Meaning and Fundamentals of Double Entry Book-Keeping | Aster Classes

Fill in the blank:

1.Increase in asset is debited and decrease in asset is ______

SOLUTION

Increase in asset is debited and decrease asset is credited.

2.Assets = Liabilities +______

SOLUTION

Assets = Liabilities + Capital.

3.Increase in capital is credited and decrease in capital is ______

SOLUTION

Increase in capital is credited and decrease in capital is debited.

4.Scientific and complete system of recording is known as ______

SOLUTION

Scientific and complete system of recording business transactions is known as double entry system.

5.Debit all expenses and losses, Credit all ______

SOLUTION

Debit all expenses and losses, Credit all incomes and gains.

6.Land and Building account is ______ account.

SOLUTION

Land and Building account is a real account.

7.Cash Book and Personal Accounts are only maintained under ______ system.

SOLUTION

Cash book and Personal accounts are only maintained under Single entry system.

8.Debit what comes in and credit what goes out is the rule of ______ account.

SOLUTION

Debit what comes in and credit what goes out is the rule of real account.

9.Travelling expenses account is ______ type of Account

SOLUTION

Travelling expense account is Nominal type of account.

10.Every transaction has ______ effect.

SOLUTION

Every transaction has two fold effects.

11.______ accounts are accounts of properties and assets.

SOLUTION

Real accounts are accounts of properties and assets.

12.Laptop account is a ______ account.

SOLUTION

Laptop account is a real account.

State whether the following statement is True or False with reasons

1.Outstanding expense is a nominal account.

Options
  • True
  • False

SOLUTION

This statement is False.

The amount payable to a person is known as an outstanding expense in the business. As a person is involved, the outstanding expense is nothing but a personal account.

2.Capital account is a real account.

Options
  • True
  • False

SOLUTION

This statement is False.

The amount invested by the owner in the form of goods, cash, or assets is known as capital. As the owner is involved in a transaction, the capital account is a personal account.

3.Every debit has equal and corresponding credit.

Options
  • True
  • False

SOLUTION

This statement is True.

As per the Dual aspect concept, every business transaction has a debit effect with equal and corresponding credit effect which is a base for the double-entry system.

4.Discount received is a nominal account.

Options

  • True
  • False

SOLUTION

This statement is True.

Discount received is an income for the business therefore discount received is a nominal account.

5.Drawings account is a nominal account.

Options
  • True
  • False

SOLUTION

This statement is False.

Drawings mean amount withdrawn by the owner from business and the owner’s account is a personal account. Therefore, we can say that the drawings account is a personal account.

6.Outstanding salary is a nominal account.

Options
  • True
  • False

SOLUTION

This statement is False.

Salary payable to an employee means an outstanding salary. As an employee (person) is involved, an outstanding salary is nothing but a personal account.

7.Loan account is personal account.

Options
  • True
  • False

SOLUTION

This statement is True.

Amount received or paid for a temporary period from or to a person is known as loan account. Here, the person is involved, therefore loan account is a personal account.

8.Goodwill account is a real account.

Options
  • True
  • False

SOLUTION

This statement is True.

Goodwill is an intangible asset for the business, and every asset account is a real account.

9.Trade discount account is a nominal account.

Options
  • True
  • False

SOLUTION

This statement is False.

When a discount is allowed on catalogue price or list price, it is known as a Trade discount, which is a general discount to be allowed to every customer. From the accounting view point, it is not to be recorded in the books. So, we can say that the trade discount itself is not an account.

10.Personal transactions of proprietor are recorded in the books of account of the business.

Options
  • True
  • False

SOLUTION

This statement is False.

As per the Business entity concept, business is a separate and distinct unit from the owner/s. So, personal transactions of proprietor are not to be recorded in the books of account of the business.

11.Motor car account is a Real Account.

Options
  • True
  • False

SOLUTION

This statement is True.

Motor car is an asset for the business and asset account is real account.

12.The rule of Nominal Account in Debit the receiver and Credit the giver.

Options
  • True
  • False

SOLUTION

This statement is False.

The rule of the nominal account is to Debit all expenses and losses and credit all incomes and gains.

13.Bank loan account is a Nominal account.

Options
  • True
  • False

SOLUTION

This statement is False.

Amount of loan given by the bank is known as a bank loan. Here, the bank is a legal entity, therefore we can say that a bank loan account is a. personal account.

14.Assets = Capital + Liabilities

Options
  • True
  • False

SOLUTION

This statement is True.

