Commerce Exam > Commerce Questions > Which of the following is an example of the G...
Start Learning for Free
Which of the following is an example of the Golden Rule of Accounting for Nominal Accounts?
- a)Debit what comes in, Credit what goes out
- b)Debit all expenses and losses, Credit all incomes and gains
- c)Debit the receiver, Credit the giver
- d)Debit what goes out, Credit what comes in
Correct answer is option 'B'. Can you explain this answer?
Most Upvoted Answer
Which of the following is an example of the Golden Rule of Accounting ...
Understanding the Golden Rule of Accounting for Nominal Accounts
The Golden Rule of Accounting provides a framework for recording financial transactions. It consists of three main rules, one for each type of account: real accounts, personal accounts, and nominal accounts.
Nominal Accounts Explained
Nominal accounts are used to record expenses, losses, incomes, and gains. They are temporary accounts that are closed at the end of each accounting period. The primary aim of these accounts is to track a business's performance over time.
Golden Rule for Nominal Accounts
The Golden Rule for Nominal Accounts states:
- Debit all expenses and losses
- Credit all incomes and gains
This means that when a business incurs an expense or loss, the nominal account is debited to reflect the decrease in equity. Conversely, when income or gains are realized, the account is credited to show an increase in equity.
Why Option B is Correct
Option B: "Debit all expenses and losses, Credit all incomes and gains" is the correct answer because it accurately reflects the treatment of nominal accounts under the Golden Rule. Here’s why:
- Expenses and Losses: When a business spends money or incurs a loss, it reduces its net profit; hence these transactions are debited.
- Incomes and Gains: When a business earns revenue or realizes a gain, it increases its net profit; therefore, these transactions are credited.
Conclusion
Understanding the Golden Rule for nominal accounts is crucial for accurate financial reporting. By following this rule, businesses can effectively track their performance, ensuring that all financial statements reflect the true financial position of the entity.
The Golden Rule of Accounting provides a framework for recording financial transactions. It consists of three main rules, one for each type of account: real accounts, personal accounts, and nominal accounts.
Nominal Accounts Explained
Nominal accounts are used to record expenses, losses, incomes, and gains. They are temporary accounts that are closed at the end of each accounting period. The primary aim of these accounts is to track a business's performance over time.
Golden Rule for Nominal Accounts
The Golden Rule for Nominal Accounts states:
- Debit all expenses and losses
- Credit all incomes and gains
This means that when a business incurs an expense or loss, the nominal account is debited to reflect the decrease in equity. Conversely, when income or gains are realized, the account is credited to show an increase in equity.
Why Option B is Correct
Option B: "Debit all expenses and losses, Credit all incomes and gains" is the correct answer because it accurately reflects the treatment of nominal accounts under the Golden Rule. Here’s why:
- Expenses and Losses: When a business spends money or incurs a loss, it reduces its net profit; hence these transactions are debited.
- Incomes and Gains: When a business earns revenue or realizes a gain, it increases its net profit; therefore, these transactions are credited.
Conclusion
Understanding the Golden Rule for nominal accounts is crucial for accurate financial reporting. By following this rule, businesses can effectively track their performance, ensuring that all financial statements reflect the true financial position of the entity.
Free Test
FREE
| Start Free Test |
Community Answer
Which of the following is an example of the Golden Rule of Accounting ...
Nominal accounts follow specific rules in accounting. The Golden Rule for these accounts states:
- Debit all expenses and losses.
- Credit all incomes and gains.
This means that when recording transactions:
- Expenses and losses increase the debit side.
- Incomes and gains increase the credit side.
Understanding this rule is essential for accurate financial reporting.
|
Explore Courses for Commerce exam
|
|
Top Courses for CommerceView all
Question Description
Which of the following is an example of the Golden Rule of Accounting for Nominal Accounts?a)Debit what comes in, Credit what goes outb)Debit all expenses and losses, Credit all incomes and gainsc)Debit the receiver, Credit the giverd)Debit what goes out, Credit what comes inCorrect answer is option 'B'. Can you explain this answer? for Commerce 2025 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about Which of the following is an example of the Golden Rule of Accounting for Nominal Accounts?a)Debit what comes in, Credit what goes outb)Debit all expenses and losses, Credit all incomes and gainsc)Debit the receiver, Credit the giverd)Debit what goes out, Credit what comes inCorrect answer is option 'B'. Can you explain this answer? covers all topics & solutions for Commerce 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Which of the following is an example of the Golden Rule of Accounting for Nominal Accounts?a)Debit what comes in, Credit what goes outb)Debit all expenses and losses, Credit all incomes and gainsc)Debit the receiver, Credit the giverd)Debit what goes out, Credit what comes inCorrect answer is option 'B'. Can you explain this answer?.
