Chapter 2: Meaning and Fundamentals of Double Entry Book-Keeping
Answer in one sentence only:
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.
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.
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.
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.
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.
Give two examples of intangible assets?
SOLUTION:
Examples of intangible assets are as follow:
(1) Goodwill
(2) Patents
(3) Copyright
(4) Trademark
State the meaning of Real Account.
SOLUTION:
Accounts represent assets and properties owned by the business having monetary value are known as Real Account.
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.
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.
How many methods of recording accounting information are there?
SOLUTION:
(1) Indian system (Mahajani Deshinama system)
(2) English system:
Single Entry System.
Write one word/term or phrase which can substitute the following statement.
Method of Accounting which records both aspects of the transaction.
SOLUTION:
Method of Accounting which records both aspects of the transaction. - Double entry system
Right hand side of an account.
SOLUTION:
Right hand side of an account. - Credit (Cr.) side
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. - Drawings A/C
Accounts of Assets and Properties.
SOLUTION:
Accounts of Assets and Properties. - Real A/c
Accounts of Expenses and Losses and Incomes and Gains.
SOLUTION:
Accounts of Expenses and Losses and Incomes and Gains. - Nominal A/c
Left hand side of an account.
SOLUTION:
Left hand side of an account. - Debit (Dr.) side
The Assets which cannot be seen, touched or felt.
SOLUTION:
The Assets which cannot be seen, touched, or felt. - Intangible assets
Person who invented the Double Entry System.
SOLUTION:
The person who invented the Double Entry System. - LUCA D BARGO PACIOLI
Incomplete system of recording business transactions.
SOLUTION:
Incomplete system of recording business transactions. - Single entry system
Scientific system of recording business transactions.
SOLUTION:
Scientific system of recording business transactions. - Double entry system
Select the most appropriate alternatives from the given below and rewrite the statement:
International Accounting day is observed on ______
Options
10th November
12th November
10th December
15th December
SOLUTION:
International Accounting day is observed on 10th November.
Conventional system of accounting is ______
Options
English entry system
Double entry system
Indian system
None of these
SOLUTION:
Conventional system of accounting is Indian system.
Every debit has corresponding ____________
Options
Debit
Credit
Right hand side
None of these
SOLUTION:
Every debit has corresponding Credit.
Radha's Account is a type of ______ account.
Options
Nominal
Personal
Real
Expenses
SOLUTION:
Radha's Account is a type of Personal account.
Machinery Account is ______ account.
Options
Nominal
Income
Personal
Real
SOLUTION:
Machinery Account is a Real account.
Goodwill is ______ asset.
Options
Tangible
Current
an intangible
None of these
SOLUTION:
Goodwill is an intangible asset.
Prepaid expenses is ______ account.
Options
Real
Personal
Nominal
Income
SOLUTION:
Prepaid expenses is a Personal account.
Debit the receiver, Credit the ____________
Options
Goes out
Giver
Income and gains
Comes in
SOLUTION:
Debit the Receiver, Credit the Giver.
Debit what comes in, Credit what ______
Options
Giver
Expenses and losses
Goes out
Income and gains
SOLUTION:
Debit what comes in, Credit what Goes out.
Debit all ______ and Credit all income and gains.
Options
Giver
Expenses and losses
Goes out
None of these
SOLUTION:
Debit all expenses and losses and Credit all income and gains.
State whether the following statement is True or False with reasons:
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.
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.
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.
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.
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.
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.
Loan account is a 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.
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.
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.
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.
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.
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.
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.
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.
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.
Fill in the blank:
Increase in asset is debited and decrease in asset is ______
SOLUTION:
Increase in asset is debited and decrease asset is credited.
Assets = Liabilities +______
SOLUTION:
Assets = Liabilities + Capital.
Increase in capital is credited and decrease in capital is ______
SOLUTION:
Increase in capital is credited and decrease in capital is debited.
Scientific and complete system of recording is known as ______
SOLUTION:
Scientific and complete system of recording business transactions is known as a double entry system.
Debit all expenses and losses, Credit all ______
SOLUTION:
Debit all expenses and losses, Credit all incomes and gains.
Land and Building account is ______ account.
SOLUTION:
Land and Building account is a real account.
Cash Book and Personal Accounts are only maintained under ______ system.
SOLUTION:
Cash book and Personal accounts are only maintained under Single entry system.
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.
Travelling expenses account is ______ type of Account
SOLUTION:
Travelling expense account is Nominal type of account.
Every transaction has ______ effect.
SOLUTION:
Every transaction has two fold effects.
______ accounts are accounts of properties and assets.
SOLUTION:
Real accounts are accounts of properties and assets.
Laptop account is a ______ account.
SOLUTION:
Laptop account is a real account.
Balbharati Solutions for Book-keeping and Accountancy 11th Standard HSC Maharashtra State Board Chapterwise List - Free
Chapter 1: Introduction to Book - Keeping and Accountancy
Chapter 2: Meaning and Fundamentals of Double Entry Book-Keeping
Chapter 6: Bank Reconciliation Statement
Chapter 8: Rectification of Errors
Chapter 9: Final Accounts of a Proprietary Concern
Chapter 10: Single Entry System
