Recording of Transactions

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Recording of Transactions - I Test 46

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Weekly Quiz Competition

Question 1
1 / -0

Increase in owner's equity can be caused by ____________________.

A
profit from a successful business operation

B
fresh investment made by the owner

C
bringing in new asset in the business

D
all of the above

Solution

When an increase occurs in a company's earnings or capital, the overall result is an increase to the company's owner's equity balance. Owner's equity may increase from selling shares of stock, raising the company's revenues and decreasing its operating expenses.
Question 2
1 / -0

Cash withdrawal by the proprietor would cause _______.

A
Cash in hand to decrease

B
External liability to decrease

C
Total liabilities to increase

D
Total assets remain unchanged

Solution

The owner's capital is the part of the accounting equation that represents the liquid cash that the company has earned, which it has on hand for daily operations as well as capital investments. When a business owner withdraws cash for personal use, these funds come out this capital account. Proprietor withdrawal cash or other asset from business recorded as credit to cash and a debit to the proprietor draws account i.e. cash in hand to decrease.
Question 3
1 / -0

________ represents the residual interest in the organisation's assets after deducting liabilities.

A
Cash profit

B
Liabilities

C
Net worth

D
Owner's equity

Solution

Owner's equity represents residual interest in the assets of an entity that remains after deducting its liabilities. In a business enterprise this is the ownership interest. Owner's equity can be calculated using following formula: Owner's equity = Assets - liabilities.
Question 4
1 / -0

A cash receipt may cause ___________.

A
Increase in liability

B
Decrease in other asset

C
Reduction in one asset and increase in other asset

D
All of the above

Solution

An amount of money received by a company for goods or services, is called as cash receipts.
Following are the results of cash receipts:-
Increase in liability, reduction in one asset and increase in other asset, decrease in other asset etc.
Question 5
1 / -0

Accounts are broadly classified into ______.

A
Real

B
Personal

C
Nominal

D
All of the above

Solution

Accounts are classified in personal, real and nominal account depending upon the nature of account. All these three account have their own rule for recording the transaction. Ram's account is a personal account, Goods account is a real account and any expenses account is a nominal account.
Question 6
1 / -0

Stock valued at Rs. $20,000$ sold for cash at Rs. $24,000$ would cause ____________________.

A
decrease in current assets by Rs. $20,000$

B
Increase in owners equity and total assets by Rs. $4,000$

C
increase in debtors by Rs. $24,000$

D
none of these

Solution

Value of stock = Rs. 20,000; Sale price of stock = Rs. 24,000
therefore gain on sale of stock = Sale price of stock - Value of stock
gain on sale of stock = Rs. 24,000 - Rs. 20,000
gain on sale of stock = Rs. 4,000

Gain on sale of stock will result in increase in the net profit which ultimately increases owner's equity and total assets.

Question 7

1 / -0

ABC Ltd. acquired a new Machine for Rs.

500,000

1

st April

2012

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 year

2013-14

Rs. $93,636$

Rs. $89,100$

Rs. $84,272$

Rs. $91,300$

Solution

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. 5,00,000 + Rs. 10,000 + Rs. 5,000 = Rs. 5,15,000

Year	Deprecation base (a)	Remaining life (b)	Depreciation fraction (b/sum)	Depreciation expense	Book value
1	5,15,000	10	10/55	93,636	4,21,364
2	5,15,000	9	9/55	84,273*	4,30,727
3	5,15,000	8	8/55	74,909	4,40,091
4	5,15,000	7	7/55	65,545	4,49,455
5	5,15,000	6	6/55	56,182	4,58,818
6	5,15,000	5	5/55	46,818	4,68,182
7	5,15,000	4	4/55	37,455	4,77,545
8	5,15,000	3	3/55	28,091	4,86,909
9	5,15,000	2	2/55	18,727	4,96,273
10	5,15,000	1	1/55	9,364	5,05,636
	Total	55

Amount vary by Rs. 1 due to rounding.

Question 8
1 / -0

Received Rs 1100 from M/s Manoj against the outstanding debt of Rs 1100 due from him. The nature of entry to record this transaction is _______.

A
Compound entry

B
Simple entry

C
Contra entry

D
Complex

Solution

There are only two accounts involved i.e. Manoj and Cash. Hence, a simple accounting entry will be passed in books of account.
Question 9
1 / -0

Which of these are the advantages of the subsidiary books?

A
Division of work

B
Specialization and efficiency

C
Saving of time

D
All the three

Solution

Subsidiary books are used when specific transactions are recorded in specific books at the first instance.
It includes purchase book, sales book, returns books etc. specifically to record these specific transaction. Hence it divides the work, facilitates specialization with effectiveness and also saves the time. All entries are recorded in chronological order in the respective books.
Question 10
1 / -0

Another term used for recording a business transaction is ___________.

A
Journalizing

B
Vouching

C
Ledger posting

D
Consolidation

Solution

Every business transaction must first be recorded in journal. Hence all original entries are found in journal itself which is a subsidiary books. Recording a transaction is also known as journalizing.

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Recording of Transactions - I Test 46

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Recording of Transactions - I Test 46

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SHARING IS CARING

Question 1

profit from a successful business operation

fresh investment made by the owner

bringing in new asset in the business

all of the above

Solution

Question 2

Cash in hand to decrease

External liability to decrease

Total liabilities to increase

Total assets remain unchanged

Solution

Question 3

Cash profit

Liabilities

Net worth

Owner's equity

Solution

Question 4

Increase in liability

Decrease in other asset

Reduction in one asset and increase in other asset

All of the above

Solution

Question 5

Real

Personal

Nominal

All of the above

Solution

Question 6

decrease in current assets by Rs. 20,00020,00020,000

Increase in owners equity and total assets by Rs. 4,0004,0004,000

increase in debtors by Rs. 24,00024,00024,000

none of these

Solution

Question 7

Rs. 93,63693,63693,636

Rs. 89,10089,10089,100

Rs. 84,27284,27284,272

Rs. 91,30091,30091,300

Solution

Question 8

Compound entry

Simple entry

Contra entry

Complex

Solution

Question 9

Division of work

Specialization and efficiency

Saving of time

All the three

Solution

Question 10

Journalizing

Vouching

Ledger posting

Consolidation

Solution

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decrease in current assets by Rs. $20,000$

Increase in owners equity and total assets by Rs. $4,000$

increase in debtors by Rs. $24,000$

Rs. $93,636$

Rs. $89,100$

Rs. $84,272$

Rs. $91,300$