Bank Reconciliation Statement Test - 7

D.Lal has given us Goods worth Rs 180000/- on credit , so he becomes our creditor And thus his account is credited and we pay Rs 20000/- the balance amount in cash so cash which is decreasing should also be credited but the total purchase is of Rs 200000/- so purchase account which is increasing will be debited with Rs200000/-.

Amount of expenses spent on construction of fixed asset or to make that asset ready for  commercial use will be added to the cost of that asset . so we will debit building account with amount of expenses done for the construction of the building as it is not still ready for its commercial use

Expenses done for the construction of a fixed assets or to make it ready for use are debited to the cost of the asset that is why building account will be debited with cost of timber and bricks cement, etc and as bank is reducing so we will credit bank account for the same.

Drawings account is the personal account of the proprietor. this account is maintained for a year only to keep rack of total withdrawals made by the proprietor during the particular year. So, when proprietor withdraws cash from business for personal use Drawings account is debited.

According to traditional approach Debit the receiver and credit the giver for the personal account. All personal accounts under traditional approach a recovered under liabilities and capital.

Goods are going out of the business at cost price and hence purchases reduces so the charity account will be debited with Rs 500/- i.e. the cost price of the goods.

Goods are going out of the business at cost price hence purchases account is reduced to the extent and as such it will be credited.

According to modern approach assets when increases it is debited and when decreases it is credited.

Capital invested in the business is Rs 100000/- and interest to be charged is 10% so the amount of interest on capital is = 100000*10/100 = Rs 10000/-.

When goods are sold on credit the purchaser becomes our debtor and it is an asset which is increasing so it should be debited. Thus in above ques Ram Lal's Account is debited.

Charity is the expenses though may be repeated or not repeated in future. so it will classified under nominal account.

when Machinery is purchased our asset i.e Machinery is increasing so according to modern approach Machinery a/c should be debited.

Life insurance premium is paid on the life of the proprietor. and when he/she dies the benefit will be received by the family and not business. So it is treated as drawings by the business when it is paid from the business.

The accounts in traditional approach are divided into three categories Personal, Real and nominal and their specified rules are followed to pass the necessary Journal entry. In modern approach accounts are classified under five heads i.e. assets, liabilities, capital expenses and income.

Prepaid means paid in advance , so prepaid expenses are expenses which are paid in advance. Prepaid expenses will give us benefit in future so it becomes our assets.

A Bank Reconciliation statement is prepared by the Accountant of the business.

Expenses which are of business should be debited to the in the books of business. Here Premises are used for personal purpose also so amount of rent whihc should be debited should be = 2/3*1500= Rs 1000., which is actually used by the buisness.

Cash account is Tangible real account i.e. it can be seen. Real account are assets and which can be touched and seen is real tangible assets.

Amount written off as bad debts when received should be credited to bad debts recovered account because once the amount is written off bad debt it will be deleted from the books of accounts and when the some amount is recovered from it it is profit and will be credited to bad debts recovered account.

As outstanding expenses need to be paid in future, though they are current expenses, so it becomes liability of the business to pay the expenses in future. outstanding means due but not paid i.e. which is to be paid in future.

Sundry expenses are the expenses which might not repeat in future. We may provide refreshment to the customer in future or not so that is why refresehment expenses are debited to the sundry expenses account.

Compound entry means entries which involve more than two accounts. so the above answer is correct.

Insurance co Has paid us the amt of claim accepted by them so We will debit bank account as it is increasing and loss of Rs 200 is to be borne by the firm so again it will be debited and insurance co which pays reduces their liability, therefore we will credit the insurance co account.

bad Debts which are written off earlier means their name has been deducted from the debtors list and they do not have any balance in our account. So, when this bad debts pay some amount in future it is as good as profit so we credit it to bad debts recovered account.

According to traditional approach Real accounts are debit what comes in and credit what goes out and all accounts under real accounts comes under assets a/c under modern approach.