Nature of Accounts and Rules of Debit and Credit Test 8

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Nature of Accounts and Rules of Debit and Credit Test 8

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Question 1
1 / -0

In an account prepared under a double-entry system, ________ prefix suggests that the concerned account is debited.

A
To

B
By

C
Balance cd

D
Balance bd

Solution

Posting is a process of transferring debit and credit aspects of the entries appearing in the journal and other books of original entry to the and credit sides of the relevant accounts in the ledger. Posting are made using the word "To" and "By" as a prefix. For debit side entry "To" prefix is used and for credit side "By" prefix is used.
Question 2
1 / -0

The balance of personal account shows ______.

A
Cash Balance

B
Profit and Loss

C
Amount due to or due from other persons, organization

D
Liquidity Position

Solution

There are mainly three types of account: 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, outstanding/prepaid accounts, banks, accounts of credit customers, accounts of good suppliers, capital, drawings, etc. Natural personal accounts is the simplest to understand out of all and includes God's creations who have ability to deal, who, in most cases, are people. Artificial personal accounts are created artificially by law, such as corporate bodies and institutions. Representative personal accounts represent a certain person or a group directly or indirectly. The balance of personal account shows amount due to or due from other persons, organizations.
Question 3
1 / -0

Which side represents debit ?

A
Left side

B
Right side

C
Side having shorter total

D
Side having larger total

Solution

Accounting is based on a unique concept i.e double entry system which means for every transaction there will be a debit and credit too. While preparing the financial statement, debits are shown in the left side and credits are shown on the right side.
Question 4
1 / -0

Purchase of office equipment for cash would cause __________.

A
Cash in hand to decrease

B
External liability to decrease

C
Total liabilities to increase

D
Total assets to increase

Solution

Cash exists as a company's most liquid asset. Purchasing office equipment for cash will reduce a company's assets (i.e. reduction in cash in hand). Since owner's equity equals assets minus liabilities, owner's equity will be reduced as a result of buying office equipment with cash.
Question 5
1 / -0

_______ is an artificial personal A/c.

A
ICICI Bank A/c

B
Goodwill A/c

C
Mohan A/c

D
Building A/c

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, bank, outstanding/prepaid accounts, accounts of credit customers, accounts of good suppliers, capital, drawings, etc. Personal accounts are personal accounts which are created artificially by law, such as corporate bodies and institutions, are called Artificial personal accounts. E.g. Pvt Ltd companies, LLCs, LLPs, clubs, schools, etc. ICICI Bank A/s is an artificial personal A/c.
Question 6
1 / -0

_______ accounts relates to expenses, losses, income, gain, revenue etc.

A
Personal a/c

B
Real a/c

C
Nominal a/c

D
Impersonal a/c

Solution

Accounts are classified in to three categories:
1) Personal Account i.e. Account of any person
2) Real Account i.e. Account of assets or things
3) Nominal Account i.e. Account of expenses, losses, income gain
For each nominal account, a separate account will be opened in the ledger.
Question 7
1 / -0

Which of the following is a Real A/c?

A
Building A/c

B
Preliminary Expenses

C
Discount received A/c

D
Ram Mohan A/c

Solution

There are mainly three types of accounts: Real, Personal and Nominal accounts. All assets of a firm, which are tangible or intangible, fall under the category "Real accounts". Tangible real accounts are related to those things that can be touched and physically felt. Few examples of tangible real accounts are buildings, machinery, stock, land, etc. Intangible real accounts are those which can't be touched and physically felt. Few examples of intangible real accounts are trademarks, patents, goodwill, etc.
Question 8
1 / -0

Accrued wages is a ____________.

A
Personal A/c

B
Suspense A/c

C
Real A/c

D
Representative personal A/c

Solution

Wages is classified as nominal account while the person to whom the wages is due is a personal account. Hence accrued wages is considered as representative personal account.
Question 9
1 / -0

Cash withdrawn from bank for business purpose would cause ____________.

A
Increase in current assets

B
No change in assets and liabilities

C
Increase in owner's equity

D
Increase in new working capital

Solution

When cash withdrawn from bank then the amount is deducted from bank account and added in the cash account of business hence, there is no effect of this transaction on asset or liability side of balance sheet i.e. the effect of transaction is nullified.
Question 10
1 / -0

Purchase of RBI bonds for cash would lead to ____________.

A
No change in total assets

B
Total assets to decrease

C
Total assets to increase

D
Total liabilities to increase

Solution

Bonds are considered to be an investment and part of assets, similarly cash is also an asset. If RBI bonds are purchased that will increase the assets against the cash which is going to be reduced. Hence there will be no change in assets.

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Nature of Accounts and Rules of Debit and Credit Test 8

Result

Nature of Accounts and Rules of Debit and Credit Test 8

Score

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Rank

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SHARING IS CARING

Question 1

To

By

Balance cd

Balance bd

Solution

Question 2

Cash Balance

Profit and Loss

Amount due to or due from other persons, organization

Liquidity Position

Solution

Question 3

Left side

Right side

Side having shorter total

Side having larger total

Solution

Question 4

Cash in hand to decrease

External liability to decrease

Total liabilities to increase

Total assets to increase

Solution

Question 5

ICICI Bank A/c

Goodwill A/c

Mohan A/c

Building A/c

Solution

Question 6

Personal a/c

Real a/c

Nominal a/c

Impersonal a/c

Solution

Question 7

Building A/c

Preliminary Expenses

Discount received A/c

Ram Mohan A/c

Solution

Question 8

Personal A/c

Suspense A/c

Real A/c

Representative personal A/c

Solution

Question 9

Increase in current assets

No change in assets and liabilities

Increase in owner's equity

Increase in new working capital

Solution

Question 10

No change in total assets

Total assets to decrease

Total assets to increase

Total liabilities to increase

Solution

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