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 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

Discount charges of Rs 1000 on discounting a B/R by one of the co-venture, maintaining all joint ventures transactions in his books of account will be __________.

  1. debited to Joint Venture Account.

  2. debited to Profit & Loss Account.

  3. debited to Other Co-venturer's Account

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

Discounting a bill of exchange is a cost incurred for the joint venture. Therefore, the discount charges are treated as an expense of the venture and are debited to the Joint Venture Account.

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

The bank statement reports a credit transfer of Rs.$4000$ from a customer. Accounting entries for this is _____________________.

  1. A debit in the cash account and a credit the account of the debtor concerned

  2. A debit in the bank account and a credit in the cash account

  3. A debit in the bank account and a credit in the account of the customer concerned

  4. A debit in the account of the debtor concerned and a credit in the bank account
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

As per double entry system of accounting, every transaction affects two account. In the given transaction, Bank and customer account are affected. Bank account is a real account and customer account is a personal account. 

Following the rule of real account and personal account, below entry will be passed:

Bank A/c                                     Dr.                   4000
         To Customer A/c                                                        4000
        

Multiple choice maths gst (goods and service tax) more about gst commission, brokerage and vat taxation, calculation of income tax

Mrs. Malhotra purchased solar panels for the taxable value of Rs $85,000$. She sold them for Rs $90,000$. The rate of GST is $5\%$. Find the ITC of Mrs Malhotra.

  1. $4000$
  2. $3500$
  3. $4500$
  4. $4250$
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

$\Rightarrow$  Mrs. Malhotra purchase solar panels for $Rs.85,000.$

$\Rightarrow$  The rate of GST is $5\%$.
$\Rightarrow$  Then, the ITC of Mrs. Malhotra = $5\%\,of\,85,000$ 
 $\Rightarrow$  The ITC of Mrs. Malhotra =$\dfrac{5}{100}\times 85000=Rs.4250.$

Multiple choice elements of accounts trial balance develop the skill of preparing trial balance by balance method methods of preparing trial balance preparation of trial balance

In the trial balance are shown Debtors Rs. 2400, Bad Debts Rs 221, Bad Debts Reserve Rs 324. For creating a Reserve for Doubtful Debts @ $10\%$ on debtors, the P & L A/c will be debited by :

  1. 137

  2. 240

  3. 343

  4. 9
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation
New reserve to be created = 2,400 x 10/100
                                              = RS-240.
P & L A/c to be debited ;-
= New reserve - (Old reserve - Bad debts)
= 240 - (324 - 221)
= 240 - 103
= Rs-137. 
Multiple choice elements of accounts trial balance develop the skill of preparing trial balance by balance method methods of preparing trial balance preparation of trial balance

On 1st January 1999, the balances on different accounts in the books of Bhushan were as follows: Stock on hand Rs. 3,500; Investments Rs. 3,000; Loans from Ramji Rs. 3,500; Owing by debtors Rs. 2,500; Owing to creditors Rs. 1,500; Plant and Machinery Rs. 3,000; Bills payable Rs. 1,250; Cash at bank Rs. 2,000.
The amount of capital of Bushan on this date was.

  1. Rs. 750

  2. Rs. 1,750

  3. Rs. 2,750

  4. Rs. 7,750
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation
Capital fund = Total assets - Total liabilities (WN 1)
                     = 14,000 - 6,250
                     = RS-7,750.

Working note:-
Total assets :- 
= stock + investments + debtors + plant and machinery + cash 
= 3,500 + 3,000 + 2,500 + 3,000 + 2,000
= RS-14,000.

Total liabilities :-
= Loans from Ramji + Creditors + Bills payable 
= 3,500 + 1,500 + 1,250
= RS-6,250. 
Multiple choice elements of accounts trial balance develop the skill of preparing trial balance by balance method methods of preparing trial balance preparation of trial balance

C's Trial Balance contains the following information: Bad debts Rs. 8,000, Provision for Doubtful debts Rs. 6,000, Sundry debtors Rs. 25,000.It is desired to create a provision for bad debts at 10% on Sundry debtors at the end of the year. Sundry debtors (after provision) will appear in Balance Sheet at a figure of :

  1. Rs.22,500

  2. Rs.21,000

  3. Rs.18,000

  4. Rs.15,500
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation
Sundry debtors after provision = Sundry debtors before provision - Provision
                                                    = 25,000 - 10% of 25,000
                                                    = RS-22,500.
Multiple choice elements of accounts trial balance develop the skill of preparing trial balance by balance method methods of preparing trial balance preparation of trial balance

P's trial balance contains the following information:
Bad debts Rs.3,000
Provision for bad debts Rs.3,500
It is desired to make a provision of Rs. 4,000 at the end of the year. the amount to be debited to profit and loss a/c is_________.

