Question by CA (Dr.) G.S.GREWAL – Series 2
- The rule “Debit all expenses and losses and credit all gains and incomes” is applicable to Personal Account
- The debit balance of a personal account shows ______________.
- What is the type of Drawings Account?
Answer – Series 2
Reason Nominal Accounts are the accounts relating to expenses, losses, incomes and gains .Expenses and Losses are debited while incomes and gains are credited.
Correct Statement: The rule “Debit all expenses and losses and credit all incomes and gains” applies to Nominal Account.
- amount receivable
Reason: Drawings is a personal account being the amount withdrawn or goods taken for personal use. It is deducted from Capital Account at the end of the year.
Question – Series 4
- Personal Accounts are related to Individuals, Banks, Companies, etc.
- Nominal Accounts are related to ___________________________.
- The rule ‘Debit what comes in Credit what goes out’ is applicable to:-
(a) Personal Account
(b) Real Account
(c) Nominal Account
(d) Liability Account
Answer – Series 4
Reason According to the classification of accounts, Accounts are of three categories i.e., Real Accounts (Represent tangible and intangible assets), personal accounts (representing individuals, artificial person’s accounts and representative accounts such as Prepaid Insurance, Outstanding Rent) and Nominal Accounts representing expenses, losses, incomes and gains. Thus, Individuals, Banks, Companies etc. are personal accounts.
- Expenses, Losses and Incomes
Reason: Real Accounts are tangible and intangible fixed assets of the business. Tangible Assets are those Assets which have physical form and can be seen and touched. Intangible fixed assets are those assets which do not have physical form and cannot be seen or touched. The assets account has debit balance representing assets owned by the business. An increase or purchase of fixed assets mean asset has come in and thus, is debited. On the other hand, sale or disposal of fixed asset means asset has gone out (sold, discarded) and thus, is credited.
Question – Series 7
- Cash column in the Cash Book cannot have credit balance whereas Bank column may have credit balance.
- Cash Balance appearing in Trail Balance is transferred to ___________________ side of the Balance Sheet.
- The closing balance of the Petty Cash Book is
Answer – Series 7
Reason: Cash Column in the Cash Book cannot have debit balance because credit balance means amount spent is more than the Cash Balance. Whereas, Bank Column of the Cash Book may have credit balance(Overdraft balance) meaning bank is overdrawn.
Reason: The closing balance of the Petty Cash Book is an asset because it is Cash in hand.
Question – Series 8
- Purchase of an asset for cash would cause Total Liabilities to decrease.
- Amount owed to an outsider is a _________.
- If total Assets of a business are ₹ 1,80,000 and net worth is ₹ 50,000, then outside liability will be:-
(a) ₹ 1,30,000
(b) ₹ 2,30,000
(c) ₹ 1,80,000
(d) ₹ 50,000
Answer – Series 8
Reason Purchase of assets for cash would cause Cash in hand to decrease on asset being purchase for cash as it means cash in hand is reduced.
Reason: Total Assets = Total Liabilities + Net Worth
₹ 1,80,000 = Total Liabilities + ₹ 50,000
Total Liabilities = ₹ 1,30,000
Question – Series 9
- Difference between Total Asset and External Liabilities is Net Worth.
- If total assets of a business are ₹ 3,80,000 and Outside Liabilities is ₹ 1,00,000. Then Net Worth will be ___________________.
- If the Owner’s Equity is ₹ 80,000 and external liability is ₹ 40,000, The total assets of the firm will be:
(a) ₹ 1,00,000
(b) ₹ 1,20,000
(c) ₹ 80,000
(d) ₹ 1,40,000
Answer – Series 9
Reason Net worth is the difference between Total Assets and External liabilities.
- ₹ 2,30,000
Reason: Assets = Liabilities + Capital
= ₹ 40,000 + ₹ 80,000
= ₹ 1,20,000
Question – Series 12
- Cash Book is an example of General Journal.
- Trade Mark is an ___________________________-.
