VERY SHORT ANSWER QUESTIONS
Q1. What is a Journal?
Ans: A Journal is a book of original entry in which transactions are recorded in the order in which they occur i.e. in chronological order.
Q2. Why is the Journal called a book of Original entry?
Ans: A Journal is called a book of Original (or Primary) entry because all transcation are entered firs t in this book.
Q3. What is Journalising?
Ans: Ans. The process of recording transactions in the Journal is called Journalising.
Q4. Give one advantage of Journal.
Ans: As transactions in journal are entere
Q5. Give one limitation of Journal.
Ans: When the number of transactions is large, it is not possible to record all the transactions in Journal. It will become bulky and voluminous.
Q6. What is Narration?
Ans: After each entry, a brief explanation of the transaction together with necessary details is given. This explanation is called ‘Narration’.
Q7. What is Ledger Folio or L.F.?
Ans: Ledger Folio or L.F. is the page number of the ledger account where the posting has been made from the journal. This page number of the ledger is recorded in the journal.
Q8. What is Compound Journal Entry?
Ans: Sometimes, two or more transactions relating to one particular account take place on the same date. In such cases, instead of passing separate entries for all such transactions, only one entry is passed. Such a Journal entry is termed as Compound Journal Entry.
Q9. What is Opening Entry?
Ans: Opening entry is a compound entry which carries forward all the balances of assets and liabilities of previous year to the current year.
Q10. What entry is passed for withdrawing of goods by the proprietor for personal use?
Ans: Drawings A/c Dr.
To Purchases A/c
Q11. Which account should be debited, if wages are paid for installation of a machine? (Delhi 2008)
Ans: Machine Account.
Q12. Why do the transactions are entered in a Journal rather than straight into ledger?
Ans: Journal contains all important information relating to a transaction whereas ledger contains only the summary
Q13. Is Capital Account a Personal or Real Account and Why?
Ans: Capital Account is a Personal Account because it represents the Proprietor of the business who is a human being.
Q14. State on situation when Capital Account is Debited and one saturation when Capital Account is Credited.
Ans: Capital Account is debited when there is a loss during the year and it is credited when there is a profit.
Q15. What does a Credit Balance in a Capital Account signify?
Ans: Credit Balance in Capital Account shows positive capital balance or the amount owed by the Firm to the Proprietor
Q16. No account is opened in the name of the Proprietor in the books of the firm. Give reason.
Ans: Proprietor is represented by Capital Account
Q17. ‘If debts written off as bad are recovered subsequently it should be credited to Debtors Account’. Do you agree?
Ans: No, It should not be credited to Debtors Account because Debtors Account has already been credited while recording bad debts. It should now he treated as gain and be credited to ‘Bad Debts Recovered A/c’.
Q18. Ashok purchased goods from Delhi Traders of Rs 2,00,000. As per the terms, if Ashok made full payment within 21 days. he will get cash discount at 2.5% Ashok paid Rs 1,50,000 within the stipulated time. How much discount will be get?
Ans: He will not get any discount because he has not paid the full amount
Q19. Ravi purchased on credit goods for Rs 5,00,000 Less 20% Trade Discount. As per the terms, he can deduct 4% Cash Discount if he pays the full amount within 15 days. What amount he will have to pay to avail the Cash Discount?
Purchase Amount 5,00,000
Less: Trade Discount @ 20% 1,00,000 4,00,000
Less: Cash Discount @ 4% on 4,00,000 16,000
Amount to be paid 3,84,000
Q20. Increase in an Asset Account is recorded on its debit side. Give reason.
Ans: Asset Account is a Real Account and thus the rule applicable is ‘Debit what Comes in, Credit what Goes out’. Increase in Asset means that the Asset has come in. Hence, the Asset is debited.
Q21. Increase in a Liability Account is recorded on its credit side. Give reason.
Ans: Liability is a Personal Account and thus the rule applicable is ‘Debi the receiver, Credit the giver’. Increase in Liability (suppose creditor) means that he has given goods or some other benefit. Hence Liability is credited.
Q22. Rent is paid by cheque. Which account will be credited and why?
Ans: Bank will be credited. Reason is that Bank is a Personal Account and the rule applicable is ‘Credit the Giver’. Bank is the Giver on behalf of the firm.
Q23. What entry is passed when cheques received from the customers are not sent to bank on the same day.
Ans: Cheques in Hand A/c Dr.
To Customer’s Personal A/c
Q24. A furniture of book value of Rs 15,000 was sold for ₹6,000 and new furniture was purchased for Rs 20,000.
Furniture Account is debited was Rs………………
Ans: Furniture Account will be debited with Rs 20,000. Amount related to sale of furniture will be Credited to Furniture Account.
Q25. What is Trade Discount?
Ans: Trade Discount is generally allowed when the goods are sold to the purchaser for resale to the ultimate consumer or when the goods are purchased in large quantity.
Q26. What is Cash Discount?
Ans: Cash Discount is the discount allowed to the debtor for making prompt payment or for making payment before the due date.
Q27. What are the advantages of allowing Trade Discount? (Two points)
Ans: Advantages of Trade Discount are:
(i) It improves sales as purchaser is encouraged to buy large quantity.
(ii) It reduces purchase cost of purchaser and, thus improves profit margin.
Q28. What are the advantages of allowing Cash Discount? (Two points)
Ans: Two advantages of Cash Discount are:
(i) Seller gets the due amount within the due date. Thus, his liquidity remains good, (ii) Purchaser gets Cash Discount thus, it increases the profits.
Q29. Distinguish Trade Discount from Cash Discount. (Two points) (KVS 2007)
Ans: Two points of distinction between Trade Discount and Cash Discount are:
(i) Trade Discount is allowed to encourage large purchases whereas Cash Discount is allowed to encourage prompt payment.
(ii) Trade Discount enables the retailer to sell goods at list price and earn better profit. Cash Discount will improve the cash flow.
Q30. How is Trade Discount recorded in the books of accounts?
Ans: Trade Discount is recorded in the Purchases Book and Sales Book but it does not enter in the Ledger Accounts. In the Ledger, only net amount of purchases and sales are entered.
Q31. How is Cash Discount recorded in the books of accounts?
Ans: Cash Discount Allowed is an expense and is debited to Cash Discount Allowed Account. It is closed by transferring it to the Profit and Loss Account. Similarly Cash Discount Received is an income and is credited to Cash Discount Received Account which is transferred to Profit and Loss Account.