FINANCIAL ACCOUNTING
Chapter-6 Accounting Procedures rules of Debit and Credit
ACCOUNT :-
Accounting is a record of transactions under a particular head. It records not only the amount of transactions but also their effect and direction.
An account is divided into two parts, i.e., debit and credit. It is usually in a 'T' from and the commonly used layout of an account is as follows:
MEANING OF DEBIT AND CREDIT :-
Debit refers to the left side of an account and credit refers to the right side of an account.In the abbreviated from Dr. stands for debit and Cr. stands for credit. An item record on the debit side of an account is said to be debited to the account. An item recorded on the credit side of an account is said to be credited to the account.
Both credit and debit may represent either decrease or increase depending upon the nature of an account. The rules of debit and credit depend on the nature of account.
Very Short Answer Type Questions :-
Q.1. What is an Account?
Ans. An account is a summarized record of transactions at one place relating to a particular head.
Q.2. What is Capital Account debited?
Ans. Capital Account is debited when the proprietor makes a drawings or with the amount of loss.
Q.3. When is Capital Account credited?
Ans. Capital Account is credited when the proprietor introduces further capital or with the amount of profit.
Q.4. What is an Asset Account?
Ans. Asset Account is the account which relates to tangible or intangible asset.
Q.5. What is the rule for an Asset Account?
Ans. Rule for an Asset Account is 'Increases in assets are debits and decreases credit'.
Q.6. What is Liability Account?
Ans. Liability Account is an account which shows the amounts payable by the enterprise.
Q.7. What is the rule for Liability Account?
Ans. Rule for Liability Account is 'Increases are credits and decrease are debits'.
Q.8. What are the two sides of an Account called?
Ans. The two sides of an account are Debit and Credit.
Q.9. What are the objective of preparing an Account?
Ans. The objective of preparing an account is to summarize all transactions relating to a particular head in one account. Balance of all the accounts leads to preparation of Trial Balance.
Q.10. What is the rule for Expenses Account?
Ans. The rule for Expenses Account is 'Increases in expenses are debited and decreases are credited'.
Q.11. What is the rule for Income or revenue Account?
Ans. The rule for Revenue or Income Account is 'Increases in revenue or income is credited and decreases are debited'.
Q.12. Give two examples of Liability Account?
Ans. Two examples of Liability Account are:
(i) Capital Account and
(ii)Creditor's Account.
Q.13. Give two examples of Asset Account.
Ans. Two examples of Asset Account are:
(i) Land Account and
(ii)Computers Account.
Q.14. Give two examples of Expense Account?
Ans. Two example of Expense Account are:
(i) Salary Account and
(ii)Commission Account.
Q.15. What does debit in an Asset Account signify?
Ans. A debit in an Asset Account means else assets purchased by the firm.
Q.16. What does credit in an Asset Account signify?
Ans. A credit in an Asset Account means the assets sold or discarded by the firm.
Q.17. What does debit in an Expense Account signify?
Ans. A debit in an Expense Account means the amount of expense incurred by the firm under that head of account.
Q.18. What does credit in an Income Account signify?
Ans. A credit in an Income Account means the amount of income earned by the firm under that head of account.
Q.19. What does credit balance in a Capital Account signify?
Ans. A credit balance in a Capital Account signifies the amount invested by the land owner as on date.
Q.20. What is signified by a debit cash balance?
Ans. A debit cash balance signifies Cash in Hand.
Q.21. What is signified by a debit bank balance?
Ans. A debit bank balance signifies balance lying deposited in the bank.
Q.22. What is signified by a credit bank balance?
Ans. A credit bank balance signifies amount payable to the bank by the firm.
Q.23. Is Capital Account a Personal Account or a Real Account?
Ans. Capital Account is a Personal Account because it represents owner of the business.
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