Tag: commercial applications

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Questions Related to commercial applications

Multiple choice commercial applications accounting procedures - rules of debit and credit golden rules of debit and credit (traditional approach) types of account meaning and classification of accounts

The basic rule of book-keeping "Debit what comes in and credit what goes out" is applicable to ____________.

  1. Personal account

  2. Real account

  3. Nominal account

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

Accounts relating to properties or assets are known as "Real accounts". A separate account is maintained for each asset e.g., Cash, Machinery, Building, etc. Real accounts can be further classified into tangible and intangible.


1. Tangible real accounts: These accounts represent assets and properties which can be seen, touched, felt, purchased, measured and sold. For e.g. Machinery account, Cash account.


2. Intangible real accounts: These accounts represent assets and properties which cannot be seen, touched or felt but hey can be measured in terms of money. For e.g. Patent account, Goodwill account.

The rule for Real accounts is: Debit what comes in; Credit what goes out.

Multiple choice commercial applications accounting procedures - rules of debit and credit golden rules of debit and credit (traditional approach) types of account meaning and classification of accounts

Outstanding rent is a_________. 

  1. Personal account

  2. Real account

  3. Nominal account

  4. None of these
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Accounts recording transactions with a person or group of persons are known as personal accounts. These accounts are necessary, in particular, to record credit transactions. Personal accounts are of the following types: 


1. Natural person: An account recording transactions with an individual ks termed as a natural persons' personal account. For e.g. Kamal's account, Mala's account. Both males and females are included in it.


2. Artificial or legal persons: An account recording financial transactions with an artificial person created y law or otherwise is termed as an artificial persons' personal account. For e.g. Firms' accounts, limited companies' accounts.

3. Representative personal accounts: An account indirectly representing a person or persons is known as representative personal account. When accounts are of similar nature and their number is large, it is better to group them under one head and open a representative personal account. For e.g. prepaid insurance, outstanding salaries, etc.

Outstanding rent is the representative personal account because it represents the outstanding expenses to a  person. Hence, it is classified as a personal account.

Multiple choice commercial applications accounting procedures - rules of debit and credit golden rules of debit and credit (traditional approach) types of account meaning and classification of accounts

Wages account, rent account, commission account, interest received account are examples of ___________.

  1. Real Accounts

  2. Personal Accounts

  3. Nominal Accounts

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

Accounts relating to income, revenue, gain, expenses and losses are termed as nominal accounts. These accounts are also known as fictitious accounts as they do not represent any tangible asset. 

A separate account is maintained for each head or expense or loss and gain or income. Wages account, Rent account, Commission account, Interest received account are some examples of nominal accounts. 
The rule for nominal account is: Debit all expenses and losses; Credit all incomes and gains.

Multiple choice commercial applications accounting procedures - rules of debit and credit golden rules of debit and credit (traditional approach) types of account meaning and classification of accounts

Firm's accounts, limited companies accounts, educational institutions accounts, co-operative society are example of _____________.

  1. Artificial or legal persons personal account

  2. Natural persons personal account

  3. Representative personal accounts

  4. Any of the above
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Accounts recording transactions with a person or group of persons are known as personal accounts. These accounts are necessary, in particular, to record credit transactions. Personal accounts are of three types: Natural, Artificial and Representative accounts.

An account recording financial transactions with an artificial person created by law or otherwise is termed as  an artificial persons' personal account. For e.g. Firms' account, limited companies' accounts, educational institutions' accounts, etc.

Multiple choice commercial applications accounting procedures - rules of debit and credit golden rules of debit and credit (traditional approach) types of account meaning and classification of accounts

An account recording financial transactions with an artificial person created by law or otherwise are termed as _____________.

  1. Artificial or legal persons account

  2. Natural persons' personal account

  3. Representative personal accounts

  4. Any of the above
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

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, banks, outstanding/prepaid accounts, accounts of credit customers, accounts of goods suppliers, capital, drawings, etc. 

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.

Multiple choice commercial applications accounting procedures - rules of debit and credit golden rules of debit and credit (traditional approach) types of account meaning and classification of accounts

Real accounts can be further classified into ____________.

  1. Tangible

  2. Intangible

  3. (A) or (B)

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

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 things that can be touched and felt physically. Intangible real accounts are related to things that can't be touched and felt physically.
The golden rule of real accounts is: Debit what comes in; Credit what goes out.

Multiple choice commercial applications bases of accounting cash and mercantile system basis of accounting basis of accounting system

A company sends its cars to dealers on sale or return basis. All such transactions are, however, treated like actual sales and are passed through the sales day book. Just before the end of the financial year, two cars which had cost Rs 50,000 each have been sent on 'sale or return' and have been debited to customers at Rs 80,000 each. Cost of goods lying with the customers will be _______________.

  1. Rs 1,00,000

  2. Rs 1,60,000

  3. Rs 50,000

  4. None of these
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The cars sent on sale or return are still inventory of the company until the customer accepts them. They must be valued at cost. Since there are 2 cars at Rs 50,000 cost each, the total value is Rs 1,00,000.

Multiple choice commercial applications bases of accounting cash and mercantile system basis of accounting basis of accounting system

The current ratio of a company is 2: 1 which of the following suggestions would Improve, reduce and net change it. I. Payment to trade creditors II. Sell machinery for cash Ill. Purchased goods for cash IV. Issue of equity shares ________________________.

  1. Decrease, Increase, Increase, No effect

  2. No effect, Increase, Decrease, Increase

  3. Increases, Increase, No effect, Increase

  4. Increase, No effect, Decrease, Increase
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Current ratio = Current Assets / Current Liabilities. (I) Payment to creditors reduces both by same amount, increasing ratio. (II) Selling machinery for cash increases current assets, increasing ratio. (III) Purchasing goods for cash has no effect on total current assets. (IV) Issuing equity shares increases cash, increasing ratio.

Multiple choice commercial applications bases of accounting cash and mercantile system basis of accounting basis of accounting system

Cash basis considers the revenue as realized, when the goods are produced. 

  1. True

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

 The major difference between the accrual accounting method and the cash accounting method is the way in which revenue and expenses are recorded in the accounts of the business. This difference consequently leads to a different profit result for a given period depending on the approach adopted. 

· Cash-basis - Using the cash-basis, revenue is only recorded when the cash is actually exchanged i.e. when revenue is received as cash and when expenses are actually paid.

Multiple choice commercial applications bases of accounting cash and mercantile system basis of accounting basis of accounting system

Amit is recording sales transactions in the  accounting system so that they can be summarized in a logical manner for the purpose of providing financial statement for decision-making. Amit is doing________.

  1. management consulting

  2. review

  3. accounting

  4. auditing
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Accounting is defined as the process of identifying, measuring, recording, and communicating financial information to enable informed judgments and decisions by users of the information.