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

Goods returned by Mr Y for Rs 10000 passed through the Purchased Return Book. This error will result in _________________.

  1. Increase in gross profit

  2. Decrease in gross profit

  3. No effect on gross profit

  4. Either (a) or (b)
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Recording a sales return in the Purchases Return Book means the return is treated as a reduction in purchases rather than a reduction in sales. This artificially inflates the cost of goods sold calculation, leading to an increase in reported gross profit.

Multiple choice commercial applications generally accepted accounting principles (gaap) acccounting cycle meaning, need and objectives of accounting accounting process
  1. The cost of stock as per physical verification as on 24th March amounted to Rs.2,00,000. Purchases as per Purchases Book after stock taking till 31st March amounted to Rs.2,00,000 and included the following:
    (i) Rs.10,000 for goods received till 23rd March.
    (ii) Rs.20,000 for goods received on 1st April. Sales as per Sales Book after stock taking, till 31st March amounted to Rs.2,00,000 and included the following:
    (I) Rs.10,000 for goods delivered till 23rd March. (II) Rs.20,000 for goods delivered on 1st April. Goods are sold by the trader at a profit of 25% on Cost. The value of stock as per books Is ____________.

  1. Rs.2,40,000

  2. Rs.2,38,000

  3. Rs.2,36,000

  4. Rs.2,34,000
Reveal answer Fill a bubble to check yourself
B Correct answer
Multiple choice elements of book keeping and accountancy bill of exchange (trade bill) dishonour of a bill dishonour of bills advantages of bill of exchange

Goods costing Rs. 4,00,000 were sent by A to B on consignment. 3/4 of the goods were sold by B at a profit of 20% on sale value. Commission payable to consignee is ordinary commission @ 3% and Del-credere commission @ 2%. A customer did not pay due to insolvency Rs. l,500 and another customer deducted Rs. 2,000 because of dispute regarding quality of.goods. Net amount of commission credited to profit and loss account in the books of consignee will be____.

  1. Rs. 15,200

  2. Rs. 16,500

  3. Rs. 17,250

  4. Rs. 16,750
Reveal answer Fill a bubble to check yourself
C Correct answer
Multiple choice book keeping and accountancy accounting equation meaning, objectives and need of adjustments need for adjustments accounting equations and transactions

The company paid Rs.15,000 as one of the installment of an outstanding bill. What effect this transaction have on the financial position of the company?

  1. No change in assets, liability decreases by Rs. 15,000

  2. Both cash and liability decrease by Rs.15,000

  3. Assets decrease by Rs.15,000, on change in liability

  4. Assets increase by Rs. 15,000, liability increase by Rs.15,000
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Paying an outstanding bill reduces the company's cash (an asset) and reduces the outstanding liability (accounts payable). Both decrease by the amount paid.

Multiple choice book keeping and accountancy accounting equation meaning, objectives and need of adjustments need for adjustments accounting equations and transactions

Mr. A had a beginning credit balance of Rs. 21,000 in his capital account. At the close of the period his drawing account had a debit balance of Rs. 2,200. On the end -of -period balance sheet, his capital balance is Rs. 32,000. If the contributed an additional Rs. 2,000 to the firm during the period, the period's net income is  _____________.

  1. Rs. 12,400

  2. Rs. 11,200

  3. Rs. 9,000

  4. Rs. 10,800
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Ending Capital = Beginning Capital + Net Income - Drawings + Additional Capital. 32,000 = 21,000 + Net Income - 2,200 + 2,000. 32,000 = 20,800 + Net Income. Net Income = 11,200.

Multiple choice book keeping and accountancy accounting equation meaning, objectives and need of adjustments need for adjustments accounting equations and transactions

Following information is available from the books of Mr.Z.

Rs.
Expenses paid during the year $1,35,000$
Expenses outstanding on $1-4-2013$ $12,250$
Expenses prepaid on $1-4-2013$ $15,000$
Expenses outstanding on $31-3-2014$ $17,000$
Expenses prepaid on $31-3-2014$ $16,750$

Net expenses debited to profit & loss account for the year ended $31.3.2014$ should be.

