If a transaction has the effect of decreasing an asset, is the decrease recorded as a debit or as a credit? If the transaction has the effect of decreasing a liability, is the decrease recorded as a debit or as a credit?
If a transaction has a decreasing effect on an asset, then this decrease is recorded as credit. This is because, as all assets have debit balance and if assets decrease, then it is credited. For example, sale of furniture results in decrease in furniture (asset); so, the sale of furniture will be credited.
If a transaction has a decreasing effect on a liability, then this decrease is recorded as debit. This is because all liabilities have credit balance. If the liability increases, then it is credited and if the liability decreases, then it is debited. For example, payment to the creditors results in a decrease in the creditors (liability); so, the creditors account will be debited.
Differentiate between source documents and vouchers.
Define accounting and state its objectives.
Complete the following work sheet:
(i) If a firm believes that some of its debtors may ′default′, it should act on this by making sure that all possible losses are recorded in the books. This is an example of the ___________ concept.
(ii) The fact that a business is separate and distinguishable from its owner is best exemplified by the ___________ concept.
(iii) Everything a firm owns, it also owns out to somebody. This co-incