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 recording and posting of cash transactions explain the purpose of maintaining a cash book introduction, meaning and importance of cash book meaning and advantages of cash book

Salary paid in cash - Rs $50,000$ will be recorded in ____________.

  1. General Journal

  2. Cash Book

  3. Purchases Return Book

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

Paying salary in cash is a cash outflow transaction. All cash payments are recorded on the credit side of the cash book, making the cash book the correct book of original entry for this transaction.

Multiple choice elements of book keeping and accountancy recording and posting of cash transactions explain the purpose of maintaining a cash book introduction, meaning and importance of cash book meaning and advantages of cash book

Investment was sold in cash for Rs $1,00,000$ at par will be recorded in ____________.

  1. Cash book

  2. General Journal

  3. Purchases return book

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

When an investment is sold for cash, it results in a cash receipt. All cash receipts and payments are recorded in the Cash Book, making it the correct book of entry.

Multiple choice elements of book keeping and accountancy recording and posting of cash transactions explain the purpose of maintaining a cash book introduction, meaning and importance of cash book meaning and advantages of cash book

Goods worth Rs. 45,000 sold to Tarun for cash will be recorded in_________.

  1. Cash book

  2. Sales book

  3. Journal book

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

Cash book is a book in which all transactions relating to cash receipts and cash payments are recorded. It starts with the cash or bank balances at the beginning of the period. Generally, it is made on monthly basis. 


This is very popular book and is maintained by all organisations, big or small, profit or not-for-profit. It serves the purpose of both journal as well as the ledger (cash) account. It is also called the book of original entry. 

When a cash book is maintained, transactions  of cash are not recorded in the journal, and no separate account for cash or bank is required in the ledger. 

For example, goods worth Rs. 45,000 sold to Tarun for cash will be recorded in the cash book.

Multiple choice elements of book keeping and accountancy recording and posting of cash transactions explain the purpose of maintaining a cash book introduction, meaning and importance of cash book meaning and advantages of cash book

A discount of Rs. 2000 was given to a supplier on his prompt repayment of debt but the cashier did not enter in the cash book. What should be the adjustment in cash to work out the correct balance of cash book? 

  1. Rs.2000 will be debited in cash book

  2. Rs.2000 will be credited in cash book

  3. Rs.4000 will be debited in cash book

  4. Rs.4000 will be credited in the cash book
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

In a three-column cash book, discount received from a supplier is recorded in the discount column on the credit side. Since the cashier omitted this entry, the correct adjustment is to credit the discount amount of Rs. 2000 in the cash book. This ensures that the discount received is properly accounted for alongside the payment.

Multiple choice elements of book keeping and accountancy recording and posting of cash transactions explain the purpose of maintaining a cash book introduction, meaning and importance of cash book meaning and advantages of cash book

A company was entered in hire purchase agreement and had to pay Rs.1000 per month. Three payment we accounted but no entry was found in cash book. Identify the correct adjustment in cash book. 

  1. Rs. 1000 will be added to cash book balance

  2. Rs. 2000 will be deducted from cash book balance

  3. Rs. 3000 will be added to cash book balance

  4. Rs. 3000 will be subtracted from cash book balance
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Since three payments of hire purchase were made but omitted from the cash book, the cash book failed to record money going out. To correct this oversight and reconcile the balance, the total outflow of 3000 rupees must be subtracted from the cash book balance.

Multiple choice elements of book keeping and accountancy recording and posting of cash transactions explain the purpose of maintaining a cash book introduction, meaning and importance of cash book meaning and advantages of cash book

On purchase of goods of the list of price Rs 10000 from Ram who allowed 10% trade discount and 5% cash discount for immediate payment _____________________.

  1. Purchase Account to be debited with Rs 10000

  2. Purchase Account to be debited with Rs 8500

  3. Purchase Account to be debited with Rs 8550

  4. Discount Received A/c to be credited with Rs 500

  5. Discount Received A/c to be credited with Rs 450
Reveal answer Fill a bubble to check yourself
E Correct answer
Explanation

The list price of the goods is Rs. 10,000. Applying the 10% trade discount reduces the purchase value to Rs. 9,000 (10,000 - 1,000), which is the amount debited to the Purchase Account. The 5% cash discount is then calculated on this net amount of Rs. 9,000, which equals Rs. 450 (9,000 * 0.05) and is credited to the Discount Received Account.

