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

Goods worth Rs. 10,000 were withdrawn by the proprietor for his personal use. The account to be credited is ___________.

  1. Sales A/c

  2. Drawing A/c

  3. Purchases A/c

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

When the proprietor withdraws goods for personal use of Rs 10,000 it should be credited/deducted from the stock while calculating cost of goods sold and hence are deducted from purchases.  

Multiple choice elements of book keeping and accountancy trial balance develop the skill of preparing trial balance by balance method methods of preparing trial balance preparation of trial balance

A's trial balance provides you the following information: Bad debts Rs.1,000. It is desired to maintain a provision for bad debts at Rs. 2,000. Amount debited to profit and loss a/c will be_________.

  1. Rs. 1,000

  2. Rs. 3,000

  3. Rs. 4,000

  4. Rs. 2,000
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation
Amount to be debited to P & L A/c = Bad debts + new provision 
                                                           = RS-1,000 + RS-2,000
                                                           = RS-3,000.
Multiple choice elements of book keeping and accountancy trial balance develop the skill of preparing trial balance by balance method methods of preparing trial balance preparation of trial balance

D's trial balance contains the following information:
Bad debts Rs. 500
Provision for bad debts Rs. 4,000
It is desired to maintain a provision of Rs. 3,000 at the end of the year Accounting treatment of this adjustment is_________________________.

  1. Rs. 1,500 to be debited to profit and loss a/c

  2. Rs. 500 to be debited to profit and loss a/c

  3. Rs. 500 to be credited to profit and loss a/c

  4. Rs. 3,500 to be debited to profit and loss a/c
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation
P & L A/c to be debited/credited = New provision + bad debts - old provision 
                                                       = Rs-3,000 + Rs-500 - Rs-4,000
                                                       = Rs-500 to be credited. 
There is excess old provision hence to make the current provision as Rs-3000, Rs-500 is to be credited. 
Multiple choice elements of book keeping and accountancy trial balance develop the skill of preparing trial balance by balance method methods of preparing trial balance preparation of trial balance

F's trial balance contains the following information:
Discount received Rs.1,200
Provision for discount on creditors Rs.1,800
It is desired to maintain a provision for discount on creditors at Rs. 1,600
The amount to be credited to profit and loss a/c is________.

  1. Rs.1,000

  2. Rs.1,400

  3. Rs.200

  4. Rs.2,200
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation
P & L A/c to be credited = New provision + Discount received - old provision 
                                                       = Rs-1,600 + Rs-1,200 - Rs-1,800
                                                       = Rs-1,000 to be credited. 

Multiple choice elements of book keeping and accountancy trial balance develop the skill of preparing trial balance by balance method methods of preparing trial balance preparation of trial balance

State whether  the following statements are True or False:
The total of purchase book casts short by Rs.1,000/- will not affect the trial balance.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

If the purchase book is cast short, the total posted to the Purchases account is understated. This creates an imbalance in the trial balance because the debit side will be less than the credit side.

Multiple choice elements of book keeping and accountancy trial balance develop the skill of preparing trial balance by balance method methods of preparing trial balance preparation of trial balance

A's trial balance contains the following information :
Discount allowed, Rs 1,000
Provision for discount, Rs. 3,000 on debtors
It is desired to make a provision for discount on debtors, Rs. 3,500. The amount to be debited to profit and loss a/c is____________.

  1. Rs. 4,500

  2. Rs. 4,000

  3. Rs. 1,500

  4. Rs. 500
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation
P & L A/c to be debited = New provision +Discount allowed - old provision 
                                                       = Rs 3,500 + Rs 1000 - Rs 3,000.
                                                       = Rs 1,500 to be debited.  

Multiple choice elements of book keeping and accountancy trial balance develop the skill of preparing trial balance by balance method methods of preparing trial balance preparation of trial balance

Which of the following errors will result into non-agreement of the trial balance?