  1. Rs.4,000

  2. Rs.5,000

  3. Rs. 6,500

  4. Rs. 3,500
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation
Amount to be debited to P & L A/c :-
= new provision + bad debts - old provision 
= Rs-4,000 + Rs-3,000 - Rs-3,500
= Rs-3,500. 
Multiple choice business mathematics and statistics insurance and annuity amount of an annuity annuities financial mathematics

A limited company intends to create a depreciation fund to replace at the end of the 25th year assets costing Rs 100000.Calculate the amount (approximately) to be retained out of profits every year if the interest rate is 3%.

  1. 2755

  2. 3245

  3. 5431

  4. 1200
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

This is a sinking fund calculation to reach a future value of 100,000 in 25 years at 3% interest. Using the formula PMT = FV * i / ((1+i)^n - 1), the result is approximately 2755.

Multiple choice business mathematics and statistics insurance and annuity amount of an annuity annuities financial mathematics

A machine costing Rs $2$ lacs has effective life of $7$ years and its scrap value is Rs $30000$. What amount (in Rs) should the company put into a sinking fund earning $5\%$ per annum so that it can replace the machine after its useful life? Assume that a new machine will cost Rs $3$ lacs after $7$ years.

  1. $30161.35$
  2. $33101.35$
  3. $33161.35$
  4. $33111.35$
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

$\Rightarrow$  Cost of new machine is $Rs.3\,lacs$

$\Rightarrow$  Scrap value of old machine is $Rs.30000$
$\Rightarrow$  Hence, money required for new machine after 7 years  = $Rs.300000-Rs.30000=Rs.270000$.
$\Rightarrow$  If A is the annual deposit into sinking fund, then we have
$\Rightarrow$  Amount of annuity, $M=Rs.270000$
$\Rightarrow$  Number of periods = $7\, years$
$\Rightarrow$  $r=5\%=0.05$
$\therefore$   $M=\dfrac{A}{r}\times [(1+r)^n - 1]$
$\Rightarrow$  $270000=\dfrac{A}{0.05}\times[(1.05)^7-1]$

$\Rightarrow$  $A=\dfrac{270000\times 0.05}{(1.05)^7 - 1}$

$\therefore$   $A=33161.35$ Rs

Multiple choice business mathematics and statistics insurance and annuity amount of an annuity annuities financial mathematics

A machine costs Rs. $98,000$ and its effective life is estimated at $12$ years. If the scrap value is Rs. $3, 000$, what should be cut out of the profit at the end of each year to accumulate at compound rate of $5\%$ per annum so that a new machine can be purchased after $12$ years ?

  1. Rs. $6,000$
  2. Rs. $5,968$
  3. Rs. $4,787$
  4. Rs. $4,763$
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation
Effective cost of the machine is $98000–3000 = 95000$.
We know that Future value of annuity (FV) $=$ annuity $\times$ Compount Value factor of Annuity (CVAF)
That is $\text{FV}= \text{annuity} \times \text{CVAF} _{(5\%, 12)}$
$\text{FV}= \text{annuity} \times \left(\dfrac{(1+r)^n-1}{r}\right)$, where $r=0.05, n=12$
$\Rightarrow 95000 = \text{annuity} \times \dfrac{(1+0.05)^{12}-1}{0.05} $
$\Rightarrow 95000 = \text{annuity} \times \dfrac{0.795856}{0.05} $
$\Rightarrow 95000=\text{annuity} \times 15.917$
$ \therefore \text{annuity} = \dfrac{95000}{15.917} =5968$
Therefore, Rs. $5,968$ should be cut out of the profit at the end of each year to accumulate at compound rate of $5\%$ per annum, so that a new machine can be purchased after $12$ years.
Multiple choice civics consumers' awareness consumer protection act of 1986 need for consumer awareness consumer : satisfaction and protection

The state level consumer court deals in cases involving claims between ___ to ___.

