I. Multiple Choice Questions
choose the correct answer
Question 1.
………………. is known as principal book of accounts.
(a) Journal
(b) Ledger
(c) Trial balance
(d) Transaction
Answer:
(b) Ledger
Question 2.
………………. accounts show the values of assets.
(a) Real
(b) Personal
(c) Nominal
(d) Journal
Answer:
(a) Real
Question 3.
………………. accounts give the net amount due to creditor and the net amount due
from debtors.
(a) Real
(b) Personal
(c) Nominal
(d) Ledger
Answer:
(b) Personal
Question 4.
Net position of an account cannot be ascertained from ……………….
(a) Journal
(b) Ledger
(c) Trial balance
(d) Balance sheet
Answer:
(a) Journal
Question 5.
Net position of an account can be ascertained from ……………….
(a) Journal
(b) Ledger
(c) Trial balance
(d) Balance sheet
Answer:
(b) Ledger
Question 6.
The term balance brought down is used in the name of ……………….
(a) Balance b/d
(b) balanced c/d
(c) debit balance
(d) credit balance
Answer:
(a) balance b/d
Question 7.
When a journal entry has more than one debit or more than one credit or both,
it is called ……………….
(a) Compound entry
(b) Single entry
(c) Journal entry
(d) Ledger entry
Answer:
(a) Compound entry
Question 8.
Total of credit > Total of debit =
(a) Debit balance
(b) Credit balance
(c) Nil balance
(d) Trial balance
Answer:
(b) Credit balance
Question 9.
Total of debit > Total of credit =
(a) Debit balance
(b) Credit balance
(c) Nil balance
(d) Trial balance
Answer:
(a) Debit balance
1. Think: A
trader has been selling goods both on cash and credit bases. Most of the goods
are sold on credit. The owner has lost track of ‘who has to pay how much?’ Is
there any quick way to get this information?
Answer:
By the way of books of accounts
Explanation:
The trader should record all the credit transactions in subsidiary
books so he could remember who has to pay and how much.
2. Think: What will happen if an account
debited or credited is left out while posting from journal to ledger?
Answer: This shows, the double entry is
not completed. This error will leave the trial balance without tallying.
3. What will happen to the ledger account
postings? Do you think that it will continue for an indefinite period of time?
Where will the accounting process stop?
What will happen to the ledger account postings?
Ledger
posting is entering information in the ledger, in respective accounts from the
journal for individual records. The account debited is posted on the debit side
and the account credited is posted on the credit side of the same account.
Do you think that it will continue for an indefinite period
of time? Where will the accounting process stop?
No, Ledger
accounts will be closed at the end of the accounting period and the balances
will be transferred to the trial balance for preparing Final Accounts. Then in
next accounting year again ledger accounts will be opened for occurring transactions.
4. ‘Accounts
of debtors will always have debit balance’. - Do you agree?
Answer: Not Always. Debtors usually will have debit balance.
But sometimes debtors account may show credit balance. The reasons could be
·
Advance amount paid by debtors
·
Errors such as discount allowed not credited in debtors a/c.
· Debtors by mistake, paid
more than what is owed by them etc.
5. State any two uses of ledger or benefits or advantages?
Answer:
(i) Quick information about a particular account
(ii) Control over business transactions
(iii)Trial balance can be prepared
(iv) Helps to prepare financial statements
6. State the process for recording Journal and ledger?
Answer:
Process
Journal: The process of recording in journal is called
journalising
Ledger: The process of recording in the ledger is called
posting.
7. In which format the Ledger is prepared. How many parts
are there in Ledger accounts?
Answer: The ledger account is prepared in T format. It is
divided into two parts. Left side is debit side and right side is credit side.
Each side contains four columns
8. What is opening Journal entry? It may be asked in both
vsa and saq
In case of existing business enterprises, opening entry is
made at the beginning of the accounting period to bring into account the
balances of accounts which were not closed in the preceding accounting period.
The accounts not closed are capital, liabilities and assets appearing in the balance
sheet of the previous year. The entry passed is as follows:
Assets A/c (individually) Dr. xxx
To Liabilities A/c (individually) xxx
To Capital A/c xxx
9. What is compound journal entry?
When a journal entry has more than one debit or more than
one credit or both, it is called a compound entry. For items debited in the
compound entry, entries are made on the debit side in the respective accounts
with the respective amount debited. For items credited in the compound entry,
entries are made on the credit side in the respective accounts with the
respective amount credited.
10. State the rules for determining the balance?
Total of debit > Total of credit = Debit balance (By
balance c/d and To balance b/d)
Total of credit > Total of debit = Credit balance (To
balance c/d and By balance b/d)
Total of debit = Total of credit = Nil balance
11. Study all Tutorial note
1. Pgno: 67
2. Pgno: 72
12. When trial balance will be prepared?
After posting the journal entries to ledger accounts and
extracting the balance of ledger accounts, the trial balance is prepared. Trial
balance is a statement which shows debit and credit balances of all accounts in
the ledger. It helps to test the arithmetical accuracy of entries made in the
journal and ledger.
13. Points to remember
Points to remember
• Left side of the ledger account is Debit [ Dr.]
• Right side of the ledger account is Credit [Cr.]
• For each type of asset, liability, expense and income,
separate ledger accounts are prepared.
• If the total on the debit side exceeds the total on the
credit side, it results in debit balance.
• If the total on the credit side exceeds the total on the
debit side, it results in credit balance.
• Closing balance of the current year in the ledger account
is the opening balance of the next year.
14. Do you know?
The three accounting concepts – business entity, duality and
money measurement - associated with double-entry book keeping are applied in
ledger.
15. CASE STUDY SOLUTION
The auditor wants you to explain each posting in the above account and also to state where will the double entry for each posting be found. Here Sita is a debtor of Mr. Reheem. So in Raheem ledger Sita A/c shows the balances.
1. April 1. The opening balance of Sita A/c 7 7,000
2. April 12. She deposited 7 5,000
3. May 2 Cash received from Sita 7 2,000
4. Sept. 25 Credit sales for Sita 7 10000
5. Oct. 3 Goods returned by Sita 7 1,000
6. Nov. 17 Cash paid by Sita 7 3,000
7. Dec. 21 Sita deposited 7 4,000
8. Dec. 29 Credit sales to Sita 7 10,000
9. Dec. 31 Closing debtors 7 12,000
So from the Sita ledger the owner of the business Raheem can find out the closing balance of debtor (Sita) 7 12.000.