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 accounting for depreciation factors for determining depreciation factors of depreciation need for depreciation and the factors affecting the amount of depreciation

An additional purchase of Rs. 2000 was made for a machine on 10th October. Under straight line method, under Income tax Act, depreciation __________.

  1. will be done for half of the year

  2. will be done from the beginning of the year

  3. Both a & b

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

Depreciation as per Income tax is calculated in a different manner than what is calculated under Companies Act.In the given case, the machine has been added after the first six month from the beginning of the financial year. As per the income tax act, if a machine is added after first six months, depreciation is calculated at 50% of the amount and at a rate specified by the act.

(Note:Half of the year or 50% is one and the same)

Multiple choice book keeping and accountancy accounting for depreciation factors for determining depreciation factors of depreciation need for depreciation and the factors affecting the amount of depreciation

In 2012, S.Ltd. acquired a mine at a cost of Rs 5,00,000. The estimated reserve of minerals is  50,00,000 tonnes of which 80% is expected to be realized. The first three years raisings are 1,50,000 : 2,00,000 & 2,50,000 tonnes, respectively. Depreciation for the third year=?

  1. Rs$31,250$
  2. Rs.$18,750$
  3. Rs.$25,000$

  4. None of the above
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation
Depreciation for the 3rd year = Cost of the mine
                                                     --------------------------- x Revenue of the 3rd year 
                                                      total revenue to be realised 
                                                  = 5,00,000 
                                                    --------------- x 2,50,000
                                                    40,00,000
                                                 = Rs-31,250. 

Multiple choice book keeping and accountancy accounting for depreciation factors for determining depreciation factors of depreciation need for depreciation and the factors affecting the amount of depreciation

Purchase Price of Machine Rs. 80,000, Installation Charges Rs. 20,000, Residual Value Rs. 40,960, Useful life 4 years, the rate of depreciation under WDV Method is: 

  1. 25%

  2. 20%

  3. 14.76%

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

Here , formula for WDV is - deprecciation rate = 100 * (1-n√s/c)

where n = number of years , s = salvage value , c = cost of asset
=[1-4√40960/100000] * 100
= [1-4√0.4096] * 100
= [1-.80]*100
=.20*100
=20

Multiple choice book keeping and accountancy accounting for depreciation factors for determining depreciation factors of depreciation need for depreciation and the factors affecting the amount of depreciation

Date of Purchase 1st July, Purchase Price of Machine Rs. 1,40,000, Installation charges Rs. 60,000, Residual Value Rs. 81,920, Accounting year -Financial year, Date when Machine was put to use- 1st Oct, the depreciation under SLM for the first year Rs. 14,760.
The useful life of the Machine is _____.

  1. 6 years

  2. 5 years

  3. 4 years

  4. None of these
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation
Depreciation(SLM basis) = Depreciable value - Residual value 
                                           -----------------------------------------------------
                                                            Useful life. 
                         14,790      = 1,00,000 - 40,960
                                            ---------------------------- 
                                                    no. of years 
                                          = 4 Years. 
Multiple choice book keeping and accountancy accounting for depreciation factors for determining depreciation factors of depreciation need for depreciation and the factors affecting the amount of depreciation

Purchase Price of machine 1,50,000, Installation charges Rs. 50,000, Residual Value Rs. 81,920. The annual depreciation under SLM is Rs. 29,520. The useful life of machine is_________.

  1. 6 years

  2. 5 years

  3. 4 years

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

Total cost of machine is Rs 1,50,000+ 50,000 = 2,00,000


Calculation of estimated useful life of machine:

Depreciation = cost-Estimated residual value/estimated useful life
which implies that, 
Estimated useful life = depreciation/cost-estimated residual value
hence,
Estimated useful life = 29,520/2,00,000-81,920

Estimated useful life = 0.25 0r 4 years.

