Nature of Accounts and Rules of Debit and Credit Test 26

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Nature of Accounts and Rules of Debit and Credit Test 26

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Question 1
1 / -0

For real a/c debit means _____.

A
Addition

B
Reduction

C
Consumption

D
Exhaustion

Solution

Golden rule of accounting for real account is.

Debit what comes in i.e. addition
Credit what goes out i.e. reduction

For Eg : if goods worth Rs.500 purchased that will have addition in goods account.
Question 2
1 / -0

Journal is also called ______.

A
Subsidiary book

B
Daily event book

C
History sheet

D
Log book

Solution

Journal is called as subsidiary books because it does not give any summarized details about an account. Journal merely helps the posting of entries in to ledger.
Question 3
1 / -0

Rent account is a ___________.

A
personal account

B
real account

C
nominal account

D
none of the above

Solution

Accounts relating to income, revenue, gain, expenses and losses are termed as nominal accounts. These accounts are also known as fictitious accounts as they do not represent any tangible asset. A separate account is maintained for each head or expense or loss and gain or income. Rent account is a nominal account. Other examples of nominal accounts are wages account, commission account, interest received account. The rule for nominal accounts is: Debit all expenses and losses; Credit all incomes and gains.
Question 4
1 / -0

Stock valued at Rs. $$20,000$$ sold for cash at Rs. $$24,000$$ would cause ____________________.

A
decrease in current assets by Rs. $$20,000$$

B
Increase in owners equity and total assets by Rs. $$4,000$$

C
increase in debtors by Rs. $$24,000$$

D
none of these

Solution

Value of stock = Rs. 20,000; Sale price of stock = Rs. 24,000
therefore gain on sale of stock = Sale price of stock - Value of stock
gain on sale of stock = Rs. 24,000 - Rs. 20,000
gain on sale of stock = Rs. 4,000

Gain on sale of stock will result in increase in the net profit which ultimately increases owner's equity and total assets.

Question 5

1 / -0

ABC Ltd. acquired a new Machine for Rs. $$500,000$$ on $$1$$st April $$2012$$ 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. $$84,272$$

Rs. $$91,300$$

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

Amount vary by Rs. 1 due to rounding.

Question 6
1 / -0

Received Rs 1100 from M/s Manoj against the outstanding debt of Rs 1100 due from him. The nature of entry to record this transaction is _______.

A
Compound entry

B
Simple entry

C
Contra entry

D
Complex

Solution

There are only two accounts involved i.e. Manoj and Cash. Hence, a simple accounting entry will be passed in books of account.
Question 7
1 / -0

Which of these are the advantages of the subsidiary books?

A
Division of work

B
Specialization and efficiency

C
Saving of time

D
All the three

Solution

Subsidiary books are used when specific transactions are recorded in specific books at the first instance.
It includes purchase book, sales book, returns books etc. specifically to record these specific transaction. Hence it divides the work, facilitates specialization with effectiveness and also saves the time. All entries are recorded in chronological order in the respective books.
Question 8
1 / -0

Another term used for recording a business transaction is ___________.

A
Journalizing

B
Vouching

C
Ledger posting

D
Consolidation

Solution

Every business transaction must first be recorded in journal. Hence all original entries are found in journal itself which is a subsidiary books. Recording a transaction is also known as journalizing.
Question 9
1 / -0

Journalising process is in __________.

A
Analytical manner

B
Summarized manner

C
Chronological order

D
None of the above.

Solution

All business transaction must be recorded as soon it occur.
Hence, every entry will be passed in a chronological order in journal.
Question 10
1 / -0

Accounts recording transactions with a person or group of persons are known _____________.

A
Personal accounts

B
Real accounts

C
Nominal accounts

D
Impersonal accounts

Solution

There are mainly three types of accounts: Real, Personal and Nominal accounts. Personal accounts are classified into three subcategories: Artificial, Natural, and Representative. Personal accounts are related to individuals, firms, companies, etc.
A few examples of personal accounts include debtors, creditors, banks, outstanding/prepaid accounts, accounts of credit customers, accounts of goods suppliers, capital, drawings, etc.
The golden rule of personal accounts is :Debit the receiver; Credit the giver.

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Nature of Accounts and Rules of Debit and Credit Test 26

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Nature of Accounts and Rules of Debit and Credit Test 26

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SHARING IS CARING

Question 1

Addition

Reduction

Consumption

Exhaustion

Solution

Question 2

Subsidiary book

Daily event book

History sheet

Log book

Solution

Question 3

personal account

real account

nominal account

none of the above

Solution

Question 4

decrease in current assets by Rs. $$20,000$$

Increase in owners equity and total assets by Rs. $$4,000$$

increase in debtors by Rs. $$24,000$$

none of these

Solution

Question 5

Rs. $$93,636$$

Rs. $$89,100$$

Rs. $$84,272$$

Rs. $$91,300$$

Solution

Question 6

Compound entry

Simple entry

Contra entry

Complex

Solution

Question 7

Division of work

Specialization and efficiency

Saving of time

All the three

Solution

Question 8

Journalizing

Vouching

Ledger posting

Consolidation

Solution

Question 9

Analytical manner

Summarized manner

Chronological order

None of the above.

Solution

Question 10

Personal accounts

Real accounts

Nominal accounts

Impersonal accounts

Solution

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