Multiple choice book keeping and accountancy reserve and fund accounting treatment for depreciation meaning and characteristics of provisions provision for depreciation account

Price of the computer = Rs 50,000
Residual value = Rs 10,000
Hours worked for the year = 6000 hrs
Estimated life of computer = 20,000 hrs
Calculate the amount of depreciation.

  1. Rs. 15,000

  2. Rs. 12,000

  3. Rs. 20,000

  4. Rs. 24,000
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation
Depreciation = Cost of the asset - salvage value 
                        ----------------------------------------------------   x no. of hours worked 
                                total estimated hours  
                      = 50,000 - 10,000 
                        -------------------------- x 6,000
                                    20,000
                     = RS-12,000.
Multiple choice book keeping and accountancy reserve and fund accounting treatment for depreciation meaning and characteristics of provisions provision for depreciation account

When operating profit Rs. $62,400$, provision for depreciation Rs. $10,000$, Provision for taxation Rs. $30,000$, Refund of tax Rs. $400$, Provision for doubtful debts Rs. $1000$, Office of admin. expenses Rs. $50,000$ then the amount of funds from operation is__________.

  1. Rs. $62,400$
  2. Rs. $1,02,400$
  3. Rs. $72,400$
  4. Rs. $72,000$
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Funds from operations
$=$ Operating Profit $+$ Provision for Dep,
$=$ Rs. $62,400+$ Rs. $10,000$
$=$ Rs. $72,400$.

Multiple choice book keeping and accountancy reserve and fund accounting treatment for depreciation meaning and characteristics of provisions provision for depreciation account

When R.D.D is created, __________ is credited.

  1. R.D.D A/c

  2. Sales A/c

  3. Bad debts A/c

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

R.D.D. means reserves for doubtful debts. 

R.D.D. is created for the anticipated bad debts based on the historical data. The reserve is creating out of profit against which following journal entry will be passed:

Profit & Loss A/c                                      Dr.
   To Reserves for Doubtful Debts.

Multiple choice book keeping and accountancy reserve and fund accounting treatment for depreciation meaning and characteristics of provisions provision for depreciation account

For the year 20 X 1 and 20 X 2, the following figures have been arrived at :
Increase in notes payable =  Rs.28,000
Decrease in provision for taxes = Rs.2,500
Increase in creditors = Rs.76,500
Decrease in provision for dividends = Rs.40,000
The change in NWC (Net Working Capital) is _________________.

  1. Decrease by Rs.86,000

  2. Decrease by Rs.62,000

  3. Decrease by Rs.11,000

  4. Increase by Rs.11,000

  5. Increase by Rs.62,000
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Net working capital  = current assets - current liabilities
Increase in notes payable and increase in creditors will increase current liabilities.
Decrease in provision for taxes and dividends will increase current assets.
Thus change in net working capital = (2500 + 40000) - (28000 + 76500) = -62000
i.e. there is decrease in net working capital by Rs.62,000.

Multiple choice book keeping and accountancy reserve and fund accounting treatment for depreciation meaning and characteristics of provisions provision for depreciation account

The entry for creating a provision for bad debts is:

  1. Debit provision for bad debts a/c and Credit debtors a/c.

  2. Debit debtors a/c and Credit provision for bad debts a/c.

  3. Debit provision for bad debts a/c and Credit [profit and loss a/c.

  4. Debit profit and loss a/c and Credit provision for bad debts a/c.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The provision for doubtful debts is the estimated amount of bad debts that will arise from accounts receivable that have been issued but not yet collected. It is identical to the allowance for doubtful accounts. The provision is used under accrual basis accounting, so that an expense is recognized for probable bad debts as soon as invoices are issued to customers, rather than waiting several months to find out exactly which invoices turned out to be noncollectable.

Journal entry for creating a provision for bad debts is:
      Profit and loss A/c          Dr.
                   To Provisions for bad debts A/c

Multiple choice book keeping and accountancy reserve and fund accounting treatment for depreciation meaning and characteristics of provisions provision for depreciation account

A machine was purchased on 1.5.2013 for Rs. $20,000$ (installation expenses Rs. $1,000$) was fully destroyed in an accident on 1.9.2015. Company provides depreciation @ $15$% p.a on reducing balance method and close accounts on 31st March each year. Which of the following journal entry is correct?

