Tag: nature of accounts and rules of debit and credit

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Multiple choice elements of book keeping and accountancy nature of accounts and rules of debit and credit meaning, advantages and limitations of journals understand the classification of accounts introduction to books of prime entry

Accounts relating to properties or assets are known as ______________.

  1. Real Accounts

  2. Personal Accounts

  3. Nominal Accounts

  4. None of above
Reveal answer Fill a bubble to check yourself
A 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, measured, purchased and sold. For e.g. Machinery account, Cash account, Furniture account.


2. Intangible real account: These accounts represent assets and properties which cannot be seen, touched and felt but can be measured in terms of money. For e.g, Goodwill account, Patents account, etc.

Multiple choice elements of book keeping and accountancy nature of accounts and rules of debit and credit meaning, advantages and limitations of journals understand the classification of accounts introduction to books of prime entry

Outstanding wages is a ______________.

  1. Real Account

  2. Personal Account

  3. Nominal Account

  4. None of above
Reveal answer Fill a bubble to check yourself
B 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 elements of book keeping and accountancy nature of accounts and rules of debit and credit meaning, advantages and limitations of journals understand the classification of accounts introduction to books of prime entry

Provision for doubtful debts account, stock reserve account etc. are ________________.

  1. Valuation (Personal) accounts

  2. Artificial or legal persons personal account

  3. Tangible real accounts

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

Provisions and reserves are created against specific assets or liabilities. In accounting classification, they are often treated as valuation accounts that reduce the book value of an asset, which is a form of personal or representative personal account logic.

Multiple choice elements of book keeping and accountancy nature of accounts and rules of debit and credit meaning, advantages and limitations of journals understand the classification of accounts introduction to books of prime entry

Which of the following account is the artificial person account?

  1. ICICI Bank A/c

  2. Neelam A/c

  3. Wages A/c

  4. Machinery A/c
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

 An Artificial person is an entity that is recognized by the law as a Legal Person i.e. an entity holding legal rights and duties distinct from the individuals whom comprise it.

For example: A registered company is a person in the sense that it can sue or be sued, as well hold property etc. in it’s own name.

A company is not however, an individual or natural person.

Multiple choice elements of book keeping and accountancy nature of accounts and rules of debit and credit meaning, advantages and limitations of journals understand the classification of accounts introduction to books of prime entry

Which one of the following statement is TRUE?

  1. Capital of the firm reduced by borrowing

  2. When there is not change in proprietor's capital, it is indication of loss in business

  3. Nominal accounts refer to false transcations

  4. Real accounts relates to the assets of a business
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Real accounts are those that relate to assets and properties of the business (e.g., Cash, Building, Machinery). Option A is false because borrowing increases liabilities, not necessarily reducing capital. Option C is false because nominal accounts relate to expenses and incomes, not false transactions.

Multiple choice elements of book keeping and accountancy nature of accounts and rules of debit and credit meaning, advantages and limitations of journals understand the classification of accounts introduction to books of prime entry

Proprietor's account is _____________.

  1. Real Accounts

  2. Personal Accounts

  3. Nominal Accounts

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

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 are classified into three subcategories: Artificial, Natural, Representative accounts.
Natural personal accounts: This type of personal accounts is the simplest to understand out of all and includes all God's creations who have ability to deal, who, in most cases, are people.
Artificial personal accounts: Personal accounts which are created artificially by law, such as corporate bodies and institutions, are called Artificial personal accounts.
Representative personal accounts: Accounts which represent a certain person or group directly or indirectly.
Proprietor's account is related to individuals, and  hence, it is classified as a personal account

Multiple choice elements of book keeping and accountancy nature of accounts and rules of debit and credit meaning, advantages and limitations of journals understand the classification of accounts introduction to books of prime entry

An account recording transaction with an individual human being is termed as a ___________.

  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
B 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. 
Natural personal accounts are the simplest to understand out of all and includes all God's creations who have ability to deal, who, in most cases, are people. E.g. Kumar's A/C, Adam's A/C, etc.

Multiple choice elements of book keeping and accountancy nature of accounts and rules of debit and credit meaning, advantages and limitations of journals understand the classification of accounts introduction to books of prime entry

Which of the following books should be used to record purchase of a typewriter on account ?

  1. Cash book

  2. Purchase book

  3. Sales book

  4. Journal book
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Journal book is meant for recording all such transactions for which no special journal has been maintained in the business. Therefore, in this journal, all such transactions are recorded which do not occur frequently and for these transactions no special journal  is required. For example, if Machinery is purchases on credit, it will be recorded in the journal book, because in the cash book only cash purchases of machinery is recorded. Similarly, many other transactions, which do not find their place in the special journals will be recorded in the General Journal such as:

(i) Outstanding expenses - Salaries outstanding, rent outstanding, etc.
(ii) Prepaid expenses - Prepaid rent, salaries paid in advance, etc.
(iii) Income received in advance - Rent received in advance, interest received in  advance, etc.
(iv) Accrued incomes - Commission yet to be received, interest yet to be received
(v) Interest on capital
Hence, recording purchase of a typewriter on account is recorded in journal book.

Multiple choice elements of book keeping and accountancy nature of accounts and rules of debit and credit meaning, advantages and limitations of journals understand the classification of accounts introduction to books of prime entry

To determine the details of a specific transaction, one should refer to ____________.

  1. Ledger

  2. Book of original entry

  3. Relevant vouchers

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

Books of original entry refers to the accounting journals in which business transactions are initially recorded. The information in these books is then summarized and posted into a general ledger, from which financial statements are produced. Each accounting journal contains detailed records for the types of accounting transactions pertaining to a specific area. Examples of these accounting journals are:

(i) Cash journal
(ii) General journal
(iii) Purchase journal
()iv Sales journal
Books of original entry are extremely useful for investigating individual accounting transactions, and ate commonly accesses by auditors, who verify a selection of business transactions to ensure that they were recorded correctly.

Multiple choice elements of book keeping and accountancy nature of accounts and rules of debit and credit meaning, advantages and limitations of journals understand the classification of accounts introduction to books of prime entry

Which of the following books should be used to record an adjusting entry for depreciation?

  1. Cash book

  2. Sales book

  3. Purchase book

  4. Journal book
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Journal book is meant for recording all such transactions for which no special journal has been maintained in the business. Therefore, in this journal, all such transactions are recorded which do not occur frequently and for these transactions no special journal  is required. For example, if Machinery is purchases on credit, it will be recorded in the journal book, because in the cash book only cash purchases of machinery is recorded. Similarly, many other transactions, which do not find their place in the special journals will be recorded in the General Journal such as:

(i) Outstanding expenses - Salaries outstanding, rent outstanding, etc.
(ii) Prepaid expenses - Prepaid rent, salaries paid in advance, etc.
(iii) Income received in advance - Rent received in advance, interest received in  advance, etc.
(iv) Accrued incomes - Commission yet to be received, interest yet to be received
(v) Interest on capital
(vi) Depreciation
(vii) Credit purchase and credit sale of fixed assets- machinery, furniture
(viii) Bade debts
(ix) Goods taken by the proprietor for personal use
Hence, recording and adjusting entry for depreciation is recorded in journal book.