Tag: meaning and classification of accounts

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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.