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

Questions Related to golden rules of debit and credit (traditional approach)

Which of the following is a personal account?

book keeping and accountancy accounting procedures - rules of debit and credit golden rules of debit and credit (traditional approach) types of account meaning and classification of accounts

  1. Outstanding Expense

  2. Investment

  3. Share premium

  4. Salary

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Correct Option: A
Explanation:

Outstanding expenses are recorded in books of finance at the end of an accounting period to show the true numbers of a business. 

The outstanding expense is a personal account and is treated as a liability for the business. It is also shown on the liability side of a balance sheet.

Kamal's account, Mala's account, Sharma's accounts are example of _______________.

book keeping and accountancy accounting procedures - rules of debit and credit golden rules of debit and credit (traditional approach) types of account meaning and classification of accounts

  1. Artificial or legal persons personal account

  2. Natural persons' personal account

  3. Representative personal accounts

  4. Any of the above

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Correct Option: B

Which of the following is a real (permanent) account?

commercial studies accounting procedures - rules of debit and credit golden rules of debit and credit (traditional approach) types of account meaning and classification of accounts

  1. Goodwill

  2. Sales

  3. Accounts Receivable

  4. Both Goodwill and Accounts Receivable

Show answer
Correct Option: D
Explanation:

Accounts of things are called real accounts. For each of the thing, a separate account is opened in the ledger. The balances of real account are carries over to the next period. Goodwill is a intangible fixed assets and accounts receivable are current assets. Both are real accounts.

Goods Account is _____.

commercial studies accounting procedures - rules of debit and credit golden rules of debit and credit (traditional approach) types of account meaning and classification of accounts

  1. Real

  2. Nominal

  3. Personal

  4. None of the above

Show answer
Correct Option: A
Explanation:

Real accounts are the accounts that refer to the possession of a business. The possessions may be tangible or intangible. The possession are the assets of a business.

Normally the books of business contains tangible assets that have physical existence. However, there are intangible assets as well that can appear in the books of accounts for instance Copyrights, Trademarks, Goodwill, Patents are intangible in nature but a business certainly possess them.The balances of these real accounts are closed at the financial year end but are carried forward as opening balances of the new financial year. Goods account is classified as a real account, as it is a tangible asset.

Income Receivable Account is _______.

commercial studies accounting procedures - rules of debit and credit golden rules of debit and credit (traditional approach) types of account meaning and classification of accounts

  1. Personal

  2. Real

  3. Nominal

  4. All of the above

Show answer
Correct Option: A
Explanation:

Personal accounts are related to individuals, firms, companies, etc. A few examples of personal accounts are debtors, creditors, banks, outstanding.//prepaid expenses, accounts of credit customers, accounts of goods suppliers, capital, drawings, etc. Personal accounts are classified into three subcategories: Artificial, Natural, and Representative.

Representative personal accounts represents a certain person or a group directly or indirectly.
Income Receivable Account is a representative personal account, i.e it represents the income to be received from a group of persons. Hence, it is classified as a personal account.

Import Duty Account is ________ in nature.

commercial studies accounting procedures - rules of debit and credit golden rules of debit and credit (traditional approach) types of account meaning and classification of accounts

  1. Real

  2. Nominal

  3. Personal

  4. None of the above

Show answer
Correct Option: B
Explanation:

Import duty is a tax collected on imports and some exports by a country's customs authorities. It is usually based on the imported goods value. Depending on the context, import duty may also be referred to as customs duty, tariff, import tax or import tariff.

There are mainly three types of accounts: Real, Personal and Nominal accounts.
Accounts which are related to expenses, losses, incomes or gains are called Nominal accounts. The dictionary meaning of the word :nominal" is "existing in name only" and the meaning remains absolutely true in accounting sense too, because nominal accounts do not really exist in physical form, but behind every nominal account money is involved. The final result of all nominal accounts is either profit or loss which is the transferred to the capital account.
Import Duty Accounts is a direct expense of a business and hence, it is classified as a nominal account.

Copyright A/c is_____.

commercial studies accounting procedures - rules of debit and credit golden rules of debit and credit (traditional approach) types of account meaning and classification of accounts

  1. Real

  2. Personal

  3. Nominal

  4. None of the above

Show answer
Correct Option: A
Explanation:

Real accounts are the accounts that refer to the possessions of a business. The possessions may be tangible and intangible. The possessions are assets of the business.

Normally the books of business contains tangible assets that have physical existence. However, there are intangible assets as well that can appear in the books of accounts. For instance, Copyrights, Trademarks, Goodwill, Patents are intangible in nature but a business certainly possess them. 
The balances of these real accounts are not closed a the financial year end but are carried forward as opening balances of the new financial year.
Copyright is an intangible asset, and hence it is classified as real account.

Free Sample Distribution A/c_____.

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

  1. Real

  2. Personal

  3. Nominal

  4. None of the above

Show answer
Correct Option: C
Explanation:

Accounts relating to income, revenue, gain, expenses  and losses are termed as nominal accounts. These accounts are also known as fictitious assets as they do represent any intangible 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 account are some examples of nominal account. The rule for nominal accounts is: Debit all expenses and losses; Credit all incomes and gains.

Free Sample Distribution account is an indirect expense of a business and thus, it is classified as a  nominal account.

Office Equipment Account is _________.

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

  1. Real

  2. Nominal

  3. Personal

  4. All of the above

Show answer
Correct Option: A
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.

1. Tangible Real Accounts: These accounts represent assets and properties which can be seen, touched, felt, measured, purchased and sold. For e.g. Machinery account, 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 accounts, Patents account, etc.
Office Equipment is the account whose value can be measured in terms of money and treated as an asset of the business. Hence, it is classified as a real account.

Bank of India Account ___________.

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

  1. Real

  2. Personal

  3. Nominal

  4. None of the above

Show answer
Correct Option: B
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 natural persons' personal account. For e.g., Kamal's account, Mala's account. Both male and females are included in it.
2. Artificial or legal persons: An account recording financial transaction with an artificial person created by law  or otherwise is termed as an artificial persons' personal account. For e.g., Firms' account, limited companies' account.
3. Representative personal account: 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 rent, outstanding wages, etc.
  • Bank of India is a personal account as it is related to a banking firm which is an artificial persons. All those accounts which are related to a person, whether artificial or natural, are termed as personal account.