Multiple choice book keeping and accountancy accounting for depreciation factors for determining depreciation factors of depreciation need for depreciation and the factors affecting the amount of depreciation

X Ltd. purchased a machine for Rs. 1,20,000 and incurred Rs. 40,000 towards freight, insurance, carriage Inwards and installation charges. It was estimated that its life is 4 years during which period is sum of Rs. 60,000 is likely to be spent on its repairs maintenance and at the end of useful life, the scrap value will be Rs. 20,000. Actual repairs were as under:
Year I -Rs. Nil, Year -II Rs. 10,000, Year -III Rs. 20,000, Year -IV Rs. 30,000
At the end of useful life, the scrap value of the machine released Rs. 16,000 only. 
The closing balance of Provision for Depreciation and Repairs Account at the Year II will be:

  1. Rs. 50,000

  2. Rs. 1,00,000

  3. Rs. 40,000

  4. Rs. 90,000
Reveal answer Fill a bubble to check yourself
D Correct answer
Multiple choice book keeping and accountancy accounting for depreciation factors for determining depreciation factors of depreciation need for depreciation and the factors affecting the amount of depreciation

M/s sam Co. purchased Machinery on 1st oct 2015 for Rs. 100000 and paid for installation Rs. 20000
Depreciation under written down value Method 10%
Ascertain the Accumulated Depreciation balance as on 31st mar 2018 ______.

  1. $27,660$
  2. $27,600$
  3. $27,750$
  4. $27,000$
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

When the depreciation is charged by creating accumulated depreciation account, following journal entry is passed:


Depreciation A/c                                 Dr.
   To Accumulated Depreciation A/c 

In the given situation, Machinery purchased on 1st Oct 2015 for Rs.100000 and installation paid Rs.20000. Depreciation is charged under written down value method @10%. Depreciation account will be debited every year by and credited to accumulated depreciation a/c . 

Depreciation will be calculated as: 

Cost of the machinery including installation;                                      Rs.120000
Less: Depreciation F.Y. 2015-16 for 6 months @10% on Rs.120000 : Rs.6000                                                                                                                    ------------------
W.D.V. as on 1st April 2016                                                                   Rs.114000
Less: Depreciation for  F.Y. 2016-17  @10% on Rs.114000:                  Rs. 11400
                                                                                                              ------------------
W.D.V. as on 1st April 2017                                                                   Rs.102600
Less; Depreciation F.Y. 2017-18  @10% on Rs.102600                        Rs. 10260
                                                                                                              ----------------

Total in accumulated depreciation a/c will be as follows:                           
For F.Y. 2015-16                           Rs.6000
For F.Y. 2016-17                           Rs.11400
For F.Y. 2017-18                           Rs.10260
                                                   ----------------
Total                                             Rs.27660

Balance in accumulated depreciation account as on 31st March 2018 will be Rs.27660 under written down value method.

Multiple choice book keeping and accountancy accounting for depreciation factors for determining depreciation factors of depreciation need for depreciation and the factors affecting the amount of depreciation

M/s Ram Co. purchased Machinery on 1st April 2015 for $Rs.100000$
Depreciation under Straight Line Method $10$%.
Ascertain the Accumulated Depreciation balance as on 31st mar 2018.

  1. $Rs.25000$
  2. $Rs.30000$
  3. $Rs.10000$
  4. $Rs.50000$
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

When the depreciation is charged by creating accumulated depreciation account, following journal entry is passed:


Depreciation A/c                                 Dr.
   To Accumulated Depreciation A/c 

In the given situation, depreciation is charged @$10$% on $Rs.100000$ under straight line method, depreciation account will be debited every year by Rs.10000 and credited to accumulated depreciation a/c . 

For F.Y. 2015-16            $Rs.10000$
For F.Y. 2016-17            $Rs.10000$
For F.Y. 2017-18            $Rs.10000$

Balance in accumulated depreciation account as on 31st March 2018 will be $Rs.30000$.

Multiple choice book keeping and accountancy accounting for depreciation factors for determining depreciation factors of depreciation need for depreciation and the factors affecting the amount of depreciation

M/s Sam & Co. purchased Machinery on $1. 10. 2015$ for $Rs.1,00,000$ and paid for installation $Rs.20,000$
Depreciation under Straight Line Method $10$%.
Ascertain the Accumulated Depreciation balance as on $31.03.2018$ ?

  1. $Rs.50,000$
  2. $Rs.40,000$
  3. $Rs.55,000$
  4. $Rs.30,000$
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

When the depreciation is charged by creating accumulated depreciation account, following journal entry is passed:


Depreciation A/c                                 Dr.
   To Accumulated Depreciation A/c 

In the given situation, Machinery purchased on 1st Oct 2015 for Rs.100000 and installation paid Rs.20000. Depreciation is charged under straight line method @10%. Depreciation account will be debited every year by and credited to accumulated depreciation a/c . 

