In this question paper, some of the important one mark, two and five marks questions from the chapter Books of Prime Entry are covered. Please C lick Here to get the answer of this question paper.

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Questions:

Multiple Choice Question

10 x 1 = 10

A debit note is called as _______

(a)

debit memo

(b)

credit memo

(c)

pay-in-slip

(d)

receipts

_______ is prepared in duplicate and the original is sent to the seller.

(a)

Debit Note

(b)

Credit Note

(c)

Pay-in-slip

(d)

None of these

________ is prepared in three copies.

(a)

Debit Note

(b)

Credit Note

(c)

Receipts

(d)

Invoice

______ is used for credit purchases and credit sales.

(a)

Cash Receipt

(b)

Debit Note

(c)

Invoice

(d)

Credit Note

____________ are recorded as and when they take place with the written and authentic proof.

(a)

Accounting equations

(b)

Transactions

(c)

Accountants

(d)

Book keeping

In double entry system of book keeping, every business transaction affects

(a)

Minimum of two accounts

(b)

Same account on two different dates

(c)

Two sides of the same account

(d)

Minimum three accounts

Withdrawal of cash from business by the proprietor should be credited to

(a)

Drawings A/c

(b)

Cash A/c

(c)

Capital A/c

(d)

Purchases A/c

Real account deals with

(a)

Individual persons

(b)

Expenses and losses

(c)

Assets

(d)

Incomes and gains

Accounting equation is formed based on the accounting principle of

(a)

Dual aspect

(b)

Consistency

(c)

Going concern

(d)

Accrual

10.

The incorrect accounting equation

(a)

Assets = Liabilities + Capital

(b)

Assets = Capital + Liabilities

(c)

Liabilities = Assets + Capital

(d)

Capital = Assets - Liabilities

Generic 2

6 x 2 = 12

11.

Give the meaning of credit note

12.

What do you mean by Invoice?

13.

State the accounting rule for nominal account

14.

How are personal accounts classified?

15.

What is real account?

16.

What is meant by journalising?

Generic 5

3 x 5 = 15

17.

Karthick opened a provisions store on 1st April, 2017. Journalise the following transactions in his books:

2017 April		Rs
1	Paid into bank for opening a current account	2,00,000
3	Goods purchased by cheque	40,000
5	Investments made in securities	40,000
6	Goods sold to Radha for Rs.20,000 and cheque received and deposited into bank
7	Amount withdrawn from bank for office use	15,000
10	Purchased goods from Kamala and cash deposited in CDM	10,000
12	Sold goods to Vanitha who paid through debit card	10,000
15	Interest on securities directly received by the bank	1,000
20	Insurance paid by the bank as per standing instructions	2,000
25	Sales made to Kunal who made payment through CDM	6,000

18.

Create accounting equation on the basis of the following transactions:
(i) Opening balance on pt January, 2018 cash Rs.20,000; stock Rs.50,000 and bank Rs.80,000
(ii) Bought goods from Suresh Rs.10,000 on credit
(iii) Bank charges Rs.500
(iv) Paid Suresh Rs.9,700 through credit card in full settlement.
(v) Goods purchased on credit from Philip for Rs.15,000
(vi) Goods returned to Philip amounting to Rs.4,000

19.

Write a brief note on accounting equation approach of recording transactions.

Generic 3

5 x 3 = 15

20.

Indicate how assets, liabilities and capital are affected by each of the following transactions with an accounting equation.
i) Purchase of machinery for cash Rs.3,00,000
ii) Receipt of cash from a debtor Rs.50,000
iii) Cash payment of a creditor Rs.30,000

21.

State the different approaches in recording business transactions.

22.

State the principles of double entry system of book keeping.

23.

What is the accounting treatment for insurance premium paid on the life of the proprietor?

24.

What is an Account? Classify the accounts with suitable examples.

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Answers Key:

Multiple Choice Question

10 x 1 = 10

(a)
debit memo

(a)
Debit Note

(d)
Invoice

(b)
Transactions

(a)
Minimum of two accounts

(b)
Cash A/c

(a)
Dual aspect

10.

Generic 2

6 x 2 = 12

11.

(i) Credit note is a statement prepared by the seller who receives back from his customer the goods sold.
(ii) It contains details such as the description of the goods, quantity returned and also their value.
(iii) It is document sent by a seller to the buyer, stating that a certain amount is owed to the buyer.
(iv) It is also called as credit memo

12.

(i) Invoice is used for credit purchases and credit sales.
(ii) The date, amount and details of credit purchases and credit sales are given in the invoices.
(iii) Invoice is prepared in three copies, The first copy is given to the purchaser, the second copy is sent along with the goods for checking and the third is retained by the seller and used as the source document for recording the business transactions.

13.

'Debit all expenses and losses and Credit all incomes and gains'. For nominal accounts, the rule is debit all expenses and losses and credit all incomes and gains

14.

Personal accounts can be classified into natural, artificial and representative personal accounts

15.

All accounts relating to tangible and intangible properties and possessions are called real accounts

16.

The process of analysing the business transactions under the heads of debit and credit and recording them in the journal is called journalising.

Generic 5

3 x 5 = 15

17.