  1. Rs. $1,96,000$
  2. Rs. $1,37,500$
  3. Rs. $1,32,000$
  4. Rs. $1,38,000$
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Net expenses = Paid + Outstanding(end) + Prepaid(start) - Outstanding(start) - Prepaid(end). Calculation: 135000 + 17000 + 15000 - 12250 - 16750 = 138000.

Multiple choice book keeping and accountancy accounting equation meaning, objectives and need of adjustments need for adjustments accounting equations and transactions

On $31$st March, goods sold at a sale price of Rs. $30,000$ were lying with customer, Mohan to whom these goods were sold on 'sale or return basis' and recorded as actual sales. Since no consent was received from Mohan, the adjustment entry was made presuming goods were sent on approval at a profit of cost plus $20\%$. In the balance sheet, the stock with customers account will be shown at.

  1. Rs. $30,000$
  2. Rs. $24,000$
  3. Rs. $20,000$
  4. Rs. $25,000$
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The sale price is 30000 with a 20% profit on cost. If Cost = C, then C + 0.2C = 30000, so 1.2C = 30000, C = 25000. Stock is valued at cost.

Multiple choice book keeping and accountancy accounting equation meaning, objectives and need of adjustments need for adjustments accounting equations and transactions

A business entity distributed goods worth Rs. 15,000 as free sample. The adjustment to be made is ____________________.

  1. Subtracted from purchases Alc and credited to Profit and Loss A/c

  2. Added to Purchase Ne and credited to Profit and Loss A/c

  3. Added to Purchase Ne and debited to Profit and Loss A/c

  4. Subtracted from Purchases No and debited to Profit and Loss A/c.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Free samples are an expense (Advertisement). We debit the P&L account and credit Purchases (or Trading) to remove the cost of those goods from inventory/purchases.

Multiple choice book keeping and accountancy accounting equation meaning, objectives and need of adjustments need for adjustments accounting equations and transactions

Sales include Rs. $60,000$ sent to Z & Co. on sale or return basis for which no approval has been received as on $31-3-2015$. The cost of the goods was Rs. $50,000$. Which of the following treatment will be correct while preparing final accounts?

  1. Increase sales & debtors by Rs. $60,000$, Decrease closing stock in trading account and balance sheet by Rs. $50,000$
  2. Increase sales & debtors by Rs. $60,000$, Increase closing stock in trading account and balance sheet by Rs. $50,000$
  3. Reducing sales & debtors by Rs. $60,000$, Increase closing stock in trading account and balance sheet by Rs. $50,000$
  4. Reduce sales & debtors by Rs. $60,000$, Reduce closing stock in trading account and balance sheet by Rs. $50,000$
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Since the goods were not approved, the sale must be reversed (reducing Sales and Debtors) and the goods must be added back to closing stock at cost.

Multiple choice book keeping and accountancy accounting equation meaning, objectives and need of adjustments need for adjustments accounting equations and transactions

After the preparation of income statement, it was discovered that accrued expenses of 1,000 have been ignored and closing inventory has been overvalued by 1,300. This will have result in:

  1. An understatement of net profit of Rs 2,300

  2. An overstatement of net profit of Rs 300

  3. An understatement of net profit of Rs 300

  4. An overstatement of net profit of Rs 2.300
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

If accrued expenses of Rs $1,000$ have been ignored this will increase the net profit by Rs. $1,000$. If closing inventory is overvalued, it will also result in increasing the net profit by Rs. $1 ,300$. Thus, net effect will be profit increased by Rs. $2,300 (1000+1300)$.

Multiple choice commercial studies basic accounting terms basic accounting terminologies introduction to financial accounting and financial accounts basic accounting terminology meaning and features of balance sheet income-expenditure account meaning, importance and specimen of journal objectives, functions, and importance of accounting stages and functions of accounting qualitative characteristics, objectives and roles of accounting

On 31.3.2019 after sale of goods Rs. 2,000, Neelam is left with the closing inventory of Rs. 10,000. This is ____________.

  1. An event

  2. A transaction

  3. A transaction as well as an event

  4. Neither a transaction nor an event
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

An event is a happening that results in a change in the financial position of a business, such as the closing inventory balance, whereas a transaction is an exchange of value.

