Nature of Accounts and Rules of Debit and Credit Test 23

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Nature of Accounts and Rules of Debit and Credit Test 23

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Question 1
1 / -0

In which of the following order, data is entered into the Journal?

A
Alphabetical order

B
Numeric order

C
Bullets order

D
Chronological order

Solution

In journal, transactions are recorded in a chronological order.
Chronological order means date wise.
Journal is prime book of accounts. The Format of Journal have 5 columns namely, Date, particulars, LF, Debit Amount, credit Amount.
Question 2
1 / -0

The books to be compulsorily maintained by a company are ______________.

A
Cash book and ledger

B
Sales and purchase book

C
Journal

D
All of the above

Solution

All business transactions are recorded in the books of account depending on the nature of transaction. There are certain books which are compulsorily maintained by the business.

Below are the books which are mandatory to maintained to record all the transactions:

1) Cash Book- It records all the cash transactions.
2) Sales & Purchase book- It records all credit sales and credit purchases.
3) Journal- It records those transactions which are not recorded in specific books. Purchase of assets etc.
4) Ledger- All above set of entries are to be posted in ledger to find out the balance of each account.
Question 3
1 / -0

Which of the following transactions will result in decrease in assets and decrease in liabilities?

A
Payment of a promissory note with cash

B
Materials returned to supplier on account

C
Redemption of debentures

D
All of these

Solution

1) Payment of promissory not with cash- liability and cash (assets) decreases.
2) Material return to supplier- Creditors (liability) and goods (assets) decreases
3) Redemption of debenture-Debenture (liability) and cash(assets) decreases.
Question 4
1 / -0

The debit balance of a personal account shows the ______________.

A
Amount of credit sales

B
Cash in hand

C
Amount payable

D
Amount receivable

Solution

The debit balance of a personal account indicated debt owing by the person and credit balance indicates debts owing to the person concerned. For the business, the first one is account receivable or asset, while the second is accounts payable or liability. Every personal account showing debit balance (i.e. excess of debit side over credit side) will reveal the amount by which the debit side is more than the credit side. Debit balance is recoverable from the person whose account shows a debit balance. A debit balance to a personal account is an asset and therefore the more debit balance to a personal account is an asset and therefore the more debit balances to personal accounts, more the assets are in the form of outstanding recoverables. The debit balance of a personal account shows the amount receivable.
Question 5
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 6
1 / -0

Which of the following transactions results in increase in shareholders' equity and decrease in liabilities?

A
Issued shares for the purchase of land and building.

B
Issued shares for acquisition of another company.

C
Shares issued in payment of bills payable.

D
Issued bonus shares.

Solution

Following entry will be passed if the shares are issued in payment of bills payable:

Bills Payable A/c Dr.
To Share Capital A/c

In the above case, shareholders equity increases and liabilities will decreases.
Question 7
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 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

Which of the followings is not a book of original entry?

A
Cash book

B
Ledger

C
Sales journal

D
Bill receivable book

Solution

Books of original entry refers to the accounting journal in which business transactions are initially recorded. The information in these books is the summarized 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 book
(iv) Sales book
(v) Cash book
The general ledger is not considered a book of original entry, if it contains summarized entries posted to it from one of the underlying accounting journals. However, if transactions are recorded directly into the general ledger, it can be considered one of the books of original entry. Books of original entry are extremely useful for investigating individual accounting transactions, and are commonly accesses by auditors, who verify a selection of business transactions to ensure that they were recorded correctly.
Question 10
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.

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Nature of Accounts and Rules of Debit and Credit Test 23

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Nature of Accounts and Rules of Debit and Credit Test 23

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SHARING IS CARING

Question 1

Alphabetical order

Numeric order

Bullets order

Chronological order

Solution

Question 2

Cash book and ledger

Sales and purchase book

Journal

All of the above

Solution

Question 3

Payment of a promissory note with cash

Materials returned to supplier on account

Redemption of debentures

All of these

Solution

Question 4

Amount of credit sales

Cash in hand

Amount payable

Amount receivable

Solution

Question 5

Machinery account

Discount earned account

Purchase Return account

All of these

None of these

Solution

Question 6

Issued shares for the purchase of land and building.

Issued shares for acquisition of another company.

Shares issued in payment of bills payable.

Issued bonus shares.

Solution

Question 7

Real account

Personal account

Nominal account

None of these

Solution

Question 8

Personal Account

Nominal Account

Real Account

Deferred Expenditure Account

Solution

Question 9

Cash book

Ledger

Sales journal

Bill receivable book

Solution

Question 10

Ledger

Book of original entry

Relevant vouchers

None of the above

Solution

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