Question by CA (Dr.) G.S.GREWAL – Series 2

  1. The rule “Debit all expenses and losses and credit all gains and incomes” is applicable to Personal Account
  1. The debit balance of a personal account shows ________.
  1. What is the type of Drawings Account?

(a)     Personal

(b)     Real

(c)     Nominal

(d)     Expense

Answer – Series 2

  1. False

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.

  1. amount receivable
  2. (a)

Reason: Drawings is a personal account being the amount withdrawn or goods taken for personal use.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

  1. Personal Accounts are related to Individuals, Banks, Companies, etc.
  1. Nominal Accounts are related to ___________.
  1. 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

  1. True

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.

  1. Expenses, Losses and Incomes
  2. (b)

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

  1. Cash column in the Cash Book cannot have credit balance whereas Bank column may have credit balance.
  1. Cash Balance appearing in Trail Balance is transferred to _________side of the Balance Sheet.
  1. The closing balance of the Petty Cash Book is

(a)     Expense/Expenditure

(b)     Profit/Gain

(c)     Asset

(d)     Liability

Answer – Series 7

  1. True

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.

  1. Assets
  2. (c)

Reason: The closing balance of the Petty Cash Book is  an asset because it is Cash in hand.

Question – Series 8

  1. Purchase of an asset for cash would cause Total Liabilities to decrease.
  1. Amount owed to an outsider is a ______.
  1. 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

  1. False

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.

  1. liability
  2. (a)

Reason: Total Assets = Total Liabilities + Net Worth

₹ 1,80,000 = Total Liabilities + ₹ 50,000

Total Liabilities = ₹ 1,30,000

Question – Series 9

  1. Difference between Total Asset and External Liabilities is Net Worth.
  1. If total assets of a business are ₹ 3,80,000 and Outside Liabilities is ₹ 1,00,000. Then Net Worth will be ________.
  1. 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

  1. True

Reason Net worth is the difference between Total Assets and External liabilities.

  1. ₹ 2,30,000
  2. (b)

Reason: Assets = Liabilities + Capital

                       = ₹ 40,000 + ₹ 80,000

                      = ₹ 1,20,000

Question – Series 12

  1. Cash Book is an example of General Journal.
  1. Trade Mark is an _________.
  1. Rent paid is a

(a)     Personal Account

(b)     Real Account

(c)     Nominal Account

(d)     Liability Account

Answer – Series 12

  1. False

Reason  Cash Book is a special journal as it is maintained to record cash and banlk transactions only.

  1. intangible asset
  2. (c)

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

  1. Money which the firm has borrowed and has not yet repaid is a liability of a firm.
  1. In accounting, the term ‘purchases’ means goods purchased for _______.
  1. 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

  1. True

Reason: Liabilities are obligations to pay amount of money.

  1. resale
  2. (d)

Reason:  Basic Accounting Equation is:-

Assets = Liabilities + Capital

Capital = Assets – Liabilities

Question – Series 17

  1. A Journal is also known as Book of Original Entry.
  1. Purchases Day Book records only credit purchases of _______.
  1. 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

  1. True

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.

  1. goods
  2. (b)

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

  1. Salary is classified as Capital Expenditure.
  1. Income tax paid for the owner is shown as debited to _______ A/c.
  1. 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

  1. False

Reason: Carriage on Goods sold is an indirect expense related to sales and therefore, is  shown in the Profit and Loss Account.

  1. Capital A/c
  2. (b)

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

  1. On inter-state (i.e., outside the state) purchase of goods, SGST and IGST is levied.
  1. A Journal is known as a book of _________entry.
  1. 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

  1. False

Reason: On intra-state (i.e., within the state) purchase of goods, CGST and SGST is levied.

  1. original
  2. (b)

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

  1. A journal is also known as Cash Account.
  1. Sales will have _______ balance.
  1. 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

  1. False

Reason: A Journal is also known as Book of Original Entry

  1. Credit

Multiple Choice Question

  1. (b)

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.

  1. Liability and Owner’s equity are also termed as _________.
  2. 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

  1. True

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’..

  1. Total Liability
  2. (b)

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.

  1. 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 __________.
  2. 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

  1. True

Reason: Asset Account always has debit balance; therefore increase in assets will result in increase in debit side.

  1. Current Asset
  2. (a)

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 _______.

  1. A sale of goods to Ram for cash is debited to

(a)     Ram

(b)     Cash

(c)     Sales

(d)     Purchases

Answer – Series 56

  1. True

Reason: According to Modern Approach Increase in Assets is always debited and decrease in Assets is always credited.

