Commerce Accountancy · Economics

Journal Entries and Depreciation

596 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 depreciation and causes of depreciation depreciation, provision and reserve depreciation accountancy

Double-declining method is often used in ________.

  1. Singapore

  2. South Africa

  3. Japan

  4. India
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The double-declining balance method is a common accounting practice used in various jurisdictions, including India, to accelerate depreciation. While it is used globally, it is specifically recognized in Indian accounting standards and tax practices.

Multiple choice depreciation and causes of depreciation depreciation, provision and reserve depreciation accountancy

A machinery was purchased on $1-1-2013$. It was delivered on $1-4-2013$. The installation was completed on $1-7-2013$. The trail run was completed on $30-9-2013$ and was made available for use on $1-10-2013$. The actual utilization started from $1-12-2013$. The effective period for calculation of depreciation for $2013$ is __________.

  1. $10$ months
  2. $9$ months
  3. $1$ months
  4. $3$ months
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The machinery is available for use from 1-10-2013,

The actual utilisation of the machine from 1-12-2013
Machinery should be depreciated from the date of availability of the machine i.e. 1-10-2013
Hence, The effective period for calculation of depreciation for 2013 is 3 months

Multiple choice depreciation and causes of depreciation depreciation, provision and reserve depreciation accountancy

Given that the value of furniture on $1-1-2001$ is $Rs. 80,000$ furniture purchased during the year is $Rs. 40,000$, sale of furniture on no loss on profit basis is $Rs. 20,000$ and the furniture is valued at $Rs. 70,000$ on $31.12.2001$, the depreciation for the year $2001$ will be _______________.

  1. $Rs. 10,000$
  2. $Rs. 30,000$
  3. $Rs. 50,000$
  4. $Rs. 70,000$
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Depreciation = opening value + purchase - sale - closing value 
                       = 80000 + 40000 - 20000 - 70000 

                       = 30000.

Multiple choice depreciation and causes of depreciation depreciation, provision and reserve depreciation accountancy

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 = ?

  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 is the difference between the opening balance plus additions and the closing balance. (8000 + 5000) - 10500 = 2500.

Multiple choice depreciation and causes of depreciation depreciation, provision and reserve depreciation accountancy

In 2012, S Ltd. acquired a machine at a cost of Rs. $50,000$. The Production Units for first three years are $15,000$; $20,000$ and $25,000$ respectively. Depreciation for the third year = ?

  1. Rs. $31,257$
  2. Rs. $18,753$
  3. Rs. $20,833$

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

Under the units of production method, depreciation = (Cost / Total Units) * Units in year. Total units = 15000 + 20000 + 25000 = 60000. Third year depreciation = (50000 / 60000) * 25000 = 20833.33.

Multiple choice depreciation and causes of depreciation depreciation, provision and reserve depreciation accountancy

N Ltd. purchased a machinery on April 1, 2010 for Rs 6,00,000. It is estimated that the machinery will have a useful life of 5 years after which it will have no salvage value. If the company follows sum of year digit method of depredation, the amount of depreciation charged during the year 2014-2015 was ____________.

  1. Rs 40,000

  2. Rs 1,20,000

  3. Rs 1,90,000

  4. Rs 2,00,000
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

As per sum of year digit method of depreciation,

Useful life = 5 years

Cost = Rs 6,00,000

the digits in the years of the asset's useful life are summed: 1 + 2 + 3 + 4 + 5 = 15.

Calculation of amount of depreciation during the year 2014-2015 is

=1/15 x 600000

= 40,000

Multiple choice depreciation and causes of depreciation depreciation, provision and reserve depreciation accountancy

Madan Engineers Ltd. purchased a new office equipment on $1$st January for Rs. $50,000$ on lease basis. The company intends to provide for renewal of lease at the end of $5$ years by setting up depreciation fund which may be invested outside the business which will yield interest at $5\%$. Sinking fund table shows Rs. $0.2309$ invested every year will provide Re. $1$ at the end of $5$ years at $5\%$ interest. How much should be transferred to depreciation fund A/c every year in order to provide for renewal of the plant at the end of $5$ years.

  1. $Rs. 11,800$
  2. $Rs. 12,900$
  3. $Rs. 11,550$
  4. $Rs. 12,100$
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Annuity factor = 0.230975

The amount transferred to  depreciation fund a/c p.a. = Rs. 50,000 x 0.230975 = Rs. 11,548.75*
*difference is due to rounding of factor.

Multiple choice depreciation and causes of depreciation depreciation, provision and reserve depreciation accountancy

What amount should be transferred annually to depreciation fund a/c if the cost of the plant is Rs. $600000$, if its is to be written off over $4$ years if sinking fund table shows Rs. $0.23549$ invested annually at $4\%$ for yr amount to Rs. $1.0$.