  1. $\begin{matrix} Accidental\quad Loss\quad A/c & Dr.\quad 18,113 \\ To\quad Machinery\quad A/c & \quad \quad \quad \quad \quad \quad \quad \quad 18,113 \end{matrix}$
  2. $\begin{matrix} Accidental\quad Loss\quad A/c & Dr.\quad 15,396 \\ To\quad Machinery\quad A/c & \quad \quad \quad \quad \quad \quad \quad \quad 15,396 \end{matrix}$
  3. $\begin{matrix} Profit\quad and\quad Loss\quad A/c & Dr.\quad 14,434 \\ Depreciation\quad A/c & Dr.\quad \quad \quad 962 \\ To\quad Machinery\quad A/c & \quad \quad \quad \quad \quad \quad \quad \quad \quad 15,396 \end{matrix}$
  4. $\begin{matrix} Machinery\quad A/c & Dr.\quad 14,434 \\ Accidental\quad Loss\quad A/c & Dr.\quad 6,566 \\ To\quad Machinery\quad A/c & \quad \quad \quad \quad \quad \quad \quad \quad \quad 21.000 \end{matrix}$
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The machine cost 21,000. Depreciation for 2013-14 (11 months) = 21,000 * 0.15 * 11/12 = 2,887.5. WDV = 18,112.5. Depreciation for 2014-15 = 18,112.5 * 0.15 = 2,716.875. WDV = 15,395.6. Depreciation for 2015-16 (5 months) = 15,395.6 * 0.15 * 5/12 = 962.2. Loss = 15,395.6 - 962.2 = 14,433.4. Option C matches these figures.

Multiple choice book keeping and accountancy reserve and fund accounting treatment for depreciation meaning and characteristics of provisions provision for depreciation account

The balance in the accumulated provision for depreciation account of a company as at the beginning of the year was Rs. 2,00,000 when the original cost of the assets amounted to Rs. 10,00,000. The company charges 10% depreciation on a straight line basis for all the assets including those which have been either purchased or sold during the year. One such asset costing Rs. 5,00,000 with accumulated depreciation as at the beginning of the year of Rs. 80,00,000 was deposited off during the year.
The balance of the accumulated depreciation account at the end of the year considering the current year's depreciation charge would be 

  1. Rs. 2,20,000

  2. Rs. 1,70,000

  3. Rs. 1,20,000

  4. Rs. 2,50,000
Reveal answer Fill a bubble to check yourself
B Correct answer
Multiple choice book keeping and accountancy reserve and fund accounting treatment for depreciation meaning and characteristics of provisions provision for depreciation account

The balance in the accumulated provision for depreciation account of a company as at the beginning of the year was Rs. 2,00,000 when the original cost of the assets amounted to Rs. 10,00,000. The company charges 10% depreciation on a straight line basis for all the assets including those which have been either purchased or sold during the year. One such asset costing Rs. 5,00,000 with accumulated depreciation as at the beginning of the year of Rs. 80,00,000 was deposited off during the year.
Depreciation for the year is __________.

  1. Rs. 40,000

  2. Rs. 50,000

  3. Rs. 60,000

  4. Rs. 1,00,000
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation
Depreciation for the year = Asset at beginning of the year x depreciation rate 
                                            = 10,00,000 x 10/100
                                            = RS-1,00,000.
Multiple choice book keeping and accountancy reserve and fund accounting treatment for depreciation meaning and characteristics of provisions provision for depreciation account

X Ltd. acquired a lease right for 10 years of a mine on a lumpsum payment of Rs. 9,00,000 to the landlord. It was estimated by the coal deposit of the mine was 40,00,000 tonnes, 75% of which could be raised within time period allowed. X Ltd. decided to depreciate the lease on Depletion Method. The sales and stocks (in tonnes) were as under: 
Year                  I                 II               III             IV               V           VI
Sales              30,000        62,000     1,96,000    4,02,000    4,02,000    3,98,000
Closing Stock  10,000       8,000        12,000     10,0000    8,000      10,000
The depreciation for the year VI will be:

  1. Rs. 1,22,400

  2. Rs. 1,19,400

  3. Rs. 1,20,000

  4. None of these
Reveal answer Fill a bubble to check yourself
C Correct answer