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

Rate of depreciation under written down value method is 15% p.a. Cost of the machinery is Rs. 10,00,000. Residual value at the end of useful life is Rs. 20,000. Depreciation for the first year will be:

  1. Rs. 1,50,000

  2. Rs. 1,20,000

  3. Rs. 1,00,000

  4. Rs. 80,000
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation
Depreciation for the 1st year = Depreciable value x rate of depreciation
                                                = 10,00,000 x 15/100
                                                = RS-1,50,000
Multiple choice book keeping and accountancy reserve and fund accounting treatment for depreciation meaning and characteristics of provisions provision for depreciation account

A company purchased new Machine for Rs. $50,000$ on $1$st April and spent Rs. $10,000$ on its installation and Rs. $5,000$ on transportation. The useful life of the machine is estimated $10$years. The firm provides depreciation using sum of years digit method. What is the depreciation for the last year of working life of the machine?

  1. Rs. $936$
  2. Rs. $1,182$
  3. Rs. $1,325$
  4. Rs. $1,013$
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Depreciation expense is calculated under sum of year's digit method as:

Depreciation expense = (Remaining useful life of the asset / Sum of the year's digit) x Depreciable cost
Depreciable cost = Purchase cost + Installation cost + Transportation
Depreciable cost = Rs. 50,000 + Rs. 10,000 + Rs. 5,000 =  Rs. 65,000

Year   Deprecation base (a) Remaining life (b)  Depreciation fraction (b/sum) Depreciation expense   Book value
 1  65,000  10  10/55  11,818  53,182
 2   65,000  9  9/55  10,636  54,364
 3   65,000  8  8/55  9,455  55,545
 4   65,000  7  7/55  8,273  56,727
 5   65,000  6  6/55  7,091  57,909
6    65,000  5  5/55  5,909  59,091
 7   65,000  4  4/55  4,727  60,273
 8   65,000  3  3/55  3,545  61,455
 9   65,000  2  2/55  2,364  62,636
 10   65,000  1  1/55  1,182  63,818
   Total  55      
Multiple choice organisation of commerce and management cash book and bank related transactions objectives and importance of bank reconciliation statement meaning of petty cash book bank balance, bank overdraft, meaning, and bank reconciliation statement

The debit balance of Rs. 112 as on the previous day was brought forward as a credit balance of Rs.121 in a Cash Book. When the balance as per Cash Book is the starting point __________ .

  1. Rs. 112 to be added

  2. Rs. 121 to be added

  3. Rs. 233 to be added

  4. Rs. 233 to be subtracted
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The cash book was supposed to show a debit of 112 but shows a credit of 121. The difference is 112 + 121 = 233. Since the balance was recorded as a credit instead of a debit, the cash book is understated by 233, so it must be added to reconcile.

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) discount/loss on issue of debenture written off issue of debentures procedure for issue of debentures

A company issued 12% debentures of Rs. 1000 each at Rs. 900 to be redeemable at Rs. 1050. The difference of Rs. 150 will be ___________.

  1. debited to loss on issue of Debenture A/ c

  2. credited to loss on issue of Debenture A/c

  3. preliminary expenses A/c

  4. capital loss A/c
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

When debentures are issued at a discount and redeemed at a premium, the total loss is debited to the Loss on Issue of Debentures account. This account represents the total cost of borrowing over the life of the debenture.

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) discount/loss on issue of debenture written off issue of debentures procedure for issue of debentures

ABC Ltd. purchased Machinery from Kumar Company for a book value of Rs. 2,00,000. The consideration was paid by issue of 10% debentures of Rs. 100 each at a discount of 20%. The debenture account was credited with ____.

  1. Rs. 4,00,000

  2. Rs. 2,50,000

  3. Rs. 3,20,000

  4. Rs. 4,80,000
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The purchase consideration is Rs. 2,00,000. Since debentures are issued at a 20% discount, the issue price per debenture is Rs. 80 (100 - 20). The number of debentures issued is 2,00,000 / 80 = 2,500. The debenture account is credited with the face value: 2,500 * 100 = Rs. 2,50,000.

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) discount/loss on issue of debenture written off issue of debentures procedure for issue of debentures

Kanta Ltd. issued 1,00,000 debentures of Rs. 100 each at a discount of 5% to be redeemed at the end of 10th year from the date of issue at par. The loss on issue of debenture will be written off as ___________.

  1. Rs. 10,000 every month

  2. Rs. 50,000 every year

  3. Rs. 5,00,000 at the end of 10th year

  4. Rs. 5,00,000 at the end of 1st year of issue
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Total discount = 1,00,000 * 100 * 0.05 = 5,00,000. Over 10 years, the annual write-off is 5,00,000 / 10 = 50,000.

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) discount/loss on issue of debenture written off issue of debentures procedure for issue of debentures

Hariom Industries Ltd. purchased a plant for Rs. 100,000 payable Rs. 37,000 in cash and balance by issue of 10% debentures of Rs. 100 each at a premium of 10%. The vendor will be issued____ debentures.

  1. 630 of Rs. 100 each

  2. 572.72 of Rs. 100 each

  3. 700 of Rs. 100 each

  4. 600 of Rs. 100 each
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The amount payable is 100,000 - 37,000 = 63,000. The issue price per debenture is 100 + 10% = 110. Number of debentures = 63,000 / 110 = 572.72.

