Tag: commercial studies

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Questions Related to commercial studies

Multiple choice commercial studies accounting procedures - rules of debit and credit modern approach of rules of accounts meaning and classification of accounts classification of accounts

Conventional system of accounting is recognised by law.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The conventional system of accounting (often based on informal practices) is generally not recognized by law for formal financial reporting; the Double Entry System is the standard.

Multiple choice commercial studies accounting procedures - rules of debit and credit modern approach of rules of accounts meaning and classification of accounts classification of accounts

What is the assumption of Double entry system of recording accounting information?

  1. Every transaction has one effect.

  2. Every transaction has two effect.

  3. Every transaction has multiple effect.

  4. None of the above.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The fundamental principle of the double entry system is that every financial transaction affects at least two accounts: one is debited and the other is credited.

Multiple choice commercial studies accounting procedures - rules of debit and credit modern approach of rules of accounts meaning and classification of accounts classification of accounts

Accounts other than the impersonal account is _________.

  1. Personal account

  2. Real account

  3. Nominal account

  4. Both B and C
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

IMPERSONAL ACCOUNT:In the accounts of the nominal ledger, we have different types of expenses for different purposes like rent, insurance, telephone and others. As these expenses are related NOT to the person to whom the money is paid and more concerned towards the reason for payment these are known as IMPERSONAL accounts.


Impersonal accounts are all accounts other than the personal accounts. They can further be categorized into Real Accounts and Nominal Accounts.

Multiple choice commercial studies accounting procedures - rules of debit and credit modern approach of rules of accounts meaning and classification of accounts classification of accounts

The accounts of expenses and losses is _________.

  1. Real

  2. Personal

  3. Nominal

  4. None of the above
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Accounts which are related to expenses, losses, incomes or gains are called Nominal accounts. 

The dictionary meaning of the word "nominal" is "existing in name only" and the meaning remains absolutely true in accounting sense too, because nominal accounts do not really exist in physical form, but behind every nominal account money is involved.
E.g. Purchase A/c, Salary A/c, Sales A/c, Commission Received A/c, etc.

Multiple choice commercial studies accounting procedures - rules of debit and credit modern approach of rules of accounts meaning and classification of accounts classification of accounts

Loan account is personal account.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Personal accounts are related to individuals, firms, companies, etc. A few examples of personal accounts are debtors, creditors, banks, outstanding/prepaid accounts, accounts of credit customers, accounts of goods suppliers, capital, drawings, etc.

Personal accounts are classified into three subcategories: Artificial, Natural, and Representative.
Representative accounts represent a certain person or group directly or indirectly.
Loan account is a representative personal account, as it represents the person from whom the loan is obtained or to whom the loan is given. Hence, it is classified as a personal account.

Multiple choice commercial studies accounting procedures - rules of debit and credit modern approach of rules of accounts meaning and classification of accounts classification of accounts

Outstanding Wages A/c is Nominal A/c.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Accounts which are related to expenses, losses, incomes and gains are called nominal accounts. Examples of nominal accounts are Purchase A/c, Sales A.c, Salary A/c etc.

The final result of all nominal accounts is either profit or loss which is the transferred to the capital account. The golden rule for nominal accounts is: Debit all expenses and losses; Credit all incomes and gains.

Outstanding wages is classified as a personal account and not a nominal account. This account represents the accounts of all those persons to whom wages have not been paid and hence, are outstanding. Therefore, it is termed as  "Representative Personal Account" or simply personal account.

Multiple choice commercial studies accounting procedures - rules of debit and credit modern approach of rules of accounts meaning and classification of accounts classification of accounts

Nominal A/c is debited when business incurs expenses.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Accounts which are related to expenses, losses, incomes or gains are called Nominal accounts. The dictionary meaning of the word "nominal" is "existing in name only" and the meaning remains absolutely true in accounting sense too, because nominal accounts do not really exist in physical form, but behind every nominal accounts money is involved. E.g. Purchase A/c, Salary A/c, Sales A/C. Commission Received A/c, etc.

The final result of all nominal accounts is either profit or loss which is then transferred to the capital account. 
The golden rule for nominal account is : Debit all expenses and losses; Credit all incomes and gains.

Multiple choice commercial studies accounting procedures - rules of debit and credit modern approach of rules of accounts meaning and classification of accounts classification of accounts

Commission received is Nominal Account.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Nominal accounts are the temporary accounts, such as the income statement accounts. In other words, nominal accounts are the 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.
Nominal accounts consist of the following types of accounts:
a. Insurance account
b. Wages account
c. Interest paid or received account
d. Commission paid or received account
e. Telephone expense account
f. Salary account.
Hence, commission received is a nominal account.

Multiple choice commercial studies accounting procedures - rules of debit and credit modern approach of rules of accounts meaning and classification of accounts classification of accounts

Conventional system of accounting cannot give a complete picture of all transactions.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Under conventional system of Accounting  :-

  • Since only one cash book is kept, personal and business transactions will be recorded together.
  • Real and Nominal accounts will be ignored by this system.
  • Profit or Loss can be ascertained but we cannot represent the financial position of the organization
  • No trial balance is prepared, so arithmetical accuracy of accounts cannot be verified
  • So, conventional or single entry system of accounting cannot give a complete picture of all transactions. 

Multiple choice commercial studies accounting procedures - rules of debit and credit modern approach of rules of accounts meaning and classification of accounts classification of accounts

Drawing account is real account.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Drawings account is a personal account. 

Personal accounts are classified as :-
a) Natural person, 
b) Artificial person 
c) Representative personal accounts.
 A representative personal account represents a person/persons.

Drawings account is a representative personal account. 
Some examples of representative personal accounts are capital, outstanding wages, prepaid salaries.