Tag: elements of book keeping and accountancy

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Multiple choice elements of book keeping and accountancy book of original record - journal understand the need for journal journals functions, advantages, objects and importance of journal

Sales for the year ended $31$st March, $2015$ amounted to Rs. $10,00,000$. Sales included goods sold to Mr.A for Rs. $50,000$ at a profit of $20\%$ on cost. Such goods are still lying in the godown at the buyer's risk. Therefore, such goods should be treated as part of.

  1. Sales

  2. Closing stock

  3. Goods in transit

  4. Sales return
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Since the goods are at the buyer's risk, the sale is considered complete, and the revenue is recognized. The goods are no longer part of the seller's inventory.

Multiple choice elements of book keeping and accountancy book of original record - journal understand the need for journal journals functions, advantages, objects and importance of journal

Journalizing is ___________.

  1. process of having the source of transactions

  2. process of recording transactions in the journal

  3. process of having the sources of transactions for journal

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

Journalizing is the process of recording a business transaction in the accounting records. This activity only applies to the double-entry bookkeeping system.  

This calls for the identification of the general ledger accounts that will be altered as a result of the transaction.

Multiple choice elements of book keeping and accountancy book of original record - journal understand the need for journal journals functions, advantages, objects and importance of journal

A debit note for 20,000 issued to Mr. Z for goods returned by us is to be accounted for in ______________.

  1. Bills receivable book

  2. General journal

  3. Purchases return book

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

A supplier when an order is received, this may be due to poor quality, inaccurate quantity, untimely delivery or other reasons. 

Purchase returns are also called returns outward and an appropriate purchase returns/returns outward book is maintained.

All returns are primarily recorded in the purchase returns book unless the returns are not that frequent, in which case they are recorded in the journal.

Multiple choice elements of book keeping and accountancy book of original record - journal understand the need for journal journals functions, advantages, objects and importance of journal

_______ is used to record the details of bills receivable by the business organization.

  1. Purchases Book

  2. Bills Payable Book

  3. Bills Receivable Book

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

Accounts Receivable (AR) is the proceeds or payment which the company will receive from its customers who have purchased its goods & services on credit. Usually the credit period is short ranging from few days to months or in some cases maybe a year.

Multiple choice elements of book keeping and accountancy book of original record - journal understand the need for journal journals functions, advantages, objects and importance of journal

A Customer returning the goods purchased on credit, may inform the seller by sending _______________.

  1. Debit Note

  2. Credit Note

  3. Court Notice

  4. Return Invoice
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

A debit note is a document used by a vendor to inform the buyer of current debt obligations, or a document created by a buyer when returning goods received on credit. The debit note can provide information regarding an upcoming invoice, or may serve as a reminder for funds currently due.

Multiple choice elements of book keeping and accountancy book of original record - journal understand the need for journal journals functions, advantages, objects and importance of journal

Which of the following specialized journals records "good returned by customers"?

  1. Purchase journal

  2. Sales journal

  3. Purchases return journal

  4. Sales return journal
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The Sales Return Journal is the specialized book used to record goods returned by customers.

Multiple choice elements of book keeping and accountancy book of original record - journal understand the need for journal journals functions, advantages, objects and importance of journal

Goods returned by Mr Y for Rs 10000 passed through the Purchased Return Book. This error will result in _________________.

  1. Increase in gross profit

  2. Decrease in gross profit

  3. No effect on gross profit

  4. Either (a) or (b)
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Recording a sales return in the Purchases Return Book means the return is treated as a reduction in purchases rather than a reduction in sales. This artificially inflates the cost of goods sold calculation, leading to an increase in reported gross profit.

Multiple choice elements of book keeping and accountancy book of original record - journal understand the need for journal journals functions, advantages, objects and importance of journal

Goods returned to X for Rs.10,000 passed through the Sales Return Book. The error will result in ________________.

  1. Increase in gross profit

  2. Decrease in gross profit

  3. No effect on gross profit

  4. Either (a) or (b)
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Recording a purchase return in the Sales Return Book reduces sales instead of reducing purchases. This results in an understated sales figure and an overstated cost of goods sold, thereby decreasing the gross profit.

Multiple choice elements of book keeping and accountancy book of original record - journal understand the need for journal journals functions, advantages, objects and importance of journal

Credit purchase of plant and machinery is recorded in_________________.

  1. purchase day book

  2. purchase ledger

  3. cash book

  4. general journal
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Specialized journals like the Purchase Day Book are only for credit purchases of stock. Credit purchases of assets like plant and machinery must be recorded in the General Journal.