  1. Totaling the returns inwards journal as $Rs. 11,400$ instead of $Rs. 12,600$.
  2. Recording a sales invoice for $Rs. 5,600$ as $Rs. 6.500$ in the Sales Journal.
  3. Failing to record a purchase invoice for $Rs. 54,000$ in the Purchases Journal.
  4. Recording in the Purchases Journal, an invoice, for acquiring a noncurrent asset for $Rs. 60,000$.
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

An error in totaling a journal (like the returns inwards journal) results in an incorrect total being posted to the ledger, which causes the trial balance to not agree. The other options involve errors that do not affect the equality of debits and credits.

Multiple choice elements of book keeping and accountancy trial balance develop the skill of preparing trial balance by balance method methods of preparing trial balance preparation of trial balance

An entry for the goods sold to Madhav for Rs.1,020 was posted to his accounts as Rs. 1,200. If rectification is done before preparation of trial balance then which of the following is correct?

  1. Suspense A/c Dr. 180

    To Madhav A/c 180

  2. Profit & Loss Adj. A/c Dr. 180

    To Madhav A/c 180

  3. Credit Madhav with Rs. 180 saying "By Excess debit for sales Rs. 180"

  4. Debit madhav with Rs. 180 saying " To Excess debit for sales Rs. 180".
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Posting of sales of Rs.1020 to Madhav a/c is done by Rs.1200. Its a single sided error. Madhav's a/c is excessively debited by Rs.180. To rectify the transaction, credit is given to Madhav by Rs.180 stating "by excess debit for sales Rs.180."

Multiple choice elements of book keeping and accountancy trial balance develop the skill of preparing trial balance by balance method methods of preparing trial balance preparation of trial balance

Goods costing Rs.10,000 destroyed as free sample should be credited to 

  1. Purchase Account

  2. Sales account

  3. Cash Account

  4. Drawing Account
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The journal for goods distributed as free samples is -

Advertisement Expense A/c             Dr 10000
          To Purchases A/c                              10000
Here, purchases account is credited because goods are going out of the business, when goods are brought in the business purchases account is debited, so when goods are going out of the business it is to be credited.

Multiple choice elements of book keeping and accountancy trial balance develop the skill of preparing trial balance by balance method methods of preparing trial balance preparation of trial balance

Rs.10,000 paid in cash for repair of a purchased old machine,Should be debited to :

  1. Repairs Account

  2. Cash Account

  3. Machine Account

  4. Installation change Account.
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

When amount is spent on repairs of existing fixed assets, it is treated as revenue expenditure and is debited to repairs account. But when amount is spent on repair of old machine purchased, it is treated as capital expenditure and is added to the value of the machinery or asset. This is because amount spent on repair of old machinery purchased enhances the efficiency of the asset which is assumed to be used for a long period of time.

The entry for this entry is -
Machinery A/c       Dr 10000
       To Cash A/c                   10000

Multiple choice elements of book keeping and accountancy trial balance develop the skill of preparing trial balance by balance method methods of preparing trial balance preparation of trial balance

Income tax paid by a proprietor $Rs.3,000$ appearing in the Trial balance ______________.

  1. to be debited to Profit & Loss Account

  2. to be credited to Profit & Loss Account

  3. to be added to Capital

  4. to be deducted from Capital
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Income tax paid by the proprietor is on the personal income of the proprietor as business do not have income. It is not a expenditure of the firm. It is a form of drawing by the proprietor and is deducted from the capital of the firm as it leads to outflow of proprietor's capital fund from the business.

