Nature of Accounts and Rules of Debit and Credit Test 25

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Nature of Accounts and Rules of Debit and Credit Test 25

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Question 1
1 / -0

A cash disbursement may result in ___________.

A
Reduction in liability

B
Increase in other asset

C
Reduction in one asset and increase in other asset

D
All of the above

Solution

Cash disbursement, also called cash payments, in accounting refer to payments made by a company during a specific period, such as quarter or year. It includes payments made by cash , but also cash equivalents like cheque or electronic fund transfer.
Question 2
1 / -0

Accrued/prepaid/received in advance/outstanding a/c are known as __________.

A
Nominal a/c

B
Real a/c

C
Representative personal a/c

D
Tangible a/c

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 is termed as a natural persons' personal account. For e.g. Kamal's account, Mala's account. Both males and females are included in it.
2. Artificial or legal persons: An account recording financial transaction with an artificial person created by law or otherwise is termed as artificial persons' personal account. For e.g. Firms' account, limited companies' accounts.
3. Representative personal account: 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. For e.g. prepaid insurance, outstanding salaries.
Hence, accrued/prepaid/received in advance/outstanding accounts becomes representative personal account.
Question 3
1 / -0

When a debtor is realized which account is credited _________.

A
cash a/c

B
miscellaneous income a/c

C
debtor a/c

D
profit and loss a/c

Solution

Debtors are the customers that buy your products on credit. Debtor are presenting in the current asset section of the balance sheet. Hence, when debtor is realized debtor account is credited.
Question 4
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 5
1 / -0

Wages paid for installation of asset should be debited ___________ A/c.

A
Wages

B
Asset

C
Cash

D
Suspense

Solution

Any expenditure incurred on the carriage and installation of asset such as freight, transit expenses, installation expenses, wages etc, should be treated as capital expenditure and should be debited to the Asset A/c. This expenditure is non-recurring in nature and, thus, added to the value of the asset. Thus, it should be debited to the Asset A/c and not to the Wages A/c.
Question 6
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 7
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 8
1 / -0

Sub-division of journal is known as _______ book.

A
Subsidiary

B
Purchase return

C
Purchase

D
Journal proper

Solution

Subsidiary books are those books of original entry in which transactions of similar nature are recorded at one place and in chronological order. In a big concern, recording of all transactions in one journal and posting them into various ledger accounts will be very difficult and involves a lot of clerical work. This is avoided by sub-dividing the journal into various subsidiary journals or books. The subdivisions of journal into various subsidiary journals for recording transactions of similar nature are called as "Subsidiary Books". The different types of subsidiary books are:
1. Purchase Day Book
2. Sales Day Book
3. Purchases Returns Book
4. Sales Returns Book
5. Bills Receivable Book
6. Bills Payable Bok
7. Cash Book
8. Journal Proper
Question 9
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 10

1 / -0

ABC Ltd. acquired a new Machine for Rs. $$500,000$$ on $$1$$st April $$2013$$ 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. $$75,908$$

Rs. $$1,01,300$$

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

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Nature of Accounts and Rules of Debit and Credit Test 25

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Nature of Accounts and Rules of Debit and Credit Test 25

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Question 1

Reduction in liability

Increase in other asset

Reduction in one asset and increase in other asset

All of the above

Solution

Question 2

Nominal a/c

Real a/c

Representative personal a/c

Tangible a/c

Solution

Question 3

cash a/c

miscellaneous income a/c

debtor a/c

profit and loss a/c

Solution

Question 4

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 5

Wages

Asset

Cash

Suspense

Solution

Question 6

Increase in liability

Decrease in other asset

Reduction in one asset and increase in other asset

All of the above

Solution

Question 7

Cash in hand to decrease

External liability to decrease

Total liabilities to increase

Total assets remain unchanged

Solution

Question 8

Subsidiary

Purchase return

Purchase

Journal proper

Solution

Question 9

Real

Personal

Nominal

All of the above

Solution

Question 10

Rs. $$93,636$$

Rs. $$89,100$$

Rs. $$75,908$$

Rs. $$1,01,300$$

Solution

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