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 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

A purchased a machinery amounting to Rs.15,00,000 on 1st April, 2000. On 31st March, 2006, the similar machinery could be purchased for Rs. 25,00,000. The present discounted value of the future net cash inflows of that machinery was calculated as Rs. 13,00,000.
On the basis of above the current cost of the machinery is ____________.

  1. Rs. 10,00,000

  2. Rs. 25,00,000

  3. Rs. 15,00,000

  4. Rs. 13,00,000
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Current cost of machinery refers to the cost of machinery on today's date. 


There can be difference between current cost of machinery and cost of same machinery on any previous date. This difference can be due to either inflation or deflation.
Current cost does not get affected by the present discounted value of the future net cash inflows.

If machinery cost to Rs. 1500000 on 1st April, 2000 and the same machine cost to Rs. 2500000 on 31st March, 2006, this difference in prices can be because of Inflation.
The present discounted value of the future net cash inflows plays no role in determining current cost.

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

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

Sales for the year ended $31$st March, $2015$ amounted to Rs. $10,00,000$. Sales included goods sold to Mr.A for Rs. $50,000$ at a profit of $20\%$ on cost. Such goods are still lying in the godown at the buyer's risk. Therefore, such goods should be treated as part of.

  1. Sales

  2. Closing stock

  3. Goods in transit

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

Since the goods are at the buyer's risk, the sale is considered complete, and the revenue is recognized. The goods are no longer part of the seller's inventory.

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.