Recording of Transactions

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Recording of Transactions - I Test 43

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Weekly Quiz Competition

Question 1
1 / -0

Which of the following accounts is increased by debit entries?

A
Machinery account

B
Discount earned account

C
Purchase Return account

D
All of these

E
None of these

Solution

Business transactions are events that have a monetary impact on the financial statements of an organization. When accounting for these transactions, numbers are recorded in two accounts, where the debit column is on the left and the credit column is on the right. A debit is an accounting entry that either increases an asset or expense account, or decreases a liability or equity account. It is positioned to the left in an accounting entry. A credit is an accounting entry that either increases a liability or equity account, or decrease an asset or expense account, It is positioned to the right in an accounting entry. As two entries are made for each transaction, each account is split into two parts. Debits go on the left of each account, and credits go on the right. Machinery is an asset account and hence increased by debit entries.
Question 2
1 / -0

The transferring of debit and credit items from journal to the respective accounts in the ledger is called as ___________.

A
Ledger

B
Posting

C
Forward journal

D
None of the above

Solution

All the accounting transactions are first recorded in journal in chronological order. These journal entries are to be transferred to individual account opened in ledger.
The process of transferring the entries from journal to ledger is called posting.
Question 3
1 / -0

The rent paid to land lord is to be credited to ___________.

A
Land lord account

B
Rent account

C
Cash account

D
Tenant account

Solution

All expense and income accounts are classified as nominal account. Rule for nominal account describe that all expense and losses should be debited and all incomes and gains should be credited.

Payment of rent to landlord is an expense which need to be debited to rent account by crediting cash account.

Accounting entry will be as under:

Rent A/c Dr. (Nominal A/c- debit all the expense)
To Cash A/c (Real A/c- credit what goes out)
Question 4
1 / -0

The cash discount allowed to a debtor should be credited to __________.

A
Discount account

B
Customer account

C
Sales account

D
None of these

Solution

Cash discount is a discount which is allowed by the business to speed up the cash collection from customers. This is an expenses to the organization and to be recorded in profit & loss account.

Accounting entry will be as under:
Cash discount a/c Dr.
To Customer A/c
Question 5
1 / -0

Which of the following statements best explains the relationship between journal and ledger?

A
First recording in journal and then posting to ledger completes the double entry of the transaction.

B
The journal is the book of original entry whereas the ledger is the book of second entry.

C
The journal is the book for analytical record and ledger is the book for chronological record.

D
The process of recording in ledger is called journalizing, which follows the process of recording transactions in journal.

Solution

Journal and Ledger are the two pillars which create the base for preparing final accounts.
The journal is a book where all the transactions are recorded immediately when they take place which is then classified and transferred into concerned account known as Ledger. Journal is also known as book of primary entry, which records transactions in chronological order.
On the other hand, Ledger, or otherwise known as principal book implies a set of accounts in which similar transactions, relating to person, asset, revenue, liability or expense are tracked. The journal is a subsidiary day book, where ,monetary transactions are recorded for the first time, whenever they arise. Ledger is a principal book which comprises a set of accounts, where the transactions are transferred from the journal.
The difference between journal and ledger is that journal is known as the book of original entry, but ledger is a book of second entry.
Question 6
1 / -0

Debit - all expenses and losses
Credit - all gains and income is the rule for_______________.

A
Real account

B
Personal account

C
Nominal account

D
None of these

Solution

There are mainly three types of accounts: Real, Personal and Nominal accounts.

Accounts which are related to expense, losses, incomes or gains are called Nominal accounts. E.g. Purchase A/c, Salary A/c, Sales A/c, Commission Received A/c.

The golden rule for nominal accounts is:
Debit all expenses and losses;
Credit all incomes and gains.
Question 7
1 / -0

Sales made by Mahesh for cash should be debited to _____________.

A
Cash A/c

B
Mahesh A/c

C
Sales A/c

D
Sales return A/c

Solution

Sales (Goods) and Cash both account are classifies as real account. The rule for real account is "debit what comes in and credit what goes out'

Accounting entry for cash sales will be as under:
Cash A/c Dr, (debit what comes in)
To Sales (Goods) A/c (credit what goes out)
Question 8
1 / -0

While preparing the annual financial statements, the balance of rent account should be treated as the balance of a __________.

A
Personal Account

B
Nominal Account

C
Real Account

D
Deferred Expenditure Account
Solution
- Accounts recording transactions with a person or group of persons are known as personal accounts. These accounts are necessary, in particular, to record credit transactions. Personal accounts are of the following types:
- Natural persons: An account recording transactions with an individual is termed as a natural persons' personal account. For e.g., Kamal's account. Mala's Account, Sharma's Account.
- Artificial or legal persons: An account recording financial transactions with an artificial person created by law or otherwise is termed as artificial persons; personal accounts. For e.g. Firm's accounts, limited companies accounts. educational institutions accounts.
- Representative personal accounts: An account indirectly representing a person or persons is known as representative personal accounts. When accounts are of similar nature and their number is large, it is better to group them under one head and open a representative personal account.
Rent account falls under representative personal accounts, and hence the balance of rent is treated as the balance of personal account while preparing the annual financial statements.
Question 9
1 / -0

To determine the details of a specific transaction, one should refer to ____________.

A
Ledger

B
Book of original entry

C
Relevant vouchers

D
None of the above

Solution

Books of original entry refers to the accounting journals in which business transactions are initially recorded. The information in these books is then summarized and posted into a general ledger, from which financial statements are produced. Each accounting journal contains detailed records for the types of accounting transactions pertaining to a specific area. Examples of these accounting journals are:
(i) Cash journal
(ii) General journal
(iii) Purchase journal
()iv Sales journal
Books of original entry are extremely useful for investigating individual accounting transactions, and ate commonly accesses by auditors, who verify a selection of business transactions to ensure that they were recorded correctly.
Question 10
1 / -0

Sundry Income Account is _______.

A
Real

B
Personal

C
Nominal

D
All of the above

Solution

Sundry income includes all those miscellaneous income that is generated by business and cannot be categorized under a particular head therefore written in sundry income group which is nominal in nature and from ledger it is posted to profit and loss account in the final accounts.
Nominal accounts in accounting are the temporary accounts, such as the income statement accounts. In other words, nominal accounts are the accounts that report revenues, expenses, gains and losses.
Sundry income account represents the income of a business and hence, it is classified as a nominal account.

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Recording of Transactions - I Test 43

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Recording of Transactions - I Test 43

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SHARING IS CARING

Question 1

Machinery account

Discount earned account

Purchase Return account

All of these

None of these

Solution

Question 2

Ledger

Posting

Forward journal

None of the above

Solution

Question 3

Land lord account

Rent account

Cash account

Tenant account

Solution

Question 4

Discount account

Customer account

Sales account

None of these

Solution

Question 5

First recording in journal and then posting to ledger completes the double entry of the transaction.

The journal is the book of original entry whereas the ledger is the book of second entry.

The journal is the book for analytical record and ledger is the book for chronological record.

The process of recording in ledger is called journalizing, which follows the process of recording transactions in journal.

Solution

Question 6

Real account

Personal account

Nominal account

None of these

Solution

Question 7

Cash A/c

Mahesh A/c

Sales A/c

Sales return A/c

Solution

Question 8

Personal Account

Nominal Account

Real Account

Deferred Expenditure Account

Solution

Question 9

Ledger

Book of original entry

Relevant vouchers

None of the above

Solution

Question 10

Real

Personal

Nominal

All of the above

Solution

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