Nature of Accounts and Rules of Debit and Credit Test 27

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Nature of Accounts and Rules of Debit and Credit Test 27

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Question 1
1 / -0

A voucher refers to a/an __________.

A
invoice received from suppliers

B
document in support of an entry made in the books of account

C
receipt issued to a customer for cash received

D
all the above
Solution
For each of the business transaction, a physical documents need to be attached with the books of account as proof of evidence of the transaction. Such document is called as voucher.
There are various kinds of vouchers for each of the business transaction:
Invoice received from suppliers against the purchase of goods.
Cash receipts issued to customer against cash received
Expenses voucher to support the expense amount.
Question 2
1 / -0

Which of the following would prevent double payment of the same voucher?

A
The person signing the cheque should cancel the supporting documents.

B
Cheques should be signed by at best two persons.

C
The data of payment of vouchers of similar nature should be the same of close to each other.

D
All of the above.

Solution

To prevent the double payment of a voucher, a process of affixing a stamp "PAID" has to be followed or voucher need to be cancelled/crossed to notify that the payment against this voucher is already done.
Question 3
1 / -0

If the premium is paid on the life policy of the proprietor of the business, it is _____________.

A
treated as the drawings and is shown by way of deduction from the capital account

B
taken to the Trading Account

C
taken to the Profit and Loss Account and is shown as an expense

D
taken to the Balance Sheet and is shown as an asset

Solution

Separate entity concept of accounting defines that owner and business are considered two separate legal entity in the eye of law.
If any amount is contributed by by the owner in the business is treated as capital and to be shown as liability.
If any amount is withdrawn by the proprietor for personal use, this will be treated as drawings and to be deducted from the capital. Life Insurance premium is a personal expense and to be recorded as drawings.
Question 4
1 / -0

Goods withdrawn by owner for personal use is an example of __________.

A
No change in Owner's Equity

B
Increase in Asset & Owner's Equity

C
Decrease in Liability & Owner's Equity

D
None of these

Solution

The effect of Goods withdrawn by owner for personal use
Goods will be reduced which implies decrease in Assets
as it is withdrawn for personal use by owner which will result in decrease in capital.
Therefore, there is decrease in asset and capital.
Question 5
1 / -0

The rule for nominal accounts is ____________.

A
debit the receiver, credit the giver

B
debit what comes in, credit what goes out

C
debit all expenses and losses, credit all incomes and gains

D
all 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. Wages account, Rent account, Commission account are some examples of nominal accounts.
The rule for nominal accounts is: Debit all expenses and losses; Credit all incomes and gains.
Question 6
1 / -0

A second-hand car is purchased for Rs. 80,000, the amount of Rs. 1,000 is spent on its repairs, Rs. 500 is incurred to get the car registered in owners name and Rs. 1,500 is paid as dealers commission. The amount debited to car account will be __________.

A
Rs. 81,000

B
Rs. 81,500

C
Rs. 80,000

D
Rs. 83,000

Solution

second hand car Rs.80000
add : repairs charges Rs.1000
add : registration charges Rs. 500
add : dealers charges Rs. 1500
so, the amount debited to car account will be Rs.83000
Question 7
1 / -0

Income earned which is yet to be received results in _________________.

A
Increases in capital and increase in liability

B
Decrease in liability and increase in capital

C
Increase in asset and increase in liability

D
Increase in capital and increase in asset.

Solution

Accrued Income is income that is earned but not received in cash by the organisation. Accrued Income is an asset.
Here, accrued income will be increase which is an asset and income will be added to the capital account. Therefore, there will be an increase in capital and an increase in the asset.
Question 8
1 / -0

Cash withdrawn by owner personal for use is an example of _________.

A
Increase in Asset & Owner's liability

B
Decrease in Asset & Owner's liability

C
Increase in Liability & Owner's liability

D
Decrease in Liability & Increase in Owner's liability

E
Increase in Liability & Decrease in Owner's liability

Solution

Here, Cash is an Asset and it is being withdrawn which will result in a decrease in capital and assets.
Therefore, Cash withdrawn by the owner personal for use is an example of a Decrease in Asset & Owner's liability.
Question 9
1 / -0

Bank account is a ________.

A
Real account

B
Personal account

C
Nominal account

D
Valuation 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:
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 transactions with an artificial person created by law or otherwise is termed as an artificial persons' personal account. For e.g. Firms' accounts, limited companies' account.
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. For e.g. prepaid insurance, outstanding wages,etc.
Bank account is a personal account as it is related to a banking firm which is an artificial person. All those accounts which are related to a person, whether artificial or natural, are termed as personal accounts.
Question 10
1 / -0

Discount allowed is an example of ________.

A
Increase in Asset & Owner's Liability

B
Decrease in Asset & Owner's Liability

C
Increase in Liability & Owner's Liability

D
Decrease in Liability & Increase in Owner's Liability

E
Increase in Liability & Decrease in Owner's Liability

Solution

Discount allowed is an expense. It is allowed when the debtor makes payment.
The journal Entry for Discount allowed is
Discount allowed a/c Dr.
To Debtors a/c

Therefore, there is a Decrease in Asset & Owner's Liability in this case.

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Nature of Accounts and Rules of Debit and Credit Test 27

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Nature of Accounts and Rules of Debit and Credit Test 27

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Question 1

invoice received from suppliers

document in support of an entry made in the books of account

receipt issued to a customer for cash received

all the above

Solution

Question 2

The person signing the cheque should cancel the supporting documents.

Cheques should be signed by at best two persons.

The data of payment of vouchers of similar nature should be the same of close to each other.

All of the above.

Solution

Question 3

treated as the drawings and is shown by way of deduction from the capital account

taken to the Trading Account

taken to the Profit and Loss Account and is shown as an expense

taken to the Balance Sheet and is shown as an asset

Solution

Question 4

No change in Owner's Equity

Increase in Asset & Owner's Equity

Decrease in Liability & Owner's Equity

None of these

Solution

Question 5

debit the receiver, credit the giver

debit what comes in, credit what goes out

debit all expenses and losses, credit all incomes and gains

all of the above

Solution

Question 6

Rs. 81,000

Rs. 81,500

Rs. 80,000

Rs. 83,000

Solution

Question 7

Increases in capital and increase in liability

Decrease in liability and increase in capital

Increase in asset and increase in liability

Increase in capital and increase in asset.

Solution

Question 8

Increase in Asset & Owner's liability

Decrease in Asset & Owner's liability

Increase in Liability & Owner's liability

Decrease in Liability & Increase in Owner's liability

Increase in Liability & Decrease in Owner's liability

Solution

Question 9

Real account

Personal account

Nominal account

Valuation account

Solution

Question 10

Increase in Asset & Owner's Liability

Decrease in Asset & Owner's Liability

Increase in Liability & Owner's Liability

Decrease in Liability & Increase in Owner's Liability

Increase in Liability & Decrease in Owner's Liability

Solution

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