- Rent paid is a
(a) Personal Account
(b) Real Account
(c) Nominal Account
(d) Liability Account
Answer – Series 12
Reason Cash Book is a special journal as it is maintained to record cash and banlk transactions only.
- intangible asset
Reason: Accounts which relate to expenses, losses, gains, revenue, etc., are Nominal Accounts. These are Salary Account, Purchases Account, Sales Account, Rent paid Account. The net result of all the Nominal Accounts is profit or loss which is transferred to the Capital Account.
Question – Series 16
- Money which the firm has borrowed and has not yet repaid is a liability of a firm.
- In accounting, the term ‘purchases’ means goods purchased for _____________.
- Which of the following equations is correct?
(a) Assets + Capital = Liabilities
(b) Liabilities – Capital = Assets
(c) Capital = Assets + Liabilities
(d) Capital = Assets – Liabilities
Answer – Series 16
Reason: Liabilities are obligations to pay amount of money.
Reason: Basic Accounting Equation is:-
Assets = Liabilities + Capital
Capital = Assets – Liabilities
Question – Series 17
- A Journal is also known as Book of Original Entry.
- Purchases Day Book records only credit purchases of _____________.
- A debtor who returned goods and is sent a note by the Seller. The note is called:-
(a) Debit Note
(b) Credit Note
(c) Refund Note
(d) Return Note
Answer – Series 17
Reason: A Journal is also known as Book of Original Entry as Journal is a book of primary entry or a book of original entry in which transactions are first recorded in a chronological order i.e., in the order or sequence they are entered.
Reason: Credit Note is made out evidencing that credit has been granted to a debtor e.g., if a customer returns goods previously invoiced, or the customer is allowed further discount, a credit not is issued.
Question – Series 19
- Salary is classified as Capital Expenditure.
- Income tax paid for the owner is shown as debited to _______________ A/c.
- Commission received in Advance existing in the Trial Balance is shown on the:-
(a) Assets side of the Balance Sheet
(b) Liability side of the Balance Sheet
(c) Debit side of the Profit and Loss A/c
(d) Credit Side of the Profit and Loss A/c
Answer – Series 19
Reason: Carriage on Goods sold is an indirect expense related to sales and therefore, is shown in the Profit and Loss Account.
- Capital A/c
Reason: Commission received in advance is unearned income. It will be accounted when it is earned. Commission received in advance has a credit balance. Hence, it will be shown in the liabilities side of the Balance Sheet.
Question – Series 26
- On inter-state (i.e., outside the state) purchase of goods, SGST and IGST is levied.
- A Journal is known as a book of ________________entry.
- For GST paid on inter-state of goods, which of the following account is credited:
(a) Output CGST A/c
(b) Output IGST A/c
(c) Input IGST A/c
(d) Output SGST A/c
Answer – Series 26
Reason: On intra-state (i.e., within the state) purchase of goods, CGST and SGST is levied.
Reason: GST collected by the seller of goods and/or services is Output GST in case of inter-state it will be Output IGST.
Question – Series 34
- A journal is also known as Cash Account.
- Sales will have _____________ balance.
- Cash purchase of raw material is recorded in
(a) Purchase Day Book
(b) Cash Book
(c) Directly in Purchase A/c
(d) All the above
Answer – Series 34
Reason: A Journal is also known as Book of Original Entry
Multiple Choice Question
Reason: Cash Book is a special journal in which all cash and bank transactions are recorded. Since, Cash Purchase is a cash transaction, it will be recorded in cash book.
Question Series – 46
1 When a customer settle his account in cash the accounts to be affected are Cash Account and Debtor Account.
- Liability and Owner’s equity are also termed as ____________________.
- Which statement is correct:-
(a) Keeping systematic recording of business transaction is not the function of financial accounting.
(b) Accounting is concerned with monetary transactions.
(c) Accounting is concerned with past as well as future events.
(d) Business and businessman are same identity from the accounting point of view.
