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 elements of book keeping and accountancy methods of valuation of closing stock adjustment for closing stock only closing stock meaning, kinds and important terms relating to stock

Ram sends goods on approval basis as follows :

Date January Customer's name Sale price of Goods sent Goods accepted Goods returned
Rs Rs Rs
10 A 3,600 3,000 600
12 B 2,000 2,000 -
15 C 2,680 - 2,680
25 D 2,260 2,000 260

The stock of goods sent on approval on 31st January will be:

  1. Rs 500

  2. Nil

  3. Rs 260

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

All goods sent on approval were either accepted or returned by January 31st. Therefore, the stock of goods sent on approval is nil.

Multiple choice elements of book keeping and accountancy methods of valuation of closing stock adjustment for closing stock only closing stock meaning, kinds and important terms relating to stock

Rs 1500 being LIC premium of proprietor paid by the firm will be debited to ________________.

  1. Income tax a/c

  2. Drawing a/c

  3. Profit and loss a/c

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

LIC premium is a personal liability of the proprietor. Hence, any amount paid or withdrawn from the business for personal purposes is to be debited to drawing account.

Multiple choice elements of book keeping and accountancy methods of valuation of closing stock adjustment for closing stock only closing stock meaning, kinds and important terms relating to stock

Linux Ltd. maintains the inventory records under perpetual system of inventory. Consider the following data pertaining to inventory of Linux Ltd. held for the month of March 2005:

Date Particulars Quantity Cost per unit
Mar. 1 Opening inventory $15$ $400$
Mar. 4 Purchases $20$ $450$
Mar. 6 Purchases $10$ $460$

If the company sold $32$ units on March 24, 2005, closing inventory under FIFO method is:

  1. Rs. $5,200$
  2. Rs. $5,681$
  3. Rs. $5,800$
  4. Rs. $5,950$
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Under FIFO, the 32 units sold are taken from the earliest stock: 15 units from March 1 (15 * 400 = 6000) and 17 units from March 4 (17 * 450 = 7650). Remaining stock: 3 units from March 4 (3 * 450 = 1350) and 10 units from March 6 (10 * 460 = 4600). Total = 1350 + 4600 = 5950.

Multiple choice elements of book keeping and accountancy methods of valuation of closing stock adjustment for closing stock only closing stock meaning, kinds and important terms relating to stock

Rs. $1,250$ paid for the residential telephone bill of the proprietor which of these accounts will be debited _________________.

  1. Household A/c

  2. Drawing A/c

  3. Telephone A/c

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

Business entity concept of accounting defines that the owner and the business are considered two separate entity in the eyes of law. Hence any amount is spent from the business for personal use, has to be debited to drawing account. Drawing will be deducted from capital account. 

Multiple choice elements of book keeping and accountancy methods of valuation of closing stock adjustment for closing stock only closing stock meaning, kinds and important terms relating to stock

Goods costing Rs.10,000 destroyed by fire should be credited to 

  1. Purchase Account

  2. Sales Account

  3. Cash Account

  4. Goods Lost by Fire A/c
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation
 Particular  L.F.  Dr.  Cr.
 Lost by fire A/c             Dr.            To Purchase A/c                (Being goods destroyed by fire)    10000  10000

Goods costing Rs.10000 destroyed by fire will be credited to purchase A/c.

Multiple choice elements of book keeping and accountancy methods of valuation of closing stock adjustment for closing stock only closing stock meaning, kinds and important terms relating to stock

Good worth $Rs.500$ taken by the proprietor for personal use should be debited to ______________.

  1. Debtors Accounts

  2. Drawing Account

  3. Installation Expenses account

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

When a proprietor takes goods for personal use, it is considered a drawing. The drawing account is debited to record the reduction in the proprietor's capital.

Multiple choice elements of book keeping and accountancy methods of valuation of closing stock adjustment for closing stock only closing stock meaning, kinds and important terms relating to stock

Employees took stock costing Rs 1000 (sale price Rs 1200) in this case _____________________.

  1. Salaries A/c to be debited with Rs. 1200

  2. Sales A/c to be credited with Rs. 1200

  3. Purchases A/c to be credited with Rs 1000

  4. Sales A/c to be credited with Rs 1000
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

When goods are taken by employees, the cost of the goods is removed from inventory. Since the goods were originally recorded in the purchases account, we credit the purchases account at cost (Rs 1000) to reduce it.

Multiple choice elements of book keeping and accountancy methods of valuation of closing stock adjustment for closing stock only closing stock meaning, kinds and important terms relating to stock

Goods costing Rs 1000 (Sale Price Rs 1200) distributed as free samples should be credited to ________.

