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Nature of Accounts and Rules of Debit and Credit Test 19

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Nature of Accounts and Rules of Debit and Credit Test 19
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  • Question 1
    1 / -0
    Another name of journal is _____________.
    Solution
    Journal is also known as Daybook as transactions are recorded in the journal on daily basis in chronological order.
    Journal is the book of Prime Entry or Books of original Entry.
  • Question 2
    1 / -0
    Bad debts written off is an example of ___________.
    Solution
    Bad debts are debtors who have not made payments to the company.
    Bad debts are expense so, there will be a decrease in capital and debtors is an asset which will be reduced.
    Therefore, Decrease in Asset & Owner's Liability.
  • Question 3
    1 / -0
    Goods purchased on credit is an example of ___________.
    Solution
    Goods purchased on credit will result in an increase in assets as goods are assets for the business when goods are purchased, goods will increase in the business whereas on the other hand Goods are bought on credit, therefore, there will be an increase in the creditors which will result in an increase in liability.
    Therefore, Goods purchased on credit is an example of Increase in assets and liabilities
  • Question 4
    1 / -0
    Goods purchased for cash is an example of __________.
    Solution
    Cash will be reduced and stock will be increased, so there will be no change in the assets or liabilities. Both Cash and Stock are assets of the business and one is increasing and the other is decreasing with the same amount. 
    Goods purchased for cash is an example of  No change in total assets and total liability.
  • Question 5
    1 / -0
    Goods returned to supplier is an example of __________.
    Solution
    The Journal entry for Goods returned to the supplier is
    Suppliers a/c     Dr.
         To Purchases return a/c
    (Being Goods returned to the supplier)
    Therefore,     Goods will reduce so, Decrease in Assets & creditors will decrease so, decrease in liabilities.
  • Question 6
    1 / -0
    Discount Received is an example of __________.
    Solution
    Discount received is an indirect income of the business. it is shown in the credit side of profit and loss account.
    When discount is received, debt amount is reduced and increase in income.
    Therefore, there will be decrease in Liability & Increase in Owner's Liability.
  • Question 7
    1 / -0
    Goods returned by a customer is an example of _____________________.
    Solution
    When Goods are returned by a customer then Goods will increase which are assets for the business on the other hand debtors will increase, debtors are also assets for the business. 
    so, there will be no change in the assets or liabilities. 
  • Question 8
    1 / -0
    Goods sold on credit is an example of __________.
    Solution
    When goods are sold on credit then  Goods (stock) will decrease which are assets for the business whereas debtors will increase, debtors are also assets for the business. So, there will be no change in the assets.
    Therefore, Goods sold on credit is an example of  No Change in Asset & Owner's Liability
  • Question 9
    1 / -0
    Depreciation written off is an example of ________.
    Solution
    Depreciation written off is an expense and the amount written off will be deducted from the asset and the same will be decreased from owners equity. It is an expense and hence will be debited to the profit and loss account which will eventually reduce owner's equity.
  • Question 10
    1 / -0
    Goods distributed as free samples is an example of _________.
    Solution
    Distribution of goods as free samples is an indirect expense of a business entity, therefore, it will reduce the capital of the business.
    The Journal Entry will be:-
    Free Samples a/c   Dr.
      To Purchases a/c
    So, there will be a decrease in owners equity and a decrease in stock.
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