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 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

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

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
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.