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

Under Compulsory Public Liability Policy, the amount of compensation payable per person for actual damage to property is up to

  1. Rs. 2000

  2. Rs. 6000

  3. Rs. 8000

  4. Rs. 25,000
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The Public Liability Insurance Act, 1991 imposes liability on no fault basis on those who handle hazardous substances, if a third party is injured or his property is damaged during the course of such handling. The names of hazardous substances and the quantity of each, is listed in the Act. The amount of compensation payable per person is fixed and for actual damage to property, it is up to Rs. 6000.

Multiple choice

The purchased and issued amounts of material Y in the month of March 2008, are as follows ||| |---|---| |Mar 4-|Purchased 600 units @ Rs. 40 per unit| |Mar - 20|Purchased 900 units @ Rs. 45 per unit| |Mar - 25|Issued 800 units| Calculate the value of closing stock when FIFO method is used.

  1. Value of Closing Stock is Rs. 31,400

  2. Value of Closing Stock is Rs. 31,500

  3. Value of Closing Stock is Rs. 64,500

  4. Value of Closing Stock is Rs. 33,000
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

 It is Rs 31,500 - Mar 4 - Purchase 600 units @ Rs 40 per unit - 600 units X  Rs 40 =  Rs 24,000   Mar 20 - Purchase 900 units @ Rs 45 per unit - 900 units X Rs 45 = Rs 40,500   Mar 25 - Issue 800 units   As First In, First Out method is used , 600 units will be valued at Rs 40 per unit.                                                               200 units will be valued at Rs 45 per unit                                                                600 units X Rs 40 = Rs 24,000                                                                200 units X Rs 45 = Rs  9,000              Closing Stock  = Total Purchase Price - Total Issue Price                                = ( 24,000 + 40,500 ) - ( 24,000 + 9,000 )                                =  64,500 - 33,000 = Rs 31,500

Multiple choice

A stayed in the hotel of B for one week. He organized a party for his friends on 0.1.11.2014 the bill of which amounted to Rs. 40,000/-. He vacated his room on 05.11.2014 and settled all his bills except the bill of the party. B can sue A for the payment of Rs. 40,000/- within:

  1. 1 year from 01.11.2014

  2. 1 year from 05.11.2014

  3. 3 years from 01.11.2014

  4. 3 years from 05.11.2014
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Under the Limitation Act, the limitation period for a simple contract (like payment for hotel services) is 3 years from when the cause of action accrues. The cause of action arises when the debt becomes due, which is the date of the party (01.11.2014) when services were rendered, not the date of vacating the room. Therefore, the 3-year period runs from 01.11.2014.

Multiple choice

Mr. A sold his motorcycle to Mr. B at a price of Rs. 5,00,000. Mr. B made part payment on the delivery of the motorcycle and promised to pay the rest of the amount in a month's time from the date of delivery. One month has passed but Mr. A has not recieved the complete payment. Which of the following remedies can be suggested to Mr. A?

  1. Mr. A can exercise his right of lien.

  2. Mr. A may sue him for the price of the goods.

  3. Mr. A can exercise the right to resell the goods.

  4. Mr. A can exercise the right to stop the goods in transit.

  5. Mr. A can exercise the right to sue Mr. B for the damages.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

This right is available to unpaid seller against buyer. Therefore, Mr. A can sue Mr. B for the price of the motorcycle.

Multiple choice

Directions: Choose the correct option for the given question.Rs. Sundry Debtors 15,000 Bills Receivable (B/R) 12,500 Cash at Bank 17,500 Stock 15,000 Profit 20,000 Creditors 25,000 Bills Payable (B/P) 15,000 Sales 1,00,000 What is the Acid Test Ratio?

  1. 1·5 : 1

  2. 1·125 : 1

  3. 16 2/3%

  4. 50%
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Acid Test Ratio (Quick Ratio) = Quick Assets / Current Liabilities. Quick assets = Sundry Debtors + Bills Receivable + Cash at Bank = 15000 + 12500 + 17500 = Rs. 45000. Current liabilities = Creditors + Bills Payable = 25000 + 15000 = Rs. 40000. Ratio = 45000/40000 = 1.125:1. Stock is excluded as it's less liquid.

Multiple choice

Directions: Choose the correct option for the given question.

What is the renewal fees paid for a patent right?

  1. Capital expenditure

  2. Revenue expenditure

  3. Deferred revenue expenditure

  4. Development expenditure
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Renewal fees for patent rights are recurring expenses to maintain existing rights, not creating new assets or enhancing capacity. Revenue expenditure includes routine operating costs that benefit the current period only. Capital expenditure creates new assets, while development expenditure relates to research activities.

Multiple choice

Directions: Choose the correct option for the given question.

On 1.4.2007, a firm's capital was Rs. 2,00,000, assets Rs. 2,40,000 and liabilities Rs. 40,000. It sold goods costing Rs. 10,000 for Rs. 12,000. What will be the position of accounting equation after this transaction has been recorded in accounts ?(Assets = Capital + Liabilities)

  1. Rs. 2,42,000 = Rs. 2,02,000 + Rs. 40,000

  2. Rs. 2,52,000 = Rs. 2,12,000 + Rs. 40,000

  3. 2,30,000 = Rs. 2,00,000 + Rs. 30,000

  4. 2,22,000 = Rs. 1,82,000 + Rs. 40,000
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Initially: Assets = Capital + Liabilities (2,40,000 = 2,00,000 + 40,000). Selling goods costing 10,000 for 12,000 increases assets by 2,000 (net effect: inventory decreases by 10,000, cash increases by 12,000). Capital increases by profit of 2,000. New position: Assets 2,42,000 = Capital 2,02,000 + Liabilities 40,000.

Multiple choice

If the total asset amount of a firm is Rs. 2,50,000 and net worth is Rs. 1,80,000, calculate creditor amount.

  1. Rs. 60,000

  2. Rs. 70,000

  3. Rs. 50,000.

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

 As total assets are equal to capital plus creditors, we can deduct net worth or capital from total assets to calculate creditors.                       ||||| |---|---|---|---| |Creditors = Total Assets - Capital| | | | | 2,50,000 - 1,80,000 = 70,000| | | | | So, creditors are Rs. 70,000| | | | | | | | | Hence, creditors are Rs 70,000 . Net worth is capital.

Multiple choice

If the rent received is Rs. 4,500 and 2/5th of that is received in advance for the next year, how much rent would be shown in the balance sheet and on which side?

  1. Rs. 1,000 in liabilities side

  2. Rs. 1,800 in asset side

  3. Rs. 1,800 in liabilities side

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

 As mentioned earlier, it would be shown in the liabilities side as it is the income received in advance for the next year.  2/5 X 4,500 = 1,800.

Multiple choice

Which column is not provided in journal

  1. LF No

  2. Narration

  3. Value

  4. JF No
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The Journal Folio (JF) column is unique to the journal proper. Subsidiary books and the ledger use the Ledger Folio (LF) column to cross-reference entries, but the journal itself does not have an LF column - it has JF numbers instead.