Nature of Accounts and Rules of Debit and Credit Test 14

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Nature of Accounts and Rules of Debit and Credit Test 14

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Weekly Quiz Competition

Question 1
1 / -0

Goodwill account is a ___________.

A
Nominal Account

B
Real account

C
Personal account

D
None of the above

Solution

It is an intangible real account. These accounts represent assets which cannot be seen, touched or felt but they can be measured in terms of money.

Question 2

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 3
1 / -0

The basic rule of book-keeping "Debit the receiver and credit the giver" is applicable to ______________.

A
Personal account

B
Real account

C
Nominal account

D
None of these

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:

1. Natural persons: An account recording transactions with an individual human being is termed as a natural persons' personal account.

2. Artificial or legal persons: An account recording financial transactions with an artificial person created by law or otherwise is termed as an artificial persons' personal account, e.g. Firms' accounts, limited companies' accounts.

3. Representative personal account: An account indirectly representing a person or persons is known as representative personal account. 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. e.g. prepaid insurance, outstanding salaries, etc.

The rule for personal accounts is: Debit the receiver; Credit the giver.
Question 4
1 / -0

Credit word has been derived from the Latin word 'credere' which means _________.

A
'to owe'

B
'to give'

C
'to trust or entrust'

D
'to take'

Solution

The term credit has its roots set in the latin word 'creditum' which means "that which is entrusted or loaned" which also came from 'credere' which means "to trust or entrust".
Question 5
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.

Question 6

1 / -0

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

List I	List II
(Transactions)	(To be recorded)
A. Cash purchase of goods	1. Cash book - Dr. side
B. Cash sales of equipments	2. Cash book - Cr. side
C. Credit sale of goods	3. Journal Proper
D. Credit sale of old furniture	4. Sales book

$$A = 1, B = 2, C = 3, D = 4$$

$$A = 2, B = 1, C = 4, D = 3$$

$$A = 2, B = 1, C = 3, D = 4$$

$$A = 4, B = 3, C = 2, D = 1$$

Question 7
1 / -0

Debit word has been derived from Latin word 'debere' which means _______________.

A
'to owe'

B
'to give'

C
'to take'

D
'to believe'

Solution

'Debit' is a formal bookkeeping and accounting term that comes from the Latin word "debere", which means "to owe".
In bookkeeping, a debit is an entry on the left side of a double-entry bookkeeping system that represents the addition of an asset or expense or the reduction to a liability or revenue.
Question 8
1 / -0

The documents on the basis of which transactions are recorded in the account books are known as ____________.

A
Source documents

B
Ledger accounts

C
Legal documents

D
Subsidiary books

Solution

All business transactions are evidenced by an appropriate document such as invoice, memo, bill, receipt, cheque etc. Such document which provides complete information of the financial transactions to be recorded are known as source documents.
Question 9
1 / -0

Investment in business by owner results in _______________.

A
increase in equity

B
decrease in liabilities

C
increase in income

D
decrease in assets

Solution

Any contribution made by the owner in the business is recorded as capital and to be shown as liability in the books of account of the business.
Owners equity is defined as capital plus reserves & surpluses.
If further capital is introduced , this will increase the owners equity.

Accounting entry will be as under:

Cash/Bank A/c Dr.
To Capital A/c
Question 10
1 / -0

A motor car which was purchased for 20,000 had its book value 12,000. It was sold for 25,000.
The capital profits will be ___________.

A
5,000

B
8,000

C
13,000

D
25,000

Solution

Capital profit is a capital gain which is arise from the sale of capital asset such as stock, bond,real estate etc.

When the asset is sold at a price which exceeds the purchase price the profit is capital profit.

Capital Profits = Sales value - Purchase price
= Rs 25000 - Rs 20000
= Rs 5000

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Nature of Accounts and Rules of Debit and Credit Test 14

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Nature of Accounts and Rules of Debit and Credit Test 14

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Question 1

Nominal Account

Real account

Personal account

None of the above

Solution

Question 2

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

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

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

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

Solution

Question 3

Personal account

Real account

Nominal account

None of these

Solution

Question 4

'to owe'

'to give'

'to trust or entrust'

'to take'

Solution

Question 5

Installation Expenses Account

Cash Account

Machinery Account

Profit and Loss Account

Solution

Question 6

$$A = 1, B = 2, C = 3, D = 4$$

$$A = 2, B = 1, C = 4, D = 3$$

$$A = 2, B = 1, C = 3, D = 4$$

$$A = 4, B = 3, C = 2, D = 1$$

Question 7

'to owe'

'to give'

'to take'

'to believe'

Solution

Question 8

Source documents

Ledger accounts

Legal documents

Subsidiary books

Solution

Question 9

increase in equity

decrease in liabilities

increase in income

decrease in assets

Solution

Question 10

5,000

8,000

13,000

25,000

Solution

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