Capital amount of a proprietor is a liability of the business and asset of the proprietor. Therefore, the total liabilities of the business are capital plus other liabilities. The accounting equation signifies that the assets of a business are always equal to the total of its liabilities and capital. Therefore, the equation is expressed as Assets = Liabilities + Capital.

15.Trademark account is a personal account.

Options
  • True
  • False

SOLUTION

This statement is False.

Trademark is an invisible asset for the business and every asset account is a real account Therefore, the Trademark account is a real account.

Select the most appropriate alternatives from the given below and rewrite the statement:

1.International Accounting day is observed on ______

  1. 10th November
  2. 12th November
  3. 10th December
  4. 15th December

2.Conventional system of accounting is ______

  1. English entry system
  2. Double entry system
  3. Indian system
  4. None of these

3.Every debit has corresponding ____________

  1. Debit
  2. Credit
  3. Right hand side
  4. None of these

4.Radha’s Account is a type of ______ account.

  • Nominal
  • Personal
  • Real
  • Expenses

5.Machinery Account is ______ account.

  • Nominal
  • Real
  • Personal

6.Goodwill is ______ asset.

  • Tangible
  • Current
  • an intangible
  • None of these

7.Prepaid expenses is ______ account.

  • Real
  • Personal
  • Nominal
  • Income

8.Debit the receiver, Credit the ____________

  • Goes out
  • Giver
  • Income and gains
  • Comes in

9.Debit what comes in, Credit what ______

  • Giver
  • Expenses and losses
  • Goes out
  • Income and gains

10Debit all ______ and Credit all income and gains.

  • Giver
  • Expenses and losses
  • Goes out
  • None of these

Write one word/term or phrase which can substitute the following statement.

1.Method of Accounting which records both aspects of the transaction.

SOLUTION

Method of Accounting which records both aspects of the transaction. – Double entry system

2.Right hand side of an account.

SOLUTION

Right hand side of an account.Β  Credit (Cr.) side

3.Name of the account which is debited when proprietor uses business money for personal use.

SOLUTION

Name of the account which is debited when proprietor uses business money for personal use. Β – Drawings A/C

4.Accounts of Assets and Properties.

SOLUTION

Accounts of Assets and Properties. – Real A/c

5.Accounts of Expenses and Losses and Incomes and Gains.

SOLUTION

Accounts of Expenses and Losses and Incomes and Gains. – Nominal A/c

6.Left hand side of an account.

SOLUTION

Left hand side of an account. Debit (Dr.) side

7.The Assets which cannot be seen, touched or felt.

SOLUTION

The Assets which cannot be seen, touched, or felt. – Intangible assets

8.Person who invented the Double Entry System.

SOLUTION

The person who invented the Double Entry System. – LUCA D BARGO PACIOLI

9.Incomplete system of recording business transactions.

SOLUTION

Incomplete system of recording business transactions. – Single entry system

10.Scientific system of recording business transactions.

SOLUTION

Scientific system of recording business transactions. – Double entry system

Answer in one sentence only.

1.What is Double Entry System?

SOLUTION

Double entry system is the most scientific method of recording all business transactions in the books of accounts by giving double or two fold effects of each transaction.

2.What is an Account?

SOLUTION

An account is a summarized record of transactions relating to a particular person, asset, liability, particular head of expense or income recorded at one place.

3.State the meaning of the Single Entry System.

SOLUTION

A single entry system of accounting records only cash books and personal accounts and thus does not provide accurate information about the financial position of a business.

4.What is Personal Account?

SOLUTION

Personal account represents accounts relating to individual human beings. the artificial person or accounts of certain person or group of persons in business dealing. Artificial persons mean accounts of organisations, associations, etc. which are created by law.

5.State the rule of Nominal Account.

SOLUTION

As per Golden Rules, rule of Nominal account is as follow:

(1) Debit all expenses and losses

(2) Credit all incomes and gains.

6.Give two examples of intangible assets?

SOLUTION

Examples of intangible assets are as follow

(1) Goodwill

(2) Patents

(3) Copyright

(4) Trademark

7.State the meaning of Real Account.

SOLUTION

Accounts represent assets and properties owned by the business having monetary value are known as Real Account.

8.Give two examples of income and gains.

SOLUTION

Examples of income and gains are:

(1) Discount received

(2) Rent received

(3) Profit on sale of furniture

9.State the rule of Personal Account.

SOLUTION

As per Golden Rules, rule of Personal account is as follows:

(1) Debit the receiver.

(2) Credit the giver.

10.How many methods of recording accounting information are there?

SOLUTION

(1) Indian system

(Mahajani Deshinama system)

(2) English system:

(Single Entry System)

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