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

In case of foreign operations, the foreign exchange difference on translation of trial balance in Indian currency shall be

  1. capitalized

  2. transferred to P and L a/c

  3. deferred for amortization in future

  4. included in the valuation of inventory
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

As per AS -11 “The effects of changes in foreign exchange rates“ in case of foreign operations, the foreign exchange difference on translation of trial balance in indian currency shall be transferred to the profit and loss account.

Multiple choice

The payment of Rs. 2,00,000 paid at the time of purchase of building to vacate the tenant shall be

  1. revenue expenditure

  2. deferred revenue expenditure

  3. miscelleneus expenditure

  4. capitalized to the cost of building
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The payment of Rs. 2,00,000 paid by the purchaser at the time of purchase of building to vacate the tenant shall be capitalized and added to the cost of the building as per the AS - 10 ”Accounting to Fixed Assets”.

Multiple choice

A purchased a computer costing Rs. 10, 000. Repairing expenses Rs. 1, 000 and miscellaneous expenses Rs. 500 were incurred by him. He sold the computer at 20% margin on selling price. The sales value will be

  1. Rs. 12, 500

  2. Rs. 11, 000

  3. Rs. 14, 375

  4. Rs. 13, 800
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Total cost = Rs. 10,000 (purchase) + Rs. 1,000 (repairs) + Rs. 500 (miscellaneous) = Rs. 11,500. With a 20% margin on selling price, cost represents 80% of selling price. Therefore, selling price = Rs. 11,500 / 0.80 = Rs. 14,375. Margin = Rs. 14,375 - Rs. 11,500 = Rs. 2,875 (20% of Rs. 14,375).

Multiple choice

R started a business with cash Rs. 50, 000. Purchased goods worth Rs. 20, 000 from M on credit. Sold goods to S costing Rs. 3, 000 for Rs. 3, 600 (cash)
The accounting equation on the basis of these transactions will be

  1. assets Rs. 70, 600 = liability Rs. 3, 600 + owner's equity Rs. 67, 000

  2. assets Rs. 70, 600 = liability Rs. 50, 600 + owner's equity Rs. 20, 000

  3. assets Rs. 70, 600 = liability Rs. 20, 000 + owner's equity Rs. 50, 600

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

Initial cash: Rs. 50,000. After purchasing goods on credit: Assets = Rs. 50,000 (cash) + Rs. 20,000 (goods) = Rs. 70,000; Liabilities = Rs. 20,000 (creditor M); Equity = Rs. 50,000. After sale: Cash increases by Rs. 3,600, goods decrease by Rs. 3,000 (cost), and profit Rs. 600 increases equity. Final: Assets = Rs. 70,600 (Rs. 53,600 cash + Rs. 17,000 goods); Liabilities = Rs. 20,000; Equity = Rs. 50,600.

Multiple choice

Consider the following data of Sky Ltd. Cost of machinery purchased on 1 - 4 - 08 : 10, 00, 000 Installation charges : 1, 00, 000 Market value as on 31 - 3 - 09 : 12, 00, 000 While finalising the annual accounts, the machinery should be valued at

  1. Rs. 10, 00, 000

  2. Rs. 11, 00, 000

  3. Rs. 12, 00, 000

  4. Rs. 15, 00, 000
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Machinery should be valued at historical cost, which includes purchase price plus installation charges. Market value is irrelevant for accounting purposes. Rs. 11,00,000 (10,00,000 + 1,00,000) represents the actual cost incurred.

Multiple choice

A, in consideration that B will employ C in collecting the rents of B's Zamindari, promises B to be responsible to the amount of Rs. 5000, for the due collection and payment by C of those rents. This is

  1. no guarantee

  2. simple guarantee

  3. continuing guarantee

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

Option (1) is incorrect: It is an example of continuing guarantee. Option (2) is incorrect: It is not a simple guarantee. Option (3) is correct: A guarantee which extends to a series of transactions is called a 'continuing guarantee'.

Multiple choice

A bill of Rs. 12, 000 was discounted by A with the banker for Rs. 11, 880. At maturity, the bill returned dishonored, noting charges Rs. 20. How much amount will the bank deduct from A's bank balance at the time of such dishonor?

