Tag: introduction to journal proper

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Multiple choice elements of accounts journal proper balancing of accounts balancing the accounts introduction to journal proper

Excess of debit side total of an account over its credit side total is called _____.

  1. debit balance

  2. credit balance

  3. equal balance

  4. nil balance
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Accounts in the ledger are periodically balanced, generally at the end of the accounting period, with object of ascertaining the net position of each amount. Balancing of an account means that the two sides are totaled and the difference between them is shown on the side, which is shorter in order to make their totals equal. 

The words 'balance c/d' are written against the amount of the difference between the two sides. The amount of balance is brought (b/d) down in the next accounting period indicating that it is a continuing account, till finally settled or closed. 
In case, the debit side exceeds the credit side, the difference is written on the credit side and is called as debit balance. 
If the credit side exceeds the debit side, the difference between the two appears on the debit side and is called credit balance.

Multiple choice elements of accounts journal proper balancing of accounts balancing the accounts introduction to journal proper

An account has a debit balance if the total of credit side is greater than the total of debit side.

  1. True

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

Balancing of an account means ascertaining the net effect of the transaction, i.e. the difference between the debit and credit side of the ledger account. 


Thus, when the debit side of the ledger account exceeds the credit side, the balancing figure is termed as Debit balance. 
All the assets expenses and losses show Debit balance.

Multiple choice elements of accounts journal proper balancing of accounts balancing the accounts introduction to journal proper

Select the most appropriate alternative from those given below:
Reserve for discount on debtor has a _______ balance.

  1. credit

  2. debit

  3. nil

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

All the reserves and provisions are made out of profit. Profit being a nominal account has a credit balance. Therefore, all the reserves and provisions also have a credit balance. 

Reserve for discount on debtors is made in order to make a provision to allow discount to the debtors on payment. Discount on debtors is an expense and thus the business provides for it in advance. 
The entry is:
Profit and Loss A/c............Dr.
To Reserve for discount on debtors A/c.
Thus, the correct option is A.

Multiple choice elements of accounts journal proper balancing of accounts balancing the accounts introduction to journal proper

Bad debts reserve account always shows ________ balance.

  1. credit

  2. debit

  3. zero

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

The bad debt reserve is a provision for the estimated amount of bad debt that is likely to arise from existing account receivable. A bad debt reserve is a contra account, which is designed to offset the receivables account with which it is prepared. The receivables account has a natural debit balance, while the bad debt reserve has a natural credit balance.

Multiple choice elements of accounts journal proper balancing of accounts balancing the accounts introduction to journal proper

State whether the following statements are True or False.
Capital Account rarely shows debit balance. 

  1. True

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

A capital account shows credit balance. It represents the amount owed by a business to the owner of the business. Thus, it is a liability for  the business. All the liabilities represents the credit balance. Hence, Capital A/c represents the credit balance.

Multiple choice elements of accounts journal proper balancing of accounts balancing the accounts introduction to journal proper

The process of equalizing the two sides of an account by putting the difference on the side where amount is short is known as _____________.

  1. Balancing

  2. Posting

  3. Journalizing

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

Balancing is the process of finding the difference between the two sides of an account and placing it on the shorter side to make the totals equal.

Multiple choice elements of accounts journal proper balancing of accounts balancing the accounts introduction to journal proper

State the reasons whether the following statement is true or false.
nominal accounts are balanced in the end of the accounting year.

  1. True

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

Nominal accounts (expenses, losses, incomes, gains) are closed at the end of the year by transferring them to the Trading and Profit & Loss Account, not balanced.