Recording of Transactions

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Recording of Transactions - I Test 26

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Weekly Quiz Competition

Question 1
1 / -0

Which of the following accounting equation is correct?

A
Capital + Liabilities = Assets

B
Capital = Assets + Liabilities

C
Capital - Liabilities = Assets

D
Capital + Assets = Liabilities

Solution

Accounting Equation means , every transaction will have two affects. For every debit there will be a credit and vice versa.
This can be further narrated as:

Owners Equity+ Liabilities= Total Assets
Capital+Reserves & Surplus+Long term Liabilities+ Short term Liabilities
= Fixed Assets+ Current Assets.

Simply,
Capital+Liabilities=Assets
Question 2
1 / -0

Nominal accounts are related to ___________.

A
Expenses, losses and incomes

B
Debtors and creditors

C
Assets and liabilities

D
Contingent liabilities

Solution

Accounts relating to income, revenue, gain, expenses and losses are termed as nominal accounts.
These accounts are also known as fictitious assets as they do not represent any tangible asset.
A separate account is maintained for each head or expense or loss and income or gain. Wages account, Rent account, Commission account, Interest received accounts are some examples of nominal account.
The rule for nominal accounts is: Debit all expenses and losses; Credit all incomes and gains.
Question 3
1 / -0

Which of the following accounts will not show a Debit balance?

A
Sales Account

B
Machinery Account

C
Salary Account

D
Purchase Account

Solution

The account Sales is credited because a corporation's sales of products will cause its stockholders equity to increase. A sole proprietorship's sales will cause the owners equity to increase.The Sales account is used in order to keep a tally of the sales made during an accounting year.
However, when the accounting year is completed, the credit balance will be moved via closing entries to the corporation's retained earnings account or in case of a sole proprietorship, to the owner's capital account.
Question 4
1 / -0

Cash purchases ________________.

A
Increase Assets

B
Result in no change in the total assets

C
Decrease Assets

D
Increase Liability

E
decrease liability

Solution

When there is cash purchase then
the stock is an asset, it will increase,
whereas cash is also an asset and it will decrease therefore, there will be no change in assets with Cash Purchases transaction.
Question 5
1 / -0

If the total of debit side of an account exceeds the total of its credit side, it indicates ______________.

A
Debit balance

B
Credit balance

C
Either (a) or (b)

D
Neither (a) nor (b)

Solution

A ledger account can have both debit or a credit balance which is determined by which side of the account is greater than the other. While preparing an account if the debit side is greater than the credit side, the difference is called "Debit Balance".

Question 6

1 / -0

Match List I with List II and select the correct answer using the codes given below the lists:

List I	List II
(Types of accounts)	(Principles)
A. Real Accounts	1. Debit the receiver Credit the giver
B. Nominal Accounts	2. Debit what comes in Credit what goes out
C. Personal Accounts	3. Debit all expenses and losses Credit all gains and incomes

$$A = 3, B = 2, C = 1$$

$$A = 1, B = 3, C = 2$$

$$A = 2, B = 3, C = 1$$

$$A = 1, B = 2, C = 3$$

Solution

Golden Rules of Accounting :-

Personal Account - Debit the Receiver & Credit the Giver.
Real Account - Debit what Comes In & Credit what Goes out.
Nominal Account - Debit all Expenses and Losses & Credit all Income and Gains.

Question 7
1 / -0

Suppose P start a business with $$Rs. 50,000$$ cash and then buys furniture from F.F. Co. on credit for $$Rs. 2,000$$. Now, the accounting equation
$$Assets = Capital + Liabilities$$ will be __________________.

A
$$52,000 = 50,000 + 2,000$$

B
$$50,000 = 50,000 + 0$$

C
$$50,000 = 48,000 + 2,000$$

D
$$48,000 = 50,000 - 2,000$$

Solution

Here, Total Assets = (Cash)50,000 + 2000 (Furniture) and Liabilities (creditor) = 2000
Therefore, accounting equation is
Assets=Capital+Liabilities
52,000 = 50,000 + 2,000
Question 8
1 / -0

If the goods purchases are in transit, then the journal entry to record will be _______________.

A
Purchase A/c Dr.

To Supplier's A/c

B
Goods-in-transit A/c Dr.

To Purchase A/c

C
Goods-in-transit A/c Dr.

To Supplier's A/c

D
Supplier's A'c Dr.

To Goods-in-transit

Solution

The effect of this transaction will be there will be an increase in goods, therefore, it will be debited and there is an increase in creditors, therefore, it will be credited.
Therefore, If the goods purchases are in transit, then the journal entry to record will be
Goods-in-transit A/c Dr.
To Supplier's A/c
(Being Goods purchased are in transit.)
Question 9
1 / -0

Owner's equity (Capital) stands for ______________.

A
Total Assets - Total Liabilities

B
Fixed Assets - Fixed Liabilities

C
Current Assets - Fixed Liabilities

D
Fixed Assets - Current Liabilities

Solution

Accounting Equation is defined as:

Owners Equity + Liabilities = Total Assets
Owners Equity= Capital+Reserves & Surpluses

Therefore Owners Equity = Total Assets - Total external liabilities
Question 10
1 / -0

The installation expenses for a new machinery will be debited to __________________.

A
Installation Expenses Account

B
Cash Account

C
Machinery Account

D
Profit and Loss Account

Solution

The installation expenses for a new machinery will be debited to machinery account.
All the incidental expenses incurred in reference to an asset till the asset is ready for put to use are treated part of the asset cost and to be debited to the respective asset account.

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Recording of Transactions - I Test 26

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Recording of Transactions - I Test 26

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Question 1

Capital + Liabilities = Assets

Capital = Assets + Liabilities

Capital - Liabilities = Assets

Capital + Assets = Liabilities

Solution

Question 2

Expenses, losses and incomes

Debtors and creditors

Assets and liabilities

Contingent liabilities

Solution

Question 3

Sales Account

Machinery Account

Salary Account

Purchase Account

Solution

Question 4

Increase Assets

Result in no change in the total assets

Decrease Assets

Increase Liability

decrease liability

Solution

Question 5

Debit balance

Credit balance

Either (a) or (b)

Neither (a) nor (b)

Solution

Question 6

$$A = 3, B = 2, C = 1$$

$$A = 1, B = 3, C = 2$$

$$A = 2, B = 3, C = 1$$

$$A = 1, B = 2, C = 3$$

Solution

Question 7

$$52,000 = 50,000 + 2,000$$

$$50,000 = 50,000 + 0$$

$$50,000 = 48,000 + 2,000$$

$$48,000 = 50,000 - 2,000$$

Solution

Question 8

Purchase A/c Dr.To Supplier's A/c

Goods-in-transit A/c Dr.To Purchase A/c

Goods-in-transit A/c Dr.To Supplier's A/c

Supplier's A'c Dr.To Goods-in-transit

Solution

Question 9

Total Assets - Total Liabilities

Fixed Assets - Fixed Liabilities

Current Assets - Fixed Liabilities

Fixed Assets - Current Liabilities

Solution

Question 10

Installation Expenses Account

Cash Account

Machinery Account

Profit and Loss Account

Solution

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Purchase A/c Dr.

To Supplier's A/c

Goods-in-transit A/c Dr.

To Purchase A/c

Goods-in-transit A/c Dr.

To Supplier's A/c

Supplier's A'c Dr.

To Goods-in-transit