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Nature of Accounts and Rules of Debit and Credit Test 5

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Nature of Accounts and Rules of Debit and Credit Test 5
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  • Question 1
    1 / -0
    Which of the following is a real account ?
    Solution
    A investment is an account on the asset side of a company's balance sheet that represents the company's investments, including stocks, bonds, real estate, and cash. Investments are assets that a company intends to hold for more than a year. Investment is an asset and it is a real account.
  • Question 2
    1 / -0
    A voucher is a _____________.
    Solution
    Every business transaction must be supported by a written evidence. Before making an entry in the books of account, it need to be ensured the proper supporting as a documentary evidence. This documentary written evidence is referred as voucher.
  • Question 3
    1 / -0
    Vouching relates to ___________.
    Solution
    Every business transaction must be supported by a written evidence. Before making an entry in the books of account, it need to be ensured the proper supporting as a documentary evidence. This documentary written evidence is referred as voucher.
    Vouching is a process of checking the accounting entries in the books of account with the relevant supporting document/voucher.
    Cash receipts, cash payments, credit transactions are to be vouched carefully with the supporting documents.
  • Question 4
    1 / -0
    Identified and measured economic events should be recorded in _________order.
    Solution
    This is very much clear from the definition of accounting that all business transactions must be recorded in books of account in the chronological order. 

    As and when an economic event is identified and measured, it has to be recorded in the books. 

    So, if a sales is effected on 29th March, it has to be recorded on the same day and if purchase is effected on 31st March, it has to be recorded on 31st March itself.
  • Question 5
    1 / -0
    Export Duty Account is __________.
    Solution
    Nominal accounts in accounting are the temporary accounts, such as the income statement accounts. In other words, nominal accounts are he accounts that report revenues, expenses, gains, and losses. 
    Nominal or temporary accounts are closed at the end of each accounting year. This means that their account balances are transferred to a permanent account. This closing process allows the nominal accounts to start the next accounting year with zero balances.
    Export Duty Account is an indirect expense and hence, it is classified as a nominal account.
  • Question 6
    1 / -0
    Life Insurance Premium A/c is _________.
    Solution
    The nominal accounts are all hose accounts that are in the nature of incomes and expenses of a business. These accounts are closed at the financial year end with the income and expense summary to arrive at the net profit or loss account. Nominal accounts start at the year end with zero balance (or no balance) and ends with no balance to carry forward (as all is transferred to income summary).
    Life insurance premium is classified as a personal account, since the insurance premium paid represents the amount paid for an individual.
  • Question 7
    1 / -0
    Sundry Expenses Account is _________.
    Solution
    The word "Sundry" is used for items which are unimportant to be mentioned individually. Sundry expenses are costs incurred for small things which cannot be categorized under a specific heading.
    Sundry expenses may also be referred to as"Miscellaneous Expenses". They can be related to a particular area within a business such as sundry office expenses, sundry retail expenses, etc.
    Accounts which are related  to expenses, losses, incomes or gains are called Nominal accounts. The final result of all nominal accounts is either profit or loss which is then transferred to the capital account.
    Sundry Expenses Accounts is a miscellaneous expenses and hence, it is classified as a nominal account.
  • Question 8
    1 / -0
    Outstanding Income Account is ______.
    Solution
    Personal accounts are related to individuals, firms, companies, etc. A few examples of personal accounts are debtors, creditors, banks, outstanding.prepaid accounts, accounts of goods suppliers, capital, drawings, etc. 
    Representative personal accounts represent a certain person or group directly or indirectly.
    Outstanding Income account is a representative personal account, as it represents the outstanding income from several persons/sources. Hence, it can be classified as a personal account.
  • Question 9
    1 / -0
    Furniture Account is ________.
    Solution
    Real accounts are the accounts that have their existence even after the close of the accounting period. In the next account period, these accounts start with a non-zero balance carried forward from the previous accounting period. 
    Real accounts are the accounts of assets which the company owns and accounts of liabilities which the company owes. Real accounts may also consist of some intangible assets. hey consist following types of accounts:
    1. Building account
    2. Furniture Account
    3. Land Account
    4. Machinery Account
    Furniture account is the tangible asset of a business whose value can be measured in terms of money. Hence, it is classified as a real account.
  • Question 10
    1 / -0
    Mr. Kulkarni's Capital Account is a ____________ account.
    Solution
    Personal accounts can be identified very easily as they are simply the accounts of those parties that a business normally deals with. They are opened in the names of those parties. They are usually suppliers and customers of the business or creditors and debtors. The balances at the financial year end are carried forward to the next accounting period. The debtors appear in the asset side of the balance sheet, whereas creditors in the liabilities and equity portion.
    Mr Kulkarni's Capital Account is the account of a natural person, i.e. an account of a person who is alive. Hence, it can be classified as a personal account.
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