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

Share allotment account is a ______________.

  1. Real account

  2. Nominal account

  3. Personal account

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

Share allotment account represents the amount due from shareholders. Since it represents a group of persons, it is a personal 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

The effect opening entry is the opening of _______________.

  1. Personal Accounts and Real Accounts

  2. Real Accounts and Nominal Accounts

  3. Personal Account and Nominal Accounts

  4. Personal Account, Real Account and Nominal Accounts.
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The effect of opening entries is opening of real and personal accounts as these are the types of account which are left with closing balance at the end of the year. 

The closing balance of previous year is transferred to the next year as opening balance. 

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 loan account is a _________.

  1. Personal account

  2. Real account

  3. Nominal account

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

There are mainly three types of accounts: Real, Personal, and Nominal. Personal accounts are classified into three subcategories: Artificial, Natural, and Representative.

The accounts related to real persons and organizations are classified as personal accounts. Examples of personal accounts include John's account, Peter's account, Procter and Gamble's account, Vibrant Marketing Agency's and City Bank's account etc. The business keeps a separate account for each individual and organization for the purpose of ascertaining the balance due from or due to them. Hence, bank loan account is a personal 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

Rent paid in advance is a ____________.

  1. Personal account

  2. Real account

  3. Nominal account

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

Prepaid expenses are those expenses which have been paid in advance and related benefits are not consumed within the same accounting period. The benefits of expenses incurred are carried to the next accounting period. Examples - prepaid salary, prepaid rent, etc 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.

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 of the following is nominal account ?

  1. Bills payable

  2. Bills receivable

  3. Debtors

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

Nominal accounts in accounting are the temporary accounts, such as the income statement accounts. In other words, nominal accounts are the accounts that report revenues, expenses, gains, and losses. They are closed at the end of each accounting year. This means that their account balances are transferred to a permanent account. This closing process allows the nominal accounts to start the next accounting year with zero balances. 

Stationary is classified as a nominal account, as it is an expense.

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 expenses is a _________ account.

  1. Real

  2. Personal

  3. Nominal

  4. None of them
Reveal answer Fill a bubble to check yourself
B 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 the following types:


1. Natural persons: An account recording transactions with an individual is termed as a natural persons' personal account.


2. Artificial or legal persons: An account recording financial transactions with an artificial person created by law or otherwise is termed as an artificial persons' personal account. 

3. Representative personal 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.

Outstanding expenses is the representative personal account because it represents the outstanding expenses to a group pf people. Hence, it can be classified as a personal 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

Bank account is a Nominal account.

  1. True

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

Accounts recording transactions with a person or group of persons are known as personal account. These accounts are necessary, in particular, to record credit transactions. Personal accounts are of the following types:


1. Natural persons: An account recording transactions with an individual is termed as natural persons' personal account.


2. Artificial or legal persons: An account recording financial transactions with an artificial person created by law or otherwise is termed as  an artificial persons; personal account. 

3. Representative personal accounts: An account indirectly representing a person or persons is known as representative personal account. When accounts are of a similar nature and their number er is large, it is better to fed up them under one head  and open a representative personal account.

Bank account is an example of personal account and not nominal account. All the accounts related to an individual, a firm or a company are termed as  a personal accounts. Hence, bank account is an example of a personal 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

Real accounts can take the form of ___________.

  1. Tangible real account like land account, building account, furniture account, cash account

  2. Intangible real account like goodwill account, trade marks account, patent rights account

  3. Natural person's accounts like proprietor's account, suppliers account, receiver's account

  4. Either (a) or (b)
Reveal answer Fill a bubble to check yourself
D 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 or intangible.

1. Tangible real accounts: These accounts represent assets and properties which can be seen, touched, felt, measured, purchased and sold. For e.g. Cash account, Furniture account, etc.
2. Intangible real accounts: These 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, Patents account, Copyright account, etc.