Tag: golden rules of debit and credit (traditional approach)

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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

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.

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

Match List I with List II and select the correct answer using the codes given below:

List I(Name of the account List II(Nature of the account)
A. Bank Loan A/c 1. Personal
B. Bills Receivable A/c 2. Nominal
C. Capital A/c 3. Real
D. Purchases A/c

  1. $A = 1, B = 1, C = 1, D = 2$

  2. $A = 1, B = 2, C = 3, D = 3$

  3. $A = 1, B = 2, C = 3, D = 1$

  4. $A = 2, B = 1, C = 2, D = 1$
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

From the fundamentals of accountancy: 

  • Bank loan accounts for customer is personal account.
  • B/R and B/P are not assets because they are not yet acquired as like Plant, building etc. They are yet to be en cashed. Asset means which has been acquired and has some value. Hence, Bills Receivable and Bills Payable are Representative Personal A/cs.
  • Capital account is a personal account. because capital account is related to owner personal capital and that why this is treated in the liabilities side of balance sheet.
  • Purchase - a real or nominal account. Purchased goods are initially treated as cost of goods which will be sold during the year. It is only at the end of the year we make an adjustment for the goods which remain unsold, i.e. closing stock.

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 all expenses and losses and credit all gains and incomes" is applicable to _________.

  1. Personal account

  2. Real account

  3. Nominal account

  4. None of these
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 accounts are some examples of nominal account. 

The rule for Nominal accounts 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

At the end of the accounting year all the nominal accounts of the ledger book are _________________________.

  1. Balanced but not transferred to profit and loss account

  2. Not balanced and also the balance is not transferred to the profit and loss account

  3. Balanced and the balance is transferred to the balance sheet

  4. Not balanced and transferred to the profit and loss account.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Nominal accounts represent expenses, losses, incomes, and gains. At the end of the accounting year, these are closed by transferring their balances to the Profit and Loss 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

Outstanding wages is an example of __________.

  1. Personal A/c

  2. Real A/c

  3. Nominal A/c

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

Examples of nominal accounts are Purchase A/c, Sales A/c, Salary A/c etc. 

Outstanding wages is classified as a personal account and not a nominal account. This account represents the accounts of all those persons to whom wages have not been paid and hence, are outstanding.

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

While preparing the Annual Financial Statements, the balance of Prepaid Rend Account should be treated as the balance of a __________. 

  1. personal Account

  2. real Account

  3. nominal Account

  4. deferred Expenditure Account
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Prepaid Rent is an asset representing a claim on a service. It is a representative personal account because it represents the landlord to whom the payment was made in advance.

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

Match List I with List II and select the correct answer using the codes given below:

List I List II
A. Rent prepaid and prepaid Insurance 1. Nominal accounts
B. Goodwill and patents 2. Real accounts
C. Rent, Interest 3. Personal accounts

  1. $A = 3, B = 2, C = 1$

  2. $A = 1, B = 2, C = 3$

  3. $A = 2, B = 1, C = 3$

  4. $A = 2, B = 3, C = 1$
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

  • Prepaid expenses are recorded in the books at the end of an accounting period to show true numbers of a business. Prepaid (unexpired) expense is a personal account and is shown on the Assets side of a balance sheet.
  •  Real account - All assets of a firm, whether tangible or intangible, fall under the category “Real Accounts“. 
Examples of intangible real accounts are goodwill, patents, trademarks, copyrights, etc. 
  • Nominal account - Accounts which are related to expenses, losses, incomes and gains are called Nominal accounts.These accounts types are related to income or gains and expenses or losses. 
  • For example: – Rent A/c, commission received A/c, salary A/c, wages A/c, conveyance A/c, 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

Joint Venture A/c is ______________.

  1. Personal A/c

  2. Nominal A/c

  3. Suspense A/c

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

A joint venture is an arrangement in which two or more parties agree to pool their resources for the purpose of a specific task or transaction. 

In a joint venture, each of the members is responsible for profits, losses and costs associated with it.

It is a Nominal 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

Salary paid to Ram will be debited to Ram's Personal account.

  1. True

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

Salary paid to Ram will be debited to salary A/c instead of Ram's Personal A/c. The correct Journal Entry is
Salary A/C                 Dr.
To Cash A/c
(Being salary paid to Ram)