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

Prepaid insurance, outstanding salaries are example of _____________.

  1. Tangible real accounts

  2. Intangible real accounts

  3. Representative personal accounts

  4. Artificial or legal persons account
Reveal answer Fill a bubble to check yourself
C 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 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.

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

Goodwill accounts, patents account, trademarks account, copyrights account are examples of _____________.

  1. Tangible real accounts

  2. Intangible real accounts

  3. Representative personal accounts

  4. Artificial or legal persons account
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.

Intangible real accounts represent assets and properties which cannot be seen, touched or felt but they can be measured in terms of money. For e.g. Goodwill account, Patent account, Trademark account, Copyright account, 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 salary is ______________.

  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

 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. Expenses are amounts paid for goods or services purchased.

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

Purchase is _______________.

  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

Nominal Accounts are accounts related and associated to losses, expenses, income or gains. Examples include purchase account, sales account, salary A/c, commission A/c etc. 

Hence, purchase is 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

______ is an intangible real account.

  1. Land

  2. Building

  3. Goodwill

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

Goodwill in accounting is an intangible asset that arises when a buyer acquires an existing business. Goodwill represents assets that are not separately identifiable. 

It is classified as an intangible asset on the balance sheet, since it can neither be seen nor touched.

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 following accounts are never balanced _____________.

  1. Personal Accounts

  2. Real Accounts

  3. Nominal Accounts

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

Nominal accounts are temporary accounts that are closed at the end of the accounting period; therefore, they are not balanced in the traditional sense of carrying a balance forward to the next period.