Answer Series – 46
Reason: When a payment is received from a customer in cash, Cash Account increases. The rule applied is – ‘Debit what comes in, Credit what goes out’. On the other hand balance of the debtor will decrease by that amount. The rule applied is – ‘Debit the receiver Credit the giver’..
- Total Liability
Reason: Accounting records only those transactions which can be measured in the terms of money. Transactions which cannot be measured in terms of money are not recorded in accounting.
Question Series – 47
1 An increase in assets is recorded in the Debit side.
- Assets which can be converted into cash or near cash or can be consumed within a period of not more than 12 months is called __________________.
- If the owner’s equity is ₹ 80,000 and external liability is ₹ 40,00, Cash in Hand is ₹ 20,000. The other assets of the firm will be:-
(a) ₹ 1,00,000
(b) ₹ 1,20,000
(c) ₹ 80,000
(d) ₹ 40,000.
Answer Series – 47
Reason: Asset Account always has debit balance; therefore increase in assets will result in increase in debit side.
- Current Asset
Reason: As per the Accounting Equation Total Assets are always equal to total of Owner’s Equity and Liability. Therefore ₹ 1,00,000 (Other Assets) + ₹ 20,000 (Cash) = ₹ 80,000 (Owner’s Equity) + ₹ 40,000 (External Liability)
Question – Series 56
1.Increase in assets are debited and decrease in assets are credited.
2 Dr. stands for _________________ and Cr. stands for _________________.
- A sale of goods to Ram for cash is debited to
Answer – Series 56
Reason: According to Modern Approach Increase in Assets is always debited and decrease in Assets is always credited.
- debit, credit
Reason: Cash Account is debited and Sales Account is credited. According to modern approach increase in asset is always debited and increase in revenue is always credited. Here Cash is an asset and sales is revenue.
Question – Series 58
- Cash book performs the function of both Journal and Ledger.
- Cash is a ________________asset.
- If Ram has sold goods for cash, the entry will be recorded in the
(a) Cash Book
(b) Sales Book
(c) Proper Journal
Answer – Series 58
Reason: Cash book plays dual role as a book of original entry as well as a ledger. cash transactions are first recorded in cash book and on the basis of such record ,ledger accounts are prepared.
- (a) Reason: Since the goods are sold in cash.
Question – Series 59
- A Simple Petty Cash Book is just like a Journal.
2. Petty Cash Book is used for recording ______________ expenses.
- The balance in the Petty Cash Book is
(a) An expense
(b) A profit
(c) An asset
(d) A revenue
Answer – Series 59
Reason: A simple Petty Cash Book is just like a Cash Book which records all the cash related transactions increase in cash is recorded in debit side which decrease is recorded on the credit side.
Reason: The balance in the petty cash book is an asset.
Question – Series 62
1.Cash Book is a sub-division of the books of original entry.
- While making entries in Cash Book the rule of _______________ account is followed.
- Cash Book records
(a) Cash receipts and payments
(b) Cash and Credit sales of goods
(c) Cash and Credit Purchase
(d) Credit Purchase of goods only.
Answer – Series 62
Reason: Cash Book is a sub-division of the books of original entry. Cash Book is a book of prime entry in which cash and bank transactions of a business are recorded in a chronological order, i.e., as they are entered into.
Reason: Cash Book records entries on both sides debit side and credit side. Increase in cash is recorded in debit side. Decrease in cash is recorded in credit side. Hence we can say that it records receipt and payments of cash items only.
Question – Series 66
- The Purchase Return Book has a debit balance.
- In Journal Proper, only __________________ discount is recorded.
- The weekly or monthly total of the Purchases Book is
(a) Posted to debit of the Purchases Account
(b) Posted to debit of the Sales Account
(c) Posted to credit of the Purchases Account
(d) Posted to the debit of Party’s Accounts
Answer – Series 66
Reason: Purchases is considered as an expense and has a debit balance while purchase return have been considered as decrease in expense hence credit balance.
Reason: The weekly or monthly total of the Purchases Book is posted to debit of the Purchases Account. Purchases have a debit balance that is why total of the Purchase book is posted to the debit side of the Purchases Account.