  1. Rs 10 lakhs to Rs 90 lakhs

  2. Rs 20 lakhs to Rs 1 crore

  3. Rs 30 lakhs to Rs 5 crores

  4. Rs 40 lakhs to Rs 10 crores
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation
National level consumer court hears cases amounting to more than Rs 1 crore.
State level consumer court hears cases amounting less than Rs 1 crore.
District level consumer court hears cases amounting up to Rs 20 lakhs.
Multiple choice commercial studies company final accounts forms of statements of profit and loss operating profit (ebit) meaning, need and format of profit and loss account

Opening balance of debtors is Rs. 18,000. 5% provision for bad debts is required to be provided on debtors. If the debtors balance is increased during the year by Rs. 5,000 and the provision for bad debt has a debit balance of Rs. 350 after transferring bad debts, the charge against the profit and loss account is ____________.

  1. Rs.1,950

  2. Rs. 1,500

  3. Rs. 650

  4. Rs. 550
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Opening balance of Debtors = Rs. 18000

The closing balance of debtors = Opening debtors + debtors during the year
= Rs. 18000 + 5000
= Rs. 23000
Now, we calculate the provision for bad debts on the Closing debtors.
Hence, Provision for bad debts = $Closing debtors \times \dfrac{Rate}{100}$
= $23000 \times \dfrac{5}{100}$
= 1150
The provision for bad debts has a Credit balance and the balance has to be Rs. 1150.
But, as given in the question the Provision for bad debts is showing a debit balance of Rs. 350.
Thus, the amount to be debited to the profit and loss account = 1150 + 350
= Rs. 1500
Thus, the correct option is B.

Multiple choice commercial studies company final accounts forms of statements of profit and loss operating profit (ebit) meaning, need and format of profit and loss account

A second hand machinery was purchased for $Rs. 10,00,000$ five years ago and was overhauled by carrying out some current repairs at a cost of $Rs. 1,00,000$. It has also an accumulated depreciation of $Rs. 5,00,000$. It has been desposed of in the beginning of the sixth year for $Rs. 6,00,000$. Profit/loss on such disposal shall be_________. 

  1. Profit of $Rs. 1,00,000$
  2. Loss of $Rs. 5,00,000$
  3. Loss of $Rs. 4,00,000$

  4. No profit, no loss
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Book value of the machinery before disposal is calculated as Original Cost (10,00,000) minus Accumulated Depreciation (5,00,000), which equals 5,00,000. Current repairs (1,00,000) are treated as revenue expenditure and do not increase the book value of the asset. Since it was sold for Rs. 6,00,000 against a book value of Rs. 5,00,000, there is a profit of Rs. 1,00,000.

Multiple choice commercial studies company final accounts forms of statements of profit and loss operating profit (ebit) meaning, need and format of profit and loss account

During the year goods destroyed by fire was Rs. $10,000$. This insurance company accepted the claim for Rs. $6,000$ and paid the money after the close of financial year. In relation to this which of the following statement is correct?

  1. Trading A/c will be credited by Rs. $10,000$, Profit & Loss A/c will be debited by Rs. $6,000$ and in balance sheet insurance claim will be shown at Rs. $4,000$
  2. Trading A/c will be credited by Rs. $10,000$, Profit & Loss A/c will be debited by Rs. $10,000$
  3. Trading A/c will be credited by Rs. $10,000$, Profit & Loss A/c will be debited by Rs. $4,000$ and in balance sheet insurance claim will be shown at Rs. $6,000$

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

The total loss of 10,000 is credited to the Trading account. The insurance claim of 6,000 is an asset (receivable), and the remaining 4,000 is the net loss debited to the Profit and Loss account.

Multiple choice commercial studies company final accounts forms of statements of profit and loss operating profit (ebit) meaning, need and format of profit and loss account

On $31^{st}$ March, $2009$ Ram has loan of Rs. $50,000$ and creditors of Rs. $80,000$ Fixed assets of Rs. $72,000$, stock Rs. $90,000$ and cash in hand Rs. $60,000$. If he had started business on April $1$ $2008$ with capital of Rs. $50,000$. Compute Profit earned by Ram for year $2008-09$.

  1. Rs. $92,000$
  2. Rs. $42,000$
  3. Rs. $1,72,000$
  4. Rs. $52,000$
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Closing Capital = Assets - Liabilities. Closing Capital = (72000 + 90000 + 60000) - (50000 + 80000) = 222000 - 130000 = 92000. Profit = Closing Capital - Opening Capital = 92000 - 50000 = 42000.