  1. debit, credit
  2. (b)

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

  1. Cash book performs the function of both Journal and Ledger.
  2. Cash is a ________asset.
  3. If Ram has sold goods for cash, the entry will be recorded in the

(a)     Cash Book

(b)     Sales Book

(c)     Proper Journal

(d)     Ledger

Answer – Series 58

  1. True

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.

  1. current.
  2. (a) Reason: Since the goods are sold in cash.

Question – Series 59

  1. A Simple Petty Cash Book is just like a Journal.

       2. Petty Cash Book is used for recording ________ expenses.

  1. The balance in the Petty Cash Book is

(a)     An expense

(b)     A profit

(c)     An asset

(d)     A revenue

Answer – Series 59

  1. False

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.

  1. petty
  2. (c)

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.

  1. While making entries in Cash Book the rule of _________ account is followed.
  2. 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

  1. True

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.

  1. real
  2. (a)

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

  1. The Purchase Return Book has a debit balance.
  2. In Journal Proper, only __________ discount is recorded.
  3. 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

  1. False

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.

  1. cash
  2. (d)

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.

Question – Series 83

  1. Loan taken from Vikas should be credited to Loan from Vikas Account.
  2. Sales Journal is used to record ________.
  3. The sale of business asset on credit is recorded in

(a)     Sales Journal

(b)     General Journal

(c)     Cash Book

(d)     Purchases Journal

Answer – Series 83

  1. True

Reason: Loan from Vikas is a Liability. And therefore, is credited to Loan from Vikas Account.

  1. credit sales of goods
  2. (b)

Reason: Sales Journal, Purchases Journal and Cash Book are maintained to record credit sales of goods dealt in, credit purchase of goods and Cash transactions respectively. All other transactions are recorded in the General Journal. Sale of business assets on credit is not in the nature of transactions that are recorded in the above three Journals. Thus, it will be recorded in General Journal.

Question – Series 84

  1. Goods purchased from Ajay for ₹ 10,000, were passed through the Sales Book. The rectification of the error will decrease the gross profit.
  2. Discount given for early or timely payment is termed as ________.
  3. An obligation of business is

(a)     An Asset

(b)     A Liability

(c)     An Income

(d)     An Expense

Answer – Series 84

  1. True

Reason: Purchase being recorded as sales will decrease the gross profit since sales (revenue) stands increased whereas expense stands reduced. After rectification, revenue will be reduced and expense will be increased. Thus, gross profit will decrease.

  1. cash discount
  2. (b)

Reason: Obligation means the amount due by the business. Thus, it is a liability.

Question – Series 85

  1. The amount of bad debts is debited to Discount Account.
  2. Closing Stock existing in the trial balance shown _________.
  3. The credit balance in the bank account is

(a)     An asset

(b)     A liability

(c)     A revenue

(d)     Cash

Answer – Question Series 85

  1. False

Reason: Bad debt is an amount that is not recoverable from the debtor. It being a loss is debited to Bad debts Account (not to Discount Account) and is transferred to Profit and Loss Account.

  1. Balance Sheet
  2. (b)

Reason: Credit balance in an account means either income or liability. Credit balance in the bank account is not an income but a liability.

Question Series 86

  1. Withdrawal of amount by the owner is not an expense but a reduction of Capital.
  2. The documents on the basis of which transactions are recorded in the account books is known as _______.
  3. Purchases Journal is prepared for the purpose of recording

(a)     Cash purchases

(b)     Credit purchases

(c)     Total purchases

(d)     All the above

Answer – Question Series 86

  1. True

Reason: Withdrawal of amount by the owner for personal use means drawing in cash. Drawings is reduced from the capital in the Balance Sheet. It thus reduces both cash and capital.

  1. source documents
  2. (b)

Reason: Purchases Journal is a special Journal to record credit purchases of goods dealt in (finished goods) or used for manufacturer (raw material, stores, etc.).

Question – Series 94

  1. Current Liabilities means which are less than ₹ one lakh.
  2. When a customer settles his account in cash the accounts to be affected are _______.
  3. If total assets of a business are ₹ 1,80,000 and net worth is ₹ 50,000, outside liability will be

(a)     ₹ 1,30,000

(b)     ₹ 2,30,000

(c)      ₹ 1,80,000

(d)     ₹ 90,000

Answer – Series 94

  1. False

Reason: Current Liabilities are those liabilities which are payable in the near future i.e., within a period of 12 months. Examples of Current Liabilities are creditors, Bills Payable, Expenses payable etc.

  1. Cash Account and Debtor Account
  2. (a)

Reason: As per the accounting equation total assets are always equal to total of owner’s equity and liabilities. Therefore ₹ 1,80,000 (Assets) = ₹ 50,000 (Net Worth) + ₹ 1,30,000 (Outside Liabilities).

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