  1. $Rs. 1,48,090$
  2. $Rs. 1,29,000$
  3. $Rs. 1,41,294$
  4. $Rs. 1,43,080$
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Sinking fund table shows the factor = 0.23549

The amount to be transferred annually to depreciation fund account = Rs. 6,00,000 x 0.23549 = Rs. 1,41,294

Multiple choice depreciation and causes of depreciation depreciation, provision and reserve depreciation accountancy

An asset is purchased for Rs. $50,000$ on $1$st January. The life of the machine is estimated to be $5$ years. It is decided to provide depreciation under annuity method by charging $5\%$ interest. The annual depreciation will be ____________.

  1. $Rs. 13,800$
  2. $Rs. 14,250$
  3. $Rs. 11,548$
  4. $Rs. 13,500$
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Annuity factor = 0.230975 (Taken from table)

The annual charge for depreciation reckoning interest at 5% p.a. would be 0.230975
the annual depreciation =Rs. 50,000 x 0.23975 =Rs. 11,548.75 i.e. Rs. 11,548

Multiple choice depreciation and causes of depreciation depreciation, provision and reserve depreciation accountancy

Cost of machine $Rs. 1,00,000$ scrap value $Rs. 10,000$; life $4$ years. What will be the amount of depreciation according to sum of years digit method in the first year?

  1. $Rs. 40000$
  2. $Rs. 60000$
  3. $Rs. 36000$
  4. $Rs. 25000$
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Option C is correct.
Sum of years = 1+2+3+4 = 10
Original Cost = 1,00,000
Salvage Value = 10,000

                          = 90,000
Depreciation = 90,000*4/10
                       = 36,000.

Depreciation in the first year will be 36000.

Multiple choice elements of book keeping and accountancy book of original record - journal understand the need for journal journals functions, advantages, objects and importance of journal

A debit note for Rs $20,000$ issued to Mr. Z for goods returned by us is to be accounted for in _______________.

  1. Bills Receivable Book

  2. General Journal

  3. Purchases Return Book

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

A debit note issued to a supplier for goods returned is recorded in the Purchases Return Book (also known as the Returns Outward Book).

Multiple choice elements of book keeping and accountancy book of original record - journal understand the need for journal journals functions, advantages, objects and importance of journal

A purchase of goods from Nathan amounting to Rs. 3,000 has been wrongly entered in the Sales Book. However Nathan Account has been correctly credited. Which of the following rectification entry is correct? 

  1. Sales A/c Dr. 3,000

    To Nathan A/c 3,000

  2. Purchases A/c Dr. 3,000

    To Sales A/c 3,000

  3. Sales A/c Dr. 3,000

    Purchases A/c Dr. 3,000

    To Suspense A/c 6,000

  4. Sales A/c Dr. 3,000

    Purchases A/c Dr. 3,000

    To Nathan A/c 6,000
Reveal answer Fill a bubble to check yourself
B Correct answer
Multiple choice elements of book keeping and accountancy book of original record - journal understand the need for journal journals functions, advantages, objects and importance of journal

A contractor's bill for extension of premises amounting to Rs. 27,500 has been debited to Building Repairs Account. Which of the following rectification entry is correct?

  1. Budding A/c Dr. 27,500

    To Building Repairs A/c 27.500

  2. Building A/c Dr. 27,500

    To Suspense A/c 27,500

  3. Building Repairs A/c Dr. 27,500

    To Suspense A/c 27,500

  4. Building Repairs A/c Dr. 27,500

    To Building A/c 27,500
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Capital expenditure (extension of premises) was wrongly debited to a revenue account (Building Repairs). To rectify, we must debit the asset account (Building) and credit the incorrectly debited expense account (Building Repairs).

Multiple choice elements of book keeping and accountancy book of original record - journal understand the need for journal journals functions, advantages, objects and importance of journal

Received Rs 1100 from M/s M in settlement of Rs 1250 due from him. The nature of the journal entry to be passed for this transaction is ______.

  1. Simple entry

  2. Compound entry

  3. Complex entry

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

A compound journal entry is an accounting entry in which there is more than one debit, more than one credit, or more than one of both debits and credits.

Hence, it is a compound entry, as cash account and discount allowed A/c is to be debited.

Multiple choice elements of book keeping and accountancy book of original record - journal understand the need for journal journals functions, advantages, objects and importance of journal

Received a first and final dividend of $60$ paise in the rupee from the Official Receiver of Mr. Ram who owed $Rs. 2,000$.

  1. Discount allowed A/c be debited with $Rs. 800$
  2. Bad debts recovered A/c be debited with $Rs. 12,00$
  3. Bad debt A/c be credited with $Rs. 800
  4. Bad debt A/c be debited with $Rs. 800
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The Journal Entry will be..

Cash a/c Dr. 1200
Bad dept  a/c Dr 800
To Ram a/c.                  2000