Multiple choice elements of book keeping and accountancy trial balance develop the skill of preparing trial balance by balance method methods of preparing trial balance preparation of trial balance

I's Trial balance contains the following information: 12% Bank Loan Rs. 40,000, Interest paid Rs. 3,800. Interest debited to the Profit & Loss Account is:

  1. Rs. 4,800

  2. Rs. 5,000

  3. Rs. 5,500

  4. Rs. 1,000
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Interest paid on bank loan is an indirect expense and is debited to the profit and loss account as it is a charge against profit. In the case the total interest paid for the year is 12% of Rs 40000 i.e., 4800. The interest already paid is Rs 3800, the remaining Rs 1000 has to be paid as it is a charge against the profit. Thus Rs 1000 will be debited to the profit and loss account to pay the full amount of interest.

Multiple choice elements of book keeping and accountancy trial balance develop the skill of preparing trial balance by balance method methods of preparing trial balance preparation of trial balance

E's Trial Balance contains the following information: Discount received Rs. 1,000. Provision for discount on creditors Rs. 1,600. It is desired to maintain a provision for discount on creditors at Rs. 1,100. The amount to be credited to the Profit & Loss Account is:

  1. Rs. 1,500

  2. Rs. 3,500

  3. Rs. 1,000

  4. Rs. 500
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Discount received is the amount received from the creditors for early payments. It is an indirect income for the business and is credited to the profit and loss account. Provision for discount on debtors is the estimated amount of creditors which is not to be paid. It is a saving and an income and is so credited to the profit and loss account. 

Discount received Rs 1000 will be credited to the profit and loss account as it is a income. While provision for discount on creditors 500 will be debited from the profit and loss account as it is a reduction in the income of the business. 
The entry passed will be -
Discount received A/c                          Dr 1000
     To Profit and loss A/c                                     500
      To Provision for discount on creditors A/c   500
Thus profit and loss account will be credited with Rs 500.

Multiple choice elements of book keeping and accountancy trial balance develop the skill of preparing trial balance by balance method methods of preparing trial balance preparation of trial balance

H's Trial Balance contains the following information:
Bad debts                                         Rs. 3,000
Discount allowed                              Rs. 3,000
Provision for discount on debtors      Rs.3,200
Provision for bad debts                      Rs. 3,500
Sundry Debtors                                  Rs. 50,000
At the end of the year, it is desired to maintain a provision for bad debts at Rs. 4,000 and provision for discount on debtors at Rs. 2,000. Sundry Debtors will appear in the Balance Sheet at a figure of:

  1. Rs. 44,000

  2. Rs. 38,000

  3. Rs. 44,700

  4. Rs. 32,300
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Provision for discount on debtors and provision for bad debts are deducted from the sundry debtors balance to show the actual value in the balance sheet. The value of sundry debtors in H's balance sheet will be(50000-4000-2000) i.e., 44000. This is because the new adjustment says to create provision for discount on debtors at Rs 2000 and provision for bad debts at Rs. 4000.

Multiple choice elements of book keeping and accountancy trial balance develop the skill of preparing trial balance by balance method methods of preparing trial balance preparation of trial balance

Extract of trial balance of Mr. Q is as follows:

Particulars Dr. Rs Cr. Rs
Sundry debtors 1,00,000 -
Sundry creditors - 78,000

Additional information:
Included in sundry debtors Rs 5,000 due from Mr A. Included in sundry creditors Rs 2,000 payable to Mr. A.
Sundry debtors and creditors will appear in balance sheet at Rs _________ & Rs ____________.

  1. 97,000, 75,000

  2. 98,000, 76,000

  3. 95,000, 76,000

  4. 98,000, 72,000
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Mr. A is a common person which is included in Sundry Debtors and Sundry Creditors. A common amount of Rs.3000 has to be adjusted from sundry debtors and sundry creditors to show the net balance in the balance sheet. 

This will be presented as:
                                                       Sundry Debtors                Sundry Creditors
Amount as per trial balance:         Rs.100000                         Rs.78000
Less: Amount due to/from Mr. A   Rs.  3000                           Rs.  3000
                                                       ---------------------------        ---------------------------
Net Balance to be shown in B/S    Rs.97000                        Rs.75000
                                                       --------------------------         ---------------------------