Date	Particulars		Debit Rs	Credit Rs
2017 April 1	BankA/c	Dr	2,00,000
	To Cash A/c			2,00,000
	(Opening a current account)
3	Purchases A/c	Dr	40,000
	To Bank A/c			40,000
	(Goods purchased by cheque)
5	Investments A/c	Dr	40,000
	To Karthick capital A/c			40,000
	(Being investments made)
6	Cash A/c	Dr	20,000
	To Sales A/c			20,000
	(Sales made and cheque received).
	Bank A/c	Dr	20,000
	To Cash A/c			20,000
	(Cheque received from Radha and deposited in the CDM)
7	Cash A/c	Dr	15,000
	To Bank A/c			15,000
	(Amount withdrawn from bank for office use)
10	Purchases A/c	Dr	10,000
	To Bank A/c			10,000
	(Cash deposited in CDM)
12	Bank A/c	Dr	10,000
	To Sales A/c			10,000
	(Sales made and money credited through debit card)
15	Bank A/c	Dr	1,000
	To Interest on securities A/c			1,000
	(Interest on securities received by the bank)
20	Insurance A/c	Dr	2,000
	To Bank A/c			2,000
	(Insurance paid by the bank)
25	Bank A/c	Dr	6,000
	To Sales A/c			6,000
	(Sales made and money received through CDM)

18.

S.No.	Transaction	Cash Rs.	Stock Rs.	Bank Rs.	Total Assets Rs.	=	Total Liabilities Rs.	Capital Rs.	Creditors Rs.
i)	Opening balance	+20,000	+50,000	+80,000				+1,50,000
	Balance	+20,000	+50,000	+80,000				+1,50,000
	Equation				+1,50,000	=	+1,50,000
ii)	Credit Purchases		+10,000						+10,000
	Balance	+20,000	+60,000	+80,000				+1,50,000	+10,000
	Equation				+1,60,000	=	+1,60,000
iii)	Bank charges			-500				-500
	Balance	+20,000	+60,000	+79,500				+1,49,500	+10,000
	Equation				+1,59,500	=	+1,59,500
iv)	Paid Suresh in full settlement			-9,700				+300	-10,000
	Balance	+20,000	+60,000	+69,800				+ 1,49,800	0
	Equation				+1,49,800	=	+1,49,800
v)	Credit Purchases		+15,000						+ 15,000
	Balance	+20,000	+75,000	+69,800				+1,49,800	+ 15,000
	Equation				+1,64,800	=	+1,64,800
vi)	Goods returned		-4,000						-4,000
	Balance	+20,000	+71,000	+69,800				+1,49,800	+11,000
	Equation				+1,60,800	=	+1,60,800

19.

(i) The relationship of assets with that of liabilities to outsiders and to owners in the equation form is known as accounting equation.
(ii) Under the double entry system of book keeping, every transaction has two fold effect, which causes the changes in assets and liabilities or capital in such a way that an accounting equation is completed and equated
Capital + Liabilities = Assets
(iii) Capital can also be called as owner's equity and liabilities as outsider's equity.
(iv) Accounting equation is a mathematical expression which shows that the total of assets is equal to the total of liabilities and capital.
(v) This is based on the dual aspect concept of accounting.
(vi) As the revenues and expenses will affect capital, the expanded equation may be given as under
Assets = Liabilities + Capital + Revenues - Expenses

Generic 3

5 x 3 = 15

20.

S.No	Transaction	Assets	=	Capital + Liabilities
i)	Purchased Machinery	Cash + Machinery	=	Capital + Liabilities
		(-) 30,000 + 3,00,000	=	0 + 0
ii)	Cash received from debtors	Cash + Debtor	=	Capital + Liabilites
		50,000 + (-) 50,000	=	0 + 0
iii)	Payment to Creditors	Cash	=	Capital + Creditor
		(-) 30,000	=	0 + (-) 30,000

21.

There are two approaches for recording business transactions, namely,
i) Accounting equation approach and
ii) Traditional approach
(i) Accounting Equation approach :
(a) The relationship of assets with that of liabilities to outsiders and to owners in the equation form is known as accounting equation.
(b) Under the Double entry system of book keeping, every transaction has two fold effects, which causes the changes in assets and liabilities or capital in such a way that an accounting equation is completed and equated
Equity + Liabilities =Assets
(ii) Traditional approach :
(a) Under this approach, the two fold aspects (Debit and Credit) in each transaction are recorded in the journal under double entry system.
(b) For the purpose of recording, the transactions are classified into three categories as
i) Transactions relating to persons,
ii) Transactions relating to assets, properties and liabilities and
iii) Transactions relating to expenses, losses, incomes and gains.

22.

Following are the principles of double entry system:
(i) In every business transaction, there are two aspects
(ii) The two aspects involved are the benefit or value receiving aspect and benefit or value giving aspect.
(iii) These two aspects involve minimum two accounts; at least one debit and at least one credit.
(iv) For every debit, there is a corresponding and equivalent credit. If one account is debited the other account must be credited.

23.

(i) Insurance premium paid on the life of the proprietor is a personal account.
(ii) It is spend for the personal use of the proprietor not for the business purpose. Hence Drawings A/c should be debited.
The entry is

Drawings A/c Dr	xxxx
To Cash A/c		xxx

24.

Account is the systematic presentation of all material information regarding a particular person or item at one place, under one head, under accounting equation approach, accounts are classified into five categories. They are,
(i) Asset Account : Any physical thing or right owned that has a monetary value is called asset. These assets are grouped and shown separately.
For example, Land and Buildings account, plant and machinery account.
(ii) Liability Account : Financial obligations of the enterprise towards outsiders are shown under separate heads as liabilities. For example, creditors account, expenses outstanding account.
(iii) Capital Account : Financial obligations of a business enterprise towards its owners are grouped under this category. For example, Capital contributed by owner,
(iv) Revenue Account : Accounts relating to revenues of an enterprise are grouped under this category.
For example, Revenues from sale of goods, Rent received.
(v) Expenses Account : Expenses incurred and losses suffered for earning revenue are grouped under this category.
For example, Purchase of goods, Salaries paid.