Ledger Test 14

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Ledger Test 14

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Question 1
1 / -0

A cash purchase of goods for proprietor's personal use should be credited to __________________.

A
Purchases Account

B
Sales Account

C
Drawings Account

D
Cash Account

Solution

A cash purchase of goods for proprietor's personal use should be credited to Cash Account.
The entry will be
Drawings a/c Dr.
To Cash a/c
Question 2
1 / -0

Credit creation power of the commercial banks gets limited by which of the following?

A
Banking habits of the people

B
Cash Reserve Ratio

C
Credit policy of the central bank

D
All of the above
Question 3
1 / -0

At the end of the accounting year all the nominal accounts of the ledger book are _________________.

A
Balanced but not transferred to profit and loss account

B
Not balanced and also the balance is not transferred to the profit and loss account

C
Balanced and the balance is transferred to the balance sheet

D
Not balanced and their balance is transferred to the profit and loss account

Solution

Nominal Accounts are not balanced as they are transfer to profit and loss account
Question 4
1 / -0

Payment to creditors is a manifestation of cash held for __________________.

A
Transactionary Motive

B
Precautionary Motive

C
Speculative Motive

D
All of the above

Solution

Creditors are the suppliers who providing goods or services to the organization. On a day to day basis, payments need to be done to the customers for smooth operations. Creditors are classifies as current liabilities.

Cash is hold in the business for various motives.
Transactionary motive is one of them. It is the amount held by the business for day to day transactions such as payment of routine expenses or payment of creditors.
Question 5
1 / -0

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

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

B
The journal is the book of original entry, where as 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 the journal is called journalising, the process of recording in the ledger is called posting

Solution

Book of original entry refers to journal where all the business transactions are recorded first in chronological order whereas ledger is a book which records all journal entries in individual ledger account.
Question 6
1 / -0

Ledger is an account book in which ______________.

A
only real accounts are opened

B
only real and personal accounts are opened

C
all the real, personal and nominal accounts are opened

D
None of the above

Solution

Business transactions are first entered in Journal or Special Purpose Subsidiary Books. The next step is to transfer the entries to respective accounts in ledger. In other word, all entries recorded in journal or special purpose subsidiary books are classified and in order to ascertain the position of a particular account, all transactions relating to that particular account are collected at one place in the ledger. In short, a ledger is a book which contains all accounts of the business enterprise whether Real, Personal or Nominal. Ledger is called the "Principal Book'. It is also called the book of final entry because the transactions which are first entered in journal or subsidiary books are finally incorporated in the ledger.
Question 7
1 / -0

Left hand side of an account is ________.

A
Debit side

B
Credit side

C
Income side

D
Expenses side

Solution

Debt and credit are two important terms used in Book-keeping and Accountancy. These two terms form the very basis of recording transactions in the books of accounts.
Left hand side of the account is called debit side. Hence, to debit an account means to record the transaction on the left hand side of the account. It is abbreviated as 'Dr.' The word 'debit' is originated from the Latin word 'Debitum' and it means what is due.
Whenever an asset increases, or equity or a liability decreases, a debit entry will be made in the appropriate account. Whenever an asset decreases, or equity or a liability increases, a credit entry will be made in the appropriate account. the difference between the two sides of an account can be calculated. This difference is called the balance of an account.
Question 8
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 9
1 / -0

A credit sale of goods to Shivendra should be debited to ______ account.

A
Sales

B
Goods

C
Shivendra's

D
Purchase

Solution

Goods sold to Shivendra on credit will affect two account i.e. goods account and Shivendra's account. Rule of personal account defines that "debit the receiver" hence Shivendra account will be debited.
Question 10
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.

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Ledger Test 14

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Ledger Test 14

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Question 1

Purchases Account

Sales Account

Drawings Account

Cash Account

Solution

Question 2

Banking habits of the people

Cash Reserve Ratio

Credit policy of the central bank

All of the above

Question 3

Balanced but not transferred to profit and loss account

Not balanced and also the balance is not transferred to the profit and loss account

Balanced and the balance is transferred to the balance sheet

Not balanced and their balance is transferred to the profit and loss account

Solution

Question 4

Transactionary Motive

Precautionary Motive

Speculative Motive

All of the above

Solution

Question 5

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

The journal is the book of original entry, where as 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 the journal is called journalising, the process of recording in the ledger is called posting

Solution

Question 6

only real accounts are opened

only real and personal accounts are opened

all the real, personal and nominal accounts are opened

None of the above

Solution

Question 7

Debit side

Credit side

Income side

Expenses side

Solution

Question 8

Ledger

Posting

Forward journal

None of the above

Solution

Question 9

Sales

Goods

Shivendra's

Purchase

Solution

Question 10

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

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