  1. Rs. 12, 000

  2. Rs. 11, 880

  3. Rs. 12, 020

  4. Rs. 11, 900
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

 If a discounted cheque gets dishonored, bank collects the amount of bill as well as noting charges from A. Thus, Amount to be deducted                       =Rs (20000+20)                                                                             =Rs 20,020

Multiple choice

X Ltd. issued 10, 000, 12% debentures of Rs. 100 each at a premium of 10%, which are redeemable after 10 years at a premium of 20%. The amount of loss on redemption of debentures to be written off every year =

  1. Rs. 10, 000

  2. Rs. 30, 000

  3. Rs. 20, 000

  4. Rs. 40, 000
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

 The premium received at the time of issue of debentures is to be credited to the securities premim account and the premium which is to be paid at the time of redemtion of debentures is a loss to be provided at the time of issue of debentures and this loss is written off in equal installments during the lifetime of debentures.  Loss on issue of debentures= Rs 2,00,000 Life of debentures                 = 10 Years Loss to be written off every year= 200000/10                                                        = Rs 20,000

Multiple choice

How many debentures will a company be required to issue for satisfying the purchase consideration 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 includes face value as well as premium.thus,No of debentures= 28,80,000/(80+10)                                  =28,80,000/90                                 = 32,000 debentures

Multiple choice

Anu consigned 200 sets of coffee mugs to Manu at proforma invoice price of Rs. 80 each, charging 10% on invoice price. She spent Rs. 3,000 on carriage and Rs. 2,000 on insurance of goods. Manu sold 150 sets @ Rs. 120. She paid Rs. 1,000 on clearing charges, Rs. 1,500 for godown rent. She charged 10% commission on invoice price and 30% on surplus over the invoice price. Calculate the commission earned by Manu.

  1. Rs. 1,200

  2. Rs. 3,000

  3. Rs. 1,800

  4. Rs. 3,600

  5. Rs. 7,200
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Total sales = 150 * 120 = Rs. 18,000. Normal commission = 10% of invoice price, i.e. 10% of (150 * 80) = Rs. 1200 Plus 30% of (18000 - 12000) = Rs. 1,800 Thus, total commission = Rs. 3,000

Multiple choice

Anu consigned 200 sets of coffee mugs to Manu at proforma invoice price of Rs. 80 each, charging 10% on invoice price. She spent Rs. 3,000 on carriage and Rs. 2000 on insurance of goods. Manu sold 150 sets @ Rs. 120. She paid Rs. 1,000 on clearing charges, Rs. 1,500 for godown rent. She charged 10% commission on invoice price and 30% on surplus over the invoice price. Calculate the amount of closing stock.

  1. Rs. 5,500

  2. Rs. 5,250

  3. Rs. 4,250

  4. Rs. 4,700

  5. Rs. 5,875
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Unsold stock = 200 - 150 = 50 sets. 50 sets @ Rs. 80 = 4,000 Plus proportionate expenses: Anu: 5,000/200 * 50 = 1,250 Manu: 1,000/200 * 50 = 250 Thus, value of stock = 4,000 + 1,250 + 250 = Rs. 5,500

Multiple choice

Rohit from Goa consigned goods to Sanjeev of Ludhiana of the proforma invoice value of Rs. 5,00,000. He spent Rs. 1,00,000 on sending the goods. He drew a bill of Rs. 1,50,000 on Sanjeev as advance. At the end of the period, the goods of invoice value of Rs. 1,50,000 are unsold. Rohit wants to maintain proportionate advance. What should be the amount of advance so maintained?

  1. Rs. 45,000

  2. Rs. 1,50,000

  3. Rs. 37,500

  4. Rs. 75,000

  5. None of these
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

This is the correct answer. The amount of advance for the goods of Rs. 5,00,000 is Rs. 1,50,000. Thus, the advance to be maintained will be Rs. 45,000 on the balance goods of Rs. 1,50,000.

Multiple choice

Rahul owes Rs. 10, 000 to Nakul under a contract. It is agreed between Rahul, Nakul and Bhim that Nakul shall henceforth accept Bhim as his debtor instead of Rahul for the same amount. Old debt of Rahul is discharged, and a new debt from Bhim to Nakul is contracted. This is a/an ______________.

  1. alteration of contract

  2. rescission of contract

  3. novation of contract

  4. all of the above
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

A novation ordinarily arises when a new individual assumes an obligation to pay that is incurred by the original party to the contract.