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 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 business organisation and correspondence partnership 3 - registration of a partnership firm partnership deed registration of partnership registration of partnership firm

Non-registration of the Firm does not affect the right of the Firm to institute a suit or claim of set-off not exceeding ________.

  1. Rs. 100

  2. Rs. 1,000

  3. Rs. 10,000

  4. Rs. 50,000.
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The law provides an exception for small claims; an unregistered firm can still institute a suit or claim of set-off if the value does not exceed Rs. 100.

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.

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.