For F.Y. 2015-16 for 6 months @10% on Rs.120000 :            Rs.6000
For F.Y. 2016-17  @10% on Rs.120000:                                  Rs. 12000
For F.Y. 2017-18  @10% on Rs.120000                                   Rs. 12000
                                                                                                ----------------
Total in accumulated depreciation a/c                                 Rs.30000

Balance in accumulated depreciation account as on 31st March 2018 will be Rs.30000.

Multiple choice book keeping and accountancy accounting for depreciation factors for determining depreciation factors of depreciation need for depreciation and the factors affecting the amount of depreciation

M/s Ram Co. purchased Machinery on 1st April 2015 for Rs. 100000
Depreciation under Written down value method 10%
Ascertain the Accumulated Depreciation balance as on 31st mar 2018______.

  1. $Rs..27,100$
  2. $Rs.27,000$
  3. $Rs.27,500$
  4. $Rs.27,200$
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

                                             Accumulated Depreciation Account

 Date  Particulars  Amount  Date  Particulars Amount 
31.03.2016 To Balance C/d     10000 31.03.2016   By Depreciation  10000
   Total   10000    Total   10000
 31.03.2017  To Balance c/d   19000  01.04.2016  By Balance b/f  10000
       31.03.2017 By Depreciation   9000
   Total  19000     Total   19000
 31.03.2018  To Balance c/d   27100  01.04.2017  By Balance b/f   19000
       31.03.2018  By Depreciation  8100
   Total   27100    Total  27100
 
Multiple choice book keeping and accountancy accounting for depreciation factors for determining depreciation factors of depreciation need for depreciation and the factors affecting the amount of depreciation

Excel Enterprises purchased a plant having estimated useful life of $10$ years, however after $5$ years the remaining life of the asset is revised to $3$ years. Rs. $24,000$ being the remaining depreciable amount. The annual depreciation charge after revaluation of remaining life will be ____________.

  1. $Rs.8,000$
  2. $Rs.4,800$
  3. $Rs.6,000$
  4. $Rs.8,500$
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Remaining depreciable amount = 24,000. Remaining life = 3 years. Annual depreciation = 24,000 / 3 = 8,000.

Multiple choice book keeping and accountancy accounting for depreciation factors for determining depreciation factors of depreciation need for depreciation and the factors affecting the amount of depreciation

On $1.1.2015$, N Ltd has a stock of bottles valued at Rs$8,000$. On $1.7.2015$, they purchased additional bottles which amounted to Rs$5,000$ on $31.12.2015$, the stock of bottles were revalued at Rs$10,500$. Depreciation on bottle will be ____________ .

  1. Rs$13,000$
  2. Rs$8,000$
  3. Rs$2,500$
  4. Rs$10,500$
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation
Depreciation = opening value - Closing value 
                      = 8,000 + 5,000 - 10,500
                      = 2,500  
Multiple choice book keeping and accountancy accounting for depreciation factors for determining depreciation factors of depreciation need for depreciation and the factors affecting the amount of depreciation

Z.Ltd had balance of Rs$4,000$ in its plant account and corresponding balance of accumulated depreciation account of that plant was Rs.$3,200$. This plant was exchanged for new plant. The payment for the new plant consisted of trade - in - allowance of Rs.$1,400$ for the old one and the balance Rs$4,600$ to be paid in cash. The old plant could have been sold for Rs.$1,000$. In relation to this transaction, which of the following statement is correct?

  1. Provision for depreciation account will be credited by Rs$3,200$.
  2. Rs$5,600$ will be debited to New Plant Account.
  3. Profit & Loss Account will be debited by Rs$200$.

  4. All of the above
Reveal answer Fill a bubble to check yourself
B Correct answer
Multiple choice commerce performance of contract who will perform the contract performance, discharge, breach and remedies of contract business law and contract act

G paid Rs. 1,00,000 to H to influence the head of the Government Organisation in order to provide him some employment. On his failure to provide the job, G sued H for recovery of the amount. Which of the following is correct?

  1. G can recover the amount of Rs. 10,000

  2. G can recover the amount of Rs. 10,000 with interest.

  3. G can file a suit

  4. G cannot recover the amount
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The agreement is for an illegal purpose (bribery/corruption). Such agreements are void, and the law will not assist in the recovery of money paid for an illegal act.