Tag: elements of book keeping and accountancy

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Questions Related to elements of book keeping and accountancy

Multiple choice elements of book keeping and accountancy accounting in business develop the understanding of recording of transactions in journal illustrations on journal entries types of journal entries meaning and classification of business transactions

Interest on capital is credited to ___________ account.

  1. Expenses

  2. Income

  3. Capital

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

Capital is a contribution done by the owner in business. If any interest is payable, this need to be debited to Interest expenses and credited to the capital account.

Multiple choice elements of book keeping and accountancy accounting in business develop the understanding of recording of transactions in journal illustrations on journal entries types of journal entries meaning and classification of business transactions

A sale of goods of vidhya for cash should be debited to ______________.

  1. Vidhya's account

  2. Cash account

  3. Sale of goods account

  4. Purchases account
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Sales of goods on cash involves cash and goods account. Both cash and goods are real account. Rule for real account says" debit what comes in". Against sale of goods cash is coming in the system, hence cash account should be debited.

Multiple choice elements of book keeping and accountancy accounting in business develop the understanding of recording of transactions in journal illustrations on journal entries types of journal entries meaning and classification of business transactions

The accounting entries which appear on both the sides of cash book are called journal entries.

  1. True

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

A contra entry is the entry that involves both the accounts, i/e/ Cash and Bank. When cash is deposited in a bank or withdrawn from the bank for office use, such transactions will be recorded on both sides of the cash book. Thus, it affects both the columns of the cash book, i.e. the cash column as well as the bank column. Thus, an entry recorded on both sides of the cash book is known as contra entry.

Multiple choice elements of book keeping and accountancy accounting in business develop the understanding of recording of transactions in journal illustrations on journal entries types of journal entries meaning and classification of business transactions

Cash discount does not appear in the books of accounts. 

  1. True

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

Discounts are two types: 


Trade Discount is a discount which is allowed to the customers to promote the sales. Its allowed on list price and general discount available to all the customers.  Trade discount is not recorded in books of account. 

Cash discount is allowed to the customer to whom the goods sold on credit. Cash discount is allowed to speed up the cash collection. Its allowed to the customer if the payment is done within the specified period. Cash discount is a an indirect expenses and to be debited in profit & loss account.

Multiple choice elements of book keeping and accountancy accounting in business develop the understanding of recording of transactions in journal illustrations on journal entries types of journal entries meaning and classification of business transactions

A closing entry of sales account, which appears on the credit side of trial balance is as under _________________.

  1. Sales A/c Dr.

    To P and L A/c

  2. Sales A/c Dr.

    To Trading A/c

  3. Trading A/c Dr.

    To Sales A/c

  4. P and L A/c Dr.

    To Sales A/c
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

To close the Sales account, which has a credit balance, it must be debited. The balance is transferred to the Trading account to determine gross profit.

Multiple choice elements of book keeping and accountancy accounting in business develop the understanding of recording of transactions in journal illustrations on journal entries types of journal entries meaning and classification of business transactions

When the claim on account of loss of stock is partly accepted by the insurance company, the journal entry will be _________________________.

  1. Insurance Claim A/c Dr.

    Profit and loss A/c Dr.

    To Trading A/c

  2. Insurance Claim A/c Dr.

    To Trading A/c

  3. Insurance Claim A/c Dr.

    To Profit and loss A/c

  4. Insurance Claim A/c Dr.

    Trading A/c

    To Profit and loss account
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

When a claim is partly accepted, the amount accepted is debited to the Insurance Claim account, the loss not covered is debited to the Profit and Loss account, and the total value of the lost stock is credited to the Trading account.

Multiple choice elements of book keeping and accountancy accounting in business develop the understanding of recording of transactions in journal illustrations on journal entries types of journal entries meaning and classification of business transactions

When the claim on account of loss of stock is fully recoverable from the insurance company, the journal entry will be ______________________.

  1. Cash A/c Dr.

    To Insurance Claim

  2. Insurance Claim A/c Dr.

    To Trading A/c

  3. Trading A/c Dr.

    To Insurance Claim A/c

  4. Insurance Claim A/c Dr.

    To P and L A/c
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

When the full loss is recoverable, the entire amount is debited to the Insurance Claim account and credited to the Trading account to offset the loss of stock.

Multiple choice elements of book keeping and accountancy accounting in business develop the understanding of recording of transactions in journal illustrations on journal entries types of journal entries meaning and classification of business transactions

What will be the necessary adjusting closing entry for the following adjustment as on $31^{st}$ March, $2005$. Insurance paid $Rs. 4,000$ (including premium of $Rs. 3,000$ per annum paid upto $30^{th}$ June, $2005$________________________.

  1. Insurance prepaid A/c Dr. $Rs. 750$

    To Insurance A/c $Rs. 750$

  2. Insurance A/c Dr. $Rs. 750$

    Insurance prepaid A/c $Rs. 750$

  3. Insurance A/c Dr. $4000$

    To cash A/c $4000$

  4. Insurance A/c Dr. $3000$

    To cash A/c $3000$
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The total insurance is 4000. The premium for the period from April 1 to June 30 (3 months) is prepaid. Calculation: (3000 / 12) * 3 = 750. The entry to record the prepayment is to debit Prepaid Insurance and credit the Insurance expense account.

Multiple choice elements of book keeping and accountancy accounting in business develop the understanding of recording of transactions in journal illustrations on journal entries types of journal entries meaning and classification of business transactions

In certain jobs, for example, hotels farms, hospitals, the employees are given the facility of residing in a house free of rent or they are given meals or clothes, water etc. A transfer of the proportionate amount is essential to salaries or wages account. Entry for this is ________________.

  1. Meals A/c Dr.

    Water A/c Dr.

    Apartment A/c Dr.

    To Salaries or Wages A/c

  2. Salaries or Wages A/c Dr

    To Meals A/c

    To water A/c

    To Apartment A/c

  3. Cash A/c Dr.

    To Meals A/c

    To Water A/c

    To Apartment A/c

  4. Meals A/c Dr.

    Water A/c Dr.

    Apartment A/c Dr.

    To Cash A/c
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

When employees receive benefits in kind, the cost is treated as part of their salary. Therefore, the Salaries/Wages account is debited, and the individual expense accounts (Meals, Water, Apartment) are credited to remove these costs from their respective expense categories.

Multiple choice elements of book keeping and accountancy accounting in business develop the understanding of recording of transactions in journal illustrations on journal entries types of journal entries meaning and classification of business transactions

Goods worth Rs. $10,000$ were purchased by B on which the traders allowed Rs. $500$ trade discount and offer to give $5\%$ cash discount if immediate payment is made. The Purchase A/c will be debited by _________.

  1. Rs. $10,000$

  2. Rs. $9,800$

  3. Rs. $9,000$

  4. Rs. $9,500$
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Discount are two types , trade discount and cash discount. 

Trade discount is allowed on the list price hence amount of trade discount is not reflected in books of account. 
Net price i.e. after deducting trade discount is only recorded in the books of account. 

Purchase Price                Rs.10000
Less: Trade Discount       Rs.500
Net Purchase Price         Rs.9500

Hence, Purchase account will be debited by Rs.9500.