  1. Sales Account with Rs 1200

  2. Sales Account with Rs 1000

  3. Purchases Account with Rs 1000

  4. Loss by Theft A/c
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Free samples are an expense. To record this, we credit the purchases account at cost to remove the goods from inventory and debit the advertising/samples account.

Multiple choice elements of book keeping and accountancy methods of valuation of closing stock adjustment for closing stock only closing stock meaning, kinds and important terms relating to stock

Goods costing Rs 1000 (Sale price Rs 1200) used in making furniture should be credited to ________________.

  1. Sales account with Rs 1200

  2. Sales account with Rs 1000

  3. Purchases account with Rs 1000

  4. Furniture A/c
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

When goods are used for internal purposes like making furniture, the cost is transferred to the asset account (Furniture). We credit the purchases account at cost to remove the goods from inventory.

Multiple choice elements of book keeping and accountancy methods of valuation of closing stock adjustment for closing stock only closing stock meaning, kinds and important terms relating to stock

Goods costing Rs 1000 (Sale price Rs 1200) stolen should be credited to __________________.

  1. Sales Account with Rs 1200

  2. Sales Account with Rs 1000

  3. Purchases Account with Rs 1000

  4. Loss by Theft A/c
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

When goods are stolen, the loss is recorded in the 'Loss by Theft' account. The purchases account is credited at cost to remove the goods from inventory.

Multiple choice elements of book keeping and accountancy methods of valuation of closing stock adjustment for closing stock only closing stock meaning, kinds and important terms relating to stock

Goods costing Rs 1000 (Sale Price Rs 1200) given as charity should be credited to __________________.

  1. Sales Account with Rs 1200

  2. Sales Account with Rs 1000

  3. Purchases Account with Rs 1000

  4. Loss by Theft A/c
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Charity is an expense. The entry involves debiting the Charity account and crediting the Purchases account at cost to remove the goods from inventory.

Multiple choice elements of book keeping and accountancy methods of valuation of closing stock adjustment for closing stock only closing stock meaning, kinds and important terms relating to stock

The cost of inventory as per physical verification as on 24th March was Rs.4,00,000. Goods are sold at a profit of 25%on cost.
On 21st March, goods on the sales value of Rs.1,00,000 were sent on sale on return basis to a customer , the period of approval being two week .He returned 20% of the goods on 31st March.
The cost of inventory as per books on 31st march is ______________.

  1. Rs.4,80,000

  2. Rs.4,16,000

  3. Rs.4,28,000

  4. None of these
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation
In case of sale or return basis the goods that are confirmed as sales and the rest are included in inventory at cost.
Calculation of goods to be included at cost and their value :-

 Goods not approved = 1,00,000 x 20%
                                    = 20,000

Calculation of book value of unapproved goods
Lets assume,
Cost = 100, Gross profit = 25% of cost  
                                        = 25
Therefore, sales = Cost + gross profit
                            = 100 + 25
                             = 125
Hence, we have sales price cost will be = 20000 x 100/125
                                                                   = 16,000

Cost of inventory as on 31st march = 4,00,000 + 16,000
                                                           = 4,16,000
Multiple choice elements of book keeping and accountancy methods of valuation of closing stock adjustment for closing stock only closing stock meaning, kinds and important terms relating to stock

Goods costing Rs 1000 (Sale Price Rs 1200) destroyed by fire should be credited to _________________.

  1. Sales Account with Rs 1200

  2. Sales Account with Rs 1000

  3. Purchases Account with Rs 1000

  4. Loss by Theft A/c
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

When goods are destroyed by fire, the loss is recorded in the 'Loss by Fire' account. The purchases account is credited at cost to remove the goods from inventory.

Multiple choice elements of book keeping and accountancy methods of valuation of closing stock adjustment for closing stock only closing stock meaning, kinds and important terms relating to stock

Cost of Physical Stock Rs.2,30,000
Goods purchases for Rs.10,000 received but omitted to be recorded
Goods costing Rs.20,000 were sold & delivered but omitted to be recorded
Goods costing Rs.5,000 were returned by customers but omitted to be recorded.
Goods costing Rs.3,000 were returned to suppliers but omitted to be recorded.
The cost of stock as per books is ____________.

  1. Rs.2,40,000

  2. Rs.2,38,000

  3. Rs.2,36,000

  4. None of these
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation
Cost of physical stock                                                                             2,30,000
Less:- purchases recorded but omitted to be recorded                          (10,000)
Add;- Goods sold, not recorded                                                                20,000
Less:- Goods returned by customers                                                         (5,000)
Add:- Goods returned to suppliers                                                             3,000
                                                                                                                  ---------------
Cost of stock as per books                                                                     2,38,000