Which of the following is an example of the Golden Rule of Accounting for Nominal Accounts?a)Debit what comes in, Credit what goes outb)Debit all expenses and losses, Credit all incomes and gainsc)Debit the receiver, Credit the giverd)Debit what goes out, Credit what comes inCorrect answer is option 'B'. Can you explain this answer? for Commerce 2025 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about Which of the following is an example of the Golden Rule of Accounting for Nominal Accounts?a)Debit what comes in, Credit what goes outb)Debit all expenses and losses, Credit all incomes and gainsc)Debit the receiver, Credit the giverd)Debit what goes out, Credit what comes inCorrect answer is option 'B'. Can you explain this answer? covers all topics & solutions for Commerce 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Which of the following is an example of the Golden Rule of Accounting for Nominal Accounts?a)Debit what comes in, Credit what goes outb)Debit all expenses and losses, Credit all incomes and gainsc)Debit the receiver, Credit the giverd)Debit what goes out, Credit what comes inCorrect answer is option 'B'. Can you explain this answer?.
Solutions for Which of the following is an example of the Golden Rule of Accounting for Nominal Accounts?a)Debit what comes in, Credit what goes outb)Debit all expenses and losses, Credit all incomes and gainsc)Debit the receiver, Credit the giverd)Debit what goes out, Credit what comes inCorrect answer is option 'B'. Can you explain this answer? in English & in Hindi are available as part of our courses for Commerce.
Download more important topics, notes, lectures and mock test series for Commerce Exam by signing up for free.
Here you can find the meaning of Which of the following is an example of the Golden Rule of Accounting for Nominal Accounts?a)Debit what comes in, Credit what goes outb)Debit all expenses and losses, Credit all incomes and gainsc)Debit the receiver, Credit the giverd)Debit what goes out, Credit what comes inCorrect answer is option 'B'. Can you explain this answer? defined & explained in the simplest way possible. Besides giving the explanation of
Which of the following is an example of the Golden Rule of Accounting for Nominal Accounts?a)Debit what comes in, Credit what goes outb)Debit all expenses and losses, Credit all incomes and gainsc)Debit the receiver, Credit the giverd)Debit what goes out, Credit what comes inCorrect answer is option 'B'. Can you explain this answer?, a detailed solution for Which of the following is an example of the Golden Rule of Accounting for Nominal Accounts?a)Debit what comes in, Credit what goes outb)Debit all expenses and losses, Credit all incomes and gainsc)Debit the receiver, Credit the giverd)Debit what goes out, Credit what comes inCorrect answer is option 'B'. Can you explain this answer? has been provided alongside types of Which of the following is an example of the Golden Rule of Accounting for Nominal Accounts?a)Debit what comes in, Credit what goes outb)Debit all expenses and losses, Credit all incomes and gainsc)Debit the receiver, Credit the giverd)Debit what goes out, Credit what comes inCorrect answer is option 'B'. Can you explain this answer? theory, EduRev gives you an
ample number of questions to practice Which of the following is an example of the Golden Rule of Accounting for Nominal Accounts?a)Debit what comes in, Credit what goes outb)Debit all expenses and losses, Credit all incomes and gainsc)Debit the receiver, Credit the giverd)Debit what goes out, Credit what comes inCorrect answer is option 'B'. Can you explain this answer? tests, examples and also practice Commerce tests.
|
|
Explore Courses for Commerce exam
|
|
Signup for Free!
Signup to see your scores go up within 7 days! Learn & Practice with 1000+ FREE Notes, Videos & Tests.
|
© EduRev
|
Education Revolution
|
|
Signup to see your scores
go up
within 7 days!
within 7 days!
Takes less than 10 seconds to signup