Rs 5,00,000$
  3. $Rs 4,80,000$
  4. $Rs 3,20,000$
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The purchase consideration is 4,00,000. Debentures of 100 are issued at a 20% discount, so the issue price is 80. Number of debentures = 4,00,000 / 80 = 5,000. The debentures account is credited with the face value: 5,000 * 100 = 5,00,000.

Multiple choice book keeping and accountancy company accounts - issue of debentures issue of debentures for consideration other than cash types of debentures issue of debentures at par, premium, discount, collateral security and for consideration other than cash

Mohan Lai Ltd. purchased a plant for Rs. 20,000 payable Rs. 6,500 in cash and balance by issue of 9% debentures of Rs. 100 each at a primium of 10%. Find the number of debentures to be issued to the vendor.

  1. 125 of Rs. 100 each

  2. 123 of Rs. 100 each

  3. 112.50 of Rs. 100 each

  4. 143 of Rs. 100 each
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The amount payable is 20,000 - 6,500 = 13,500. The debentures are issued at a 10% premium, so the issue price is 110. Number of debentures = 13,500 / 110 = 122.72. Since you cannot issue a fraction of a debenture, the question likely implies 123 debentures (rounding up).

Multiple choice book keeping and accountancy company accounts - issue of debentures issue of debentures for consideration other than cash types of debentures issue of debentures at par, premium, discount, collateral security and for consideration other than cash

The following entry appears in the books of Vikas Ltd.

Rs. Rs.
Bank Account $95,000$
Loss on issue of Debenture A/c $13,000$
To $8\%$ Debentures A/c $1,00,000$
To Premium on Redemption of Debentures A/c $8,000$

Debentures have been issued at a discount of.

  1. $10\%$
  2. $7\%$
  3. $6\%$
  4. $5\%$
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The debentures are 1,00,000. The bank received 95,000. The difference of 5,000 is the discount. 5,000 / 1,00,000 = 5%.

Multiple choice book keeping and accountancy company accounts - issue of debentures issue of debentures for consideration other than cash types of debentures issue of debentures at par, premium, discount, collateral security and for consideration other than cash

X Co. Ltd purchased assets worth Rs. $28,80,000$. It issued debentures of Rs. $100$ each at a discount of $4\%$ in full satisfaction of the purchase consideration. The number of debentures issued to the various of asset is?

  1. $30,000$
  2. $28,800$
  3. $32,000$
  4. $35,000$
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The purchase consideration is Rs. 28,80,000. The issue price per debenture is Rs. 100 minus 4% discount (Rs. 4), which equals Rs. 96. Dividing 28,80,000 by 96 gives 30,000 debentures.

Multiple choice book keeping and accountancy company accounts - issue of debentures issue of debentures for consideration other than cash types of debentures issue of debentures at par, premium, discount, collateral security and for consideration other than cash

The following journal entry appears in the books of X Co. Ltd.

Bank A/c Dr. Rs. $4,75,000$
Loss on Issue of Deb. A/c Dr. Rs. $75,000$
To $12\%$ Debentures A/c $5,00,000$
To Premium on redemption of Deb. A/c $50,000$

Debentures have been issued at a discount of.

  1. $15\%$
  2. $5\%$
  3. $10\%$
  4. $20\%$
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The total face value of debentures is Rs. 5,00,000. The bank received Rs. 4,75,000. The difference of Rs. 25,000 represents the discount on issue. Discount percentage = (25,000 / 5,00,000) * 100 = 5%.

Multiple choice book keeping and accountancy company accounts - issue of debentures issue of debentures for consideration other than cash types of debentures issue of debentures at par, premium, discount, collateral security and for consideration other than cash

When debentures of Rs. $1,00,000$ are issued as collateral security, against a loan of Rs. $1,50,000$, the entry for issue of debentures will be

  1. Credit Debentures Rs. $1,50,000$ and debit cash A/c. Rs. $1,50,000$
  2. Debit Debenture Suspense A/c Rs. $1,00,000$ and credit Cash A/c Rs. $1,00,000$
  3. Debit Debenture Suspense A/c Rs. $1,00,000$ and Credit Debentures A/c Rs. $1,00,000$
  4. Debit Cash A/c Rs. $1,50,000$ and credit Bank A/c Rs. $1,50,000$
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

When debentures are issued as collateral security, the standard accounting entry is to debit Debenture Suspense A/c and credit Debentures A/c with the face value of the debentures issued.

Multiple choice book keeping and accountancy company accounts - issue of debentures issue of debentures for consideration other than cash types of debentures issue of debentures at par, premium, discount, collateral security and for consideration other than cash

P Ltd. issued $10,000$, $12\%$ debentures of Rs. $100$ each at a premium of $10\%$ which are redeemable after $10$ years at a premium of $20\%$. The amount of loss on redemption of debentures to be written off every year will be.

  1. Rs. $1,60,000$
  2. Rs. $80,000$
  3. Rs. $20,000$
  4. Rs. $16,000$
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The loss on redemption is the premium payable on redemption, which is 20% of Rs. 100 = Rs. 20 per debenture. For 10,000 debentures, the total loss is Rs. 2,00,000. Over 10 years, the annual write-off is 2,00,000 / 10 = Rs. 20,000.

Multiple choice book keeping and accountancy company accounts - issue of debentures issue of debentures for consideration other than cash types of debentures issue of debentures at par, premium, discount, collateral security and for consideration other than cash

A Ltd issued $3,000$ $15\%$ Debentures of Rs. $100$ each at a discount of $7.5\%$ payable at a premium of $5\%$ at the end of $5$ years. The loss on issue of debentures will be.

  1. Rs. $22,500$
  2. Rs. $30,000$
  3. Rs. $37,500$
  4. Rs. $45,000$
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The loss on issue includes the discount on issue (7.5% of 100 = 7.5) and the premium on redemption (5% of 100 = 5). Total loss per debenture = 7.5 + 5 = 12.5. For 3,000 debentures, total loss = 3,000 * 12.5 = 37,500.

Multiple choice mathematics and statistics compound interest [using formula] compounding interest annually compouding interest compounding interest non-annually

Choose the most appropriate option.
The value of a machine depreciates every year at the rate of $10\%$ on its value at the beginning of that year. If the present value of the machine is Rs. $729$, its worth three years ago was?

  1. Rs. $947.70$
  2. Rs. $1,000$
  3. Rs. $750.87$
  4. Rs. $800$
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

$P\left(1-\dfrac{10}{100}\right)^3=729$


$\Rightarrow$  $P\times\dfrac{90}{100}\times\dfrac{90}{100}\times\dfrac{90}{100}=729$

$\Rightarrow$  $P\times\dfrac{729}{10\times100}=729$

$\Rightarrow$  $P=\dfrac{729\times1000}{729}$

$\Rightarrow$  $P=Rs.1000$ 

$\therefore$  The value of machine $3$ years ago was $Rs.1000$

Multiple choice mathematics and statistics compound interest [using formula] compounding interest annually compouding interest compounding interest non-annually

It is estimated that every year the value of a machine depreciates by 20% of its value at the beginning of the year. Calculate the original valu of the machine, if its value after two year is Rs. 10,240.

  1. Rs. 21,000

  2. Rs. 19,000

  3. Rs. 17,000

  4. Rs. 16,000
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

machine value after 2 year=Rs.10240

Rate of depreciation=20%
Let the original value of the machine=Rs.x
Value after 2 year=Present value$\left(1-\frac{R}{100}\right)^T$
$\Rightarrow 10240=x\left(1-\frac{20}{100}\right)^2$
$\Rightarrow 10240=x\times \frac{80}{100}\times \frac{80}{100}$
$\Rightarrow x=\frac{10240\times 100\times 100}{80\times 80}=Rs.16000$



Multiple choice book keeping and accountancy bill of exchange (trade bill) dishonour of a bill dishonour of bills bills of exchange advantages of bill of exchange

A bill of Rs 23000 dishonoured and noting charges paid by Drawer is Rs. 100 than Drawee's A/c will be Debited for Rs. __________.

  1. 23100

  2. 23000

  3. 100

  4. none
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Upon dishonor, the drawee is liable for the original bill amount plus the noting charges paid by the drawer. Thus, 23000 + 100 = 23100.

Multiple choice book keeping and accountancy bill of exchange (trade bill) dishonour of a bill dishonour of bills bills of exchange advantages of bill of exchange

Bills sent for collection Rs 1000 dishonored and noting charges paid by drawer Rs 100 then, Cash A/c will be credited by Rs. _____________.

  1. 1000

  2. 1100

  3. 100

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

The noting charges are paid by the drawer in cash. Therefore, the Cash account is credited by the amount of the noting charges, which is 100.