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

Fill in the blanks with correct alternative and rewrite the statements.
___________ accounts usually shows a debit balance.

  1. Personal

  2. Real

  3. Nominal

  4. Income
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation
Real account usually shows a debit balance.
A real account is an account hat retains and rolls forward its ending balance from period to period. The areas in the balance sheet in which real accounts are found are assets, liabilities, and equity. Examples of real accounts are: Accounts payable. Retained earnings.

Assets, expenses, losses, and the owner's drawing account will normally have debit balances. Their balances will increase with a debit entry, and will decrease with a credit entry.

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

Bank gives overdraft facility to _____________ account holders.

  1. Savings

  2. Current

  3. Fixed deposit

  4. Re-curring deposit
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

 An overdraft facility is a credit agreement made with a bank that allows an account holder to use or withdraw more money than what they have in their account up to the approved limit. The sanctioned overdraft limit and the interest charged will vary based on the nature of the asset offered as collateral.

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

________ accounts relate to assets of the firm.

  1. Personal 

  2. Real 

  3. Nominal 

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

There are mainly three types of accounts: Real, Personal and Nominal accounts. 

All assets of the 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. Few examples of tangible real accounts are building, machinery, stock, land, etc. 

Intangible real accounts are related to things that can't be touched and felt physically. Few examples of such real accounts are goodwill, trademarks, 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

Prepaid/Advance Salary A/c is classified as _______.

  1. Representative personal A/c

  2. Real A/c

  3. Nominal A/c

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

There are mainly three types of accounts in accounting: 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. Representative Personal accounts are those which represent a certain person or a group directly or indirectly. E.g. Let's say that wages are paid in advance to an employee-a wage prepaid account will be opened in the books of accounts. This wages prepaid account is a representative personal account directly linked to the person. Prepaid.Advance Salary A/c are classified as representative personal A/c.

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

_______ is a Nominal A/c.

  1. Insurance prepaid A/c

  2. Insurance premium A/c

  3. Bank A/c

  4. Rent outstanding A/c
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

There are mainly three types of accounts in accounting: Real, Personal and Nominal accounts. 

  • Personal accounts are classified into three subcategories: Artificial, Natural and Representative.
Accounts which are related to expenses, losses, incomes or gains are called Nominal accounts.
Example, 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 losses which is then transferred to the capital 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

Carriage inward A/c is ________.

  1. Personal A/c

  2. Real A/c

  3. Nominal A/c

  4. Both (b) & (c)
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

There are mainly three types of accounts in accounting: Real, Personal and Nominal account. 

Accounts which are related to expenses, losses, incomes or gains are called Nominal accounts. 
Carriage Inward A/c is a nominal account.The final result of all nominal accounts is either profit or loss which is then transferred to the capital 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

Credit balance of a personal account indicates ________________.

  1. Cash balance

  2. Amount payable

  3. Amount receivable

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

The debit balance of a personal account indicated debt owing by the person and credit balance indicates debts owing to the person concerned. For the business, the first one is account receivable or asset, while the second is accounts payable or liability. Every personal account showing debit balance (i.e. excess of debit side over credit side) will reveal the amount by which the debit side is more than the credit side. Debit balance is recoverable from the person whose account shows a debit balance. A debit balance to a personal account is an asset and therefore the more debit balance to a personal account is an asset and therefore the more debit balances to personal accounts, more the assets are in the form of outstanding recoverables. The debit balance of a personal account shows the amount receivable.

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

Which one of the following is a personal account?

  1. Bills Receivable Account

  2. Livestock Account

  3. Goodwill Account

  4. Outstanding Salaries A/c
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Outstanding Salary A/c is a Representative Personal Account as it represents a group of people to whom some amount of salary is payable. Similarly other outstanding and prepaid expenses also fall under the category of representative personal accounts.

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

Normally, the following accounts are balanced _________________.

  1. Personal accounts and nominal accounts.

  2. Real accounts and nominal accounts.

  3. Personal accounts and real accounts.

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

Normally the Personal account and Real account are balanced. Only accounts relating to assets and liabilities ,that is real account and personal accounts are balanced periodically.

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

Ram's account is related to ___________.

  1. Personal account

  2. Nominal account

  3. Real account

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

A personal account is an account for use by an individual for that person's own needs. It is a relative term to differentiate them from those accounts for business or corporate use.

Ram's A/c is a personal A/c.