Page 24 - DCOM101_FINANCIAL_ACCOUNTING_I

Financial Accounting-I

Notes Personal A/c: Accounts which are related to person, firms, companies and representatives.

Real A/c: Accounts which are related to all the assets accounts are included into it.
2.7 Self Assessment

Fill in the blanks:
1. Double entry system is a system in which every transaction affects at least ..........................
2. There are two systems of double entry book keeping namely cash system and .....................
..................... system.
3. An increase in assets is recorded on the .............................. side of account.
4. When some transaction is entered/recorded on the left hand side of an account it is termed
as ............................................
5. The system of double entry can be understood easily by an equation which is called ..........
...........................................
State whether the following statements are true or false:

6. Every transaction must be recorded at two places or accounts.
7. The most common system of accounting data for an enterpriser is the double entry
system.

8. Increase in capital is recorded on the right hand side of an account.

9. Modern classification of account is also known as classification based on accounting

equation.
10. The rules of debiting and crediting of nominal account are–the expenses and losses of the
business are credited and the gains and profit of the business are debited.

2.8 Review Questions

1. Which A/c is to be debited:
A. If furniture is purchased for cash

(a) Furniture A/c (b) Cash A/c
B. If goods are sold for cash.
(a) Goods A/c (b) Cash A/c
C. If expenses are paid in cash
(a) Expenses A/c (b) Cash A/c

D. If commission is accrued but not received
(a) Income (Commission) (b) Commission accrued
2. Explain, in brief, cash basis of accounting and differentiate it with accrual basis of
accounting.

3. State the fundamental rules followed to record the changes in various accounts.
4. What are the rules of double entry system of accounting? Explain with suitable examples.
5. Illustrate the key points which make double entry accounting system more signifi cant than
the other traditional accounting systems.

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