Nature of Accounts and Rules of Debit and Credit Test 4

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Nature of Accounts and Rules of Debit and Credit Test 4

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Question 1
1 / -0

Investment by owner results in ___________________.

A
Increase in capital and decrease in libility

B
Increase in capital and increase in liability

C
Increase in capital and decrease in asset

D
Increase in capital and increase in asset

Solution

Owner investment, also called owner's investment or contributed capital, is the amount of assets that the owner puts into the company.

In other words, this is the amount of money or other assets that the owner contributes to the business either to start it or to keep it running.
Question 2
1 / -0

Which of the following accounts is increased by credit entries?

A
Sales return account

B
Bank overdraft account

C
Goodwill account

D
Purchase account

Solution

If the company has no other offsetting balances at the bank, and it truly is an overdrawn situation, then it is shown as a current liability, labeled “Bank overdraft.”
Hence, Credit entry will increase overdraft balance.
Question 3
1 / -0

Voucher relates to ___________

A
Cash receipt and payments, credit transactions

B
Cash payment only

C
Credit transactions only

D
Cash receipt only

Solution

Vouchers refer to those documents evidencing business transactions.
On the basis of source documents, a voucher detailing the accounts that are debited and credited is prepared.
There are two types of Accounting Vouchers
1. Cash Vouchers
2. Non-Cash Vouchers.
Therefore, Voucher relates to Cash receipt and payments, credit transactions
Question 4
1 / -0

Which of the followings shows the chronological record of transactions ?

A
Journal

B
Ledger

C
Trial balance

D
None of these

Solution

After analyzing and preparing business documents, the transactions are then recorded in the books of the company. A journal entry is the recording of a business transaction in the journal. A journal entry shows all the effects of a business transaction as expressed in debit(s) and credit(s) and may include an explanation of the transaction. A transaction is entered in a journal and before it is entered in ledger accounts. In double-entry accounting transactions are recorded in the journal through journal entries. A journal, also known as Books of Original Entry, keeps records of business transactions in a systematic order. Transactions are recorded in the journal in chronological order, i.e. as they occur; one after the other.
Question 5
1 / -0

Income tax paid is debited to ______________.

A
Trading account

B
Profit and Loss Account

C
Drawing Account

D
Cash Account

Solution

If any amount is withdrawn by the owner for personal use, that is considered as drawing and debited to drawing account. Drawing amount will be deducted from the capital account.

Income Tax paid is a personal expense of the owner, hence this has to be debited to drawings account.
Question 6
1 / -0

Accounting transactions of an organisation are documented using a _________.

A
Bill

B
Invoice

C
Voucher

D
None of these

Solution

The first step to capture accounting data from transaction(s) so as to prepare a document, is called voucher that expresses and document an accounting transaction.
Question 7
1 / -0

While recording transactions in the books of company's purchasing and selling, which of the following must be noted _________________.

A
Assets and business

B
Liabilities and Trade liabilities

C
Accumulated profits

D
All the above

Solution

The full disclosure principle is a concept that requires a business to report all necessary information about their financial statements and other relevant information to any persons who are accustomed to reading this information.
Transactions include purchases, sales, receipts, and payments by an individual person or an organization/corporation must be properly recorded.
Hence, Option D is correct.
Question 8
1 / -0

A Voucher is ________.

A
Document for support of an entry made in books of accounts

B
Invoice received from suppliers

C
Receipt issued to a customer for cash

D
Dispatch Receipt

Solution

A Voucher is document for support of transaction which is to be recorded in books of accounts. Vouchers are prepared with the help of source documents.
There are mainly two types of Voucher
1. Cash Vouchers
2. Non Cash Voucher.
Question 9
1 / -0

Which of the following accounts have only credit balance?

A
Reserve Fund account

B
Capital account

C
Accounts payable account

D
All of these

Solution

All the three have credit balance as All the incomes, gains , capital and liabilities are credited.
Question 10
1 / -0

Where process scrap is re-cycled for use in conjunction with new material as well as being sold externally, which of the following is most likely, to be the value at which it is debited to the process?

A
At the same price as it is sold externally

B
At the cost of normal losses

C
At the cost attached to abnormal losses

D
Nil value

Solution

During the process, a certain percentage of material gets wasted. This is called as normal loss. These units can be sold as scrap in the open market or re cycled with new material. In such situation market price of such scrap should be debited to process account.

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Nature of Accounts and Rules of Debit and Credit Test 4

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Nature of Accounts and Rules of Debit and Credit Test 4

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Rank

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SHARING IS CARING

Question 1

Increase in capital and decrease in libility

Increase in capital and increase in liability

Increase in capital and decrease in asset

Increase in capital and increase in asset

Solution

Question 2

Sales return account

Bank overdraft account

Goodwill account

Purchase account

Solution

Question 3

Cash receipt and payments, credit transactions

Cash payment only

Credit transactions only

Cash receipt only

Solution

Question 4

Journal

Ledger

Trial balance

None of these

Solution

Question 5

Trading account

Profit and Loss Account

Drawing Account

Cash Account

Solution

Question 6

Bill

Invoice

Voucher

None of these

Solution

Question 7

Assets and business

Liabilities and Trade liabilities

Accumulated profits

All the above

Solution

Question 8

Document for support of an entry made in books of accounts

Invoice received from suppliers

Receipt issued to a customer for cash

Dispatch Receipt

Solution

Question 9

Reserve Fund account

Capital account

Accounts payable account

All of these

Solution

Question 10

At the same price as it is sold externally

At the cost of normal losses

At the cost attached to abnormal losses

Nil value

Solution

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