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) discount/loss on issue of debenture written off issue of debentures procedure for issue of debentures

A company issues $14\%$ debentures of Rs. $10,00,000$ at a discount of $10\%$. The discount allowed will be treated in the account books as.

  1. Capital expenditure

  2. Revenue expenditure

  3. Deferred revenue expenditure

  4. Capital loss
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Discount on issue of debentures is a capital loss because it relates to the cost of raising long-term capital rather than an operating expense.

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) discount/loss on issue of debenture written off issue of debentures procedure for issue of debentures

How many debentures will a company be required to issue for satisfying the purchase considerations of $Rs. 28,80,000$ if the debenture is of $Rs. 80$ and is issued at a premium of $Rs. 10$ per debenture?

  1. $Rs. 28,800$
  2. $Rs. 30,800$
  3. $Rs. 32,200$
  4. $Rs. 32,000$
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Purchase consideration = 2,880,000. Issue price per debenture = 80 + 10 = 90. Number of debentures = 2,880,000 / 90 = 32,000.

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) discount/loss on issue of debenture written off issue of debentures procedure for issue of debentures

X.Ltd. issued Rs$1,00,000$ $12\%$ debentures at a discount of $6\%$ on $1st$ April repayable by five equal annual drawings of Rs$20,000$ each on $31st$ March every year. The amount of discount to be written of each year assuming that the company closes its accounts on financial year basis is-

  1. Rs$1,200$ each year
  2. Rs$2,000, Rs1600, Rs1,200, Rs800, Rs400$
  3. Rs$1,000$ each year

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

The total discount is 6,000 (6% of 100,000). The debentures are redeemed in five installments of 20,000 each. The outstanding amounts are 100k, 80k, 60k, 40k, and 20k. The ratio is 5:4:3:2:1. Distributing 6,000 in this ratio gives 2,000, 1,600, 1,200, 800, and 400.

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) discount/loss on issue of debenture written off issue of debentures procedure for issue of debentures

A Ltd. took over the assets of Rs$6,60,000$ and liabilities of Rs$80,000$ of B Ltd. for an agreed purchase consideration of Rs$6,00,000$ payable $10\%$ in cash and the balance by the issue of $15\%$ Debentures of Rs$100$ each at $10\%$ discount.
The number of debentures to be issued is-

  1. $6,600$
  2. $6,000$
  3. $5,400$
  4. $4,500$
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Purchase consideration = 600,000. Cash paid = 10% of 600,000 = 60,000. Balance to be paid in debentures = 540,000. Issue price = 100 - 10% = 90. Number of debentures = 540,000 / 90 = 6,000.

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) discount/loss on issue of debenture written off issue of debentures procedure for issue of debentures

X Ltd issues $500, 15\%$ Debentures of Rs$100$ each on $1st$ May at a discount of $10\%$ redeemable at a premium of $5\%$ after $4$ years. Interest was payable half yearly on $30th$ June and $31st$ December. The amount of interest debited to profit & Loss Account for the year ended $31st$ March is-

  1. Rs$1,250$
  2. Rs$3,750$
  3. Rs$5,000$
  4. Rs$6,875$
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Total amount of debentures = 500*100 = Rs. 50,000
Interest at 15% for full year = Rs. 7500
Debentures issued on 1st May. So interest for 11 month from 1st May to 31st March will be debited. 
Interest for 11 Months = 7500/12*11 = Rs.6875

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) discount/loss on issue of debenture written off issue of debentures procedure for issue of debentures

X Ltd. has issued $14\%$ Debentures of Rs $20,000$ at a discount of $12\%$ on April $01$ and the company pays interest half-yearly on June $30$, and December $31$ every year. On March $31$ the amount shown as "Interest accrued but not due" in the Balance Sheet will be

  1. Rs$70,000$ shown along with Debentures
  2. Rs$70,000$ under current liabilities
  3. Rs$1,20,000$ shown along with Debentures
  4. Rs$12,000$ under current liabilities
Reveal answer Fill a bubble to check yourself
B Correct answer
Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) discount/loss on issue of debenture written off issue of debentures procedure for issue of debentures

F Ltd. purchased Machinery from G Company for a book value of Rs. $4,00,000$. The consideration was paid by issue of $10\%$ debentures of Rs. $100$ each at a discount of $20\%$. The debenture account will be credited by.

  1. Rs. $4,00,000$
  2. Rs. $5,00,000$
  3. Rs. $3,20,000$
  4. Rs. $4,80,000$
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The consideration is Rs. 4,00,000. Debentures of Rs. 100 are issued at 20% discount, meaning the issue price is Rs. 80. Number of debentures = 4,00,000 / 80 = 5,000. The debenture account is credited with the face value: 5,000 * 100 = 5,00,000.

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) discount/loss on issue of debenture written off issue of debentures procedure for issue of debentures

T Ltd. has issued $15\%$ Debentures of Rs. $20,00,000$ at a discount of $10\%$ on April $01$, $2004$ and the company pays interest half-yearly on June $30$ and December $31$ every year. On March $31$, $2006$, the amount shown as "interest accrued but not due" in the Balance Sheet will be.

  1. Rs. $75,000$
  2. Rs. $2,25,000$
  3. Rs. $1,50,000$
  4. Rs. $3,00,000$
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Interest is paid half-yearly on June 30 and Dec 31. On March 31, 2006, interest for 3 months (Jan, Feb, March) has accrued but is not yet due. Interest = 20,00,000 * 15% * (3/12) = 75,000.