1. Which of the following transactions is recorded in the "Journal Proper"?
Purchase of furniture on credit.
Cash sales of goods.
Purchase of goods on credit.
Payment of salary by cheque.
Explanation:
Journal Proper is used for transactions that do not fit into special subsidiary books (like Cash Book, Purchase Book, Sales Book). Credit purchase of fixed assets (Furniture) goes to Journal Proper, whereas credit purchase of Goods goes to Purchase Book.
2. A "Contra Entry" appears in which type of Cash Book?
Petty Cash Book
Purchase Book
Double/Three Column Cash Book with Cash and Bank columns
Single Column Cash Book
Explanation:
A Contra Entry is recorded when cash is deposited into the bank or withdrawn from the bank for office use. It affects both Cash and Bank columns simultaneously on opposite sides.
3. The "Imprest System" is associated with:
Sales Ledger
Bank Reconciliation
Depreciation
Petty Cash Book
Explanation:
In the Imprest system, the petty cashier is given a fixed float (Imprest amount) at the beginning. At the end of the period, they are reimbursed the exact amount spent to restore the float to the original level.
4. How is "Trade Discount" treated in the accounting books?
It is recorded in the Cash Book.
It is recorded in the Journal.
It is shown as an expense in P&L.
It is deducted from the invoice price and NOT recorded in the books.
Explanation:
Trade discount is given at the time of sale to encourage bulk buying. Only the net amount (List Price - Trade Discount) is entered in the books. Cash discount, however, is recorded.
5. The process of transferring entries from the Journal to the Ledger is called:
Balancing
Analyzing
Posting
Journalizing
Explanation:
Journalizing is recording; Posting is the act of transferring the debit and credit aspects to the respective accounts in the Ledger.
6. The "Cash Column" of a Cash Book will always have a:
Debit Balance
Credit Balance
Nil Balance
Debit or Credit Balance
Explanation:
Cash column represents physical cash in hand. Since you cannot pay out more cash than you have, the cash balance can never be negative (Credit). It is always Debit or Nil.
7. The Sales Book is used to record:
Sale of old furniture.
Credit sales of goods dealt in.
All sales (Cash and Credit).
Cash sales of goods.
Explanation:
Sales Book records only CREDIT sales of GOODS (inventory). Cash sales go to Cash Book. Asset sales go to Journal Proper.
8. Opening entries and Closing entries are recorded in:
Cash Book
Balance Sheet
Ledger
Journal Proper
Explanation:
The Journal Proper is the residual book of original entry used for Opening, Closing, Transfer, and Rectification entries.
9. While balancing a "Real Account" (e.g., Machinery A/c), the balance is:
Always a Credit balance.
Always a Debit balance.
Transferred to P&L A/c.
Transferred to Trading A/c.
Explanation:
Real accounts represent assets. An asset cannot have a negative value. Hence, the Debit side (inflow/value) is always greater than or equal to the Credit side (outflow/sale), resulting in a Debit Balance.
10. Loss of goods by fire should be recorded in:
Cash Book
Sales Book
Journal Proper
Purchase Book
Explanation:
Abnormal losses like fire or theft are adjusting entries that don't fit in special journals. Entry: Loss by Fire A/c Dr to Purchase A/c. This goes to Journal Proper.
11. At the end of the year, "Nominal Accounts" (Expenses and Incomes) are closed by transferring them to:
Balance Sheet
Trading and Profit & Loss Account
Suspense Account
Capital Account directly
Explanation:
Nominal accounts are temporary. They are summarized in the P&L account to determine profit/loss, which is then added to Capital. Real/Personal accounts go to Balance Sheet.
12. Goods returned by customers are recorded in:
Journal Proper
Sales Return Book
Cash Book
Purchase Return Book
Explanation:
Returns Inward (Sales Return) of goods sold on credit are entered here.