Multiple choice commercial studies basic accounting terms basic accounting terminologies introduction to financial accounting and financial accounts basic accounting terminology meaning and features of balance sheet income-expenditure account meaning, importance and specimen of journal objectives, functions, and importance of accounting stages and functions of accounting qualitative characteristics, objectives and roles of accounting

Ram purchased goods of Rs. $10,000$. This can be classified as _________.

  1. an event

  2. a transaction

  3. a transaction as well as an event

  4. neither a transaction nor an event
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Any exchange of value for value ( for money or money's worth) is called a transaction. Something having value is received, and something having value goes out.  Selling or purchasing of goods or taking or granting any loan are examples of transactions. 

Ram purchased goods of Rs.10000 is a transaction. 

Multiple choice commercial studies basic accounting terms basic accounting terminologies introduction to financial accounting and financial accounts basic accounting terminology meaning and features of balance sheet income-expenditure account meaning, importance and specimen of journal objectives, functions, and importance of accounting stages and functions of accounting qualitative characteristics, objectives and roles of accounting

On 1.1.2019, CS N. S. Zad paid rent of Rs. 25,000 for Zads Professional Academy. This can be classified as _________.

  1. an event

  2. a transaction

  3. a transaction as well as an event

  4. neither a transaction nor an event
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Monetary concept of accounting defines that only those transactions are recorded in the books of account which are measured in terms of money. 

Rent of Rs.25000 paid is monetary transaction hence to be recorded in books of account. 
Accounting entry will be as under:

Rent A/c                           Dr.
        To Cash/Bank

Multiple choice commercial studies basic accounting terms basic accounting terminologies introduction to financial accounting and financial accounts basic accounting terminology meaning and features of balance sheet income-expenditure account meaning, importance and specimen of journal objectives, functions, and importance of accounting stages and functions of accounting qualitative characteristics, objectives and roles of accounting

Atul purchased a car for Rs. $5,00,000$, by making a down payment of Rs. $1,00,000$ and signing a Rs. $4,00,000$ bill payable due in $60$ days. As a result of this transaction ____________________.

  1. total assets increased by Rs. $5,00,000$

  2. total liabilities increased by Rs. <span class="MathJax_Preview"><span class="MathJax"><span class="math"><span class="mrow"><span class="mn">4<span class="mo">,<span class="mn">00<span class="mo">,<span class="mn">000<span class="MJX_Assistive_MathML">4,00,000

  3. total assets increased by Rs. 3<span class="MathJax"><span class="math"><span class="mrow"><span class="mo">,<span class="mn">00<span class="mo">,<span class="mn">000<span class="MJX_Assistive_MathML">4,00,000

  4. total assets increased by Rs. <span class="MathJax_Preview"><span class="MathJax"><span class="math"><span class="mrow"><span class="mn">4<span class="mo">,<span class="mn">00<span class="mo">,<span class="mn">000<span class="MJX_Assistive_MathML">4,00,000
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

On purchase of a Car, total assets of balance sheet will be increased by $Rs. 5,00,000$ and on making of down payment of $Rs.1,00,000$ total assets will decrease by $Rs. 1,00,000$. The result will be that total assets of Balance sheet will increase by $Rs.4,00,000$.
On other hand a liability of $Rs.4,00,000$ has been made so the liability side of Balance Sheet will be increased by $Rs.4,00,000$.

Multiple choice commercial studies basic accounting terms basic accounting terminologies introduction to financial accounting and financial accounts basic accounting terminology meaning and features of balance sheet income-expenditure account meaning, importance and specimen of journal objectives, functions, and importance of accounting stages and functions of accounting qualitative characteristics, objectives and roles of accounting

Ram paid rent of Rs 10,000. This can be classified as _____________.

  1. An event

  2. A transaction

  3. A transaction as well as an event.

  4. Neither a transaction nor an event.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

'Transaction' involves money or money's worth, and hence, has a financial impact in the books of accounts.

Event may or may not have a financial impact in the books of accounts.
Example: Change of Operations Manager of the company.
In the given example amount paid as rent involves a financial element as amount is paid by one person to another. 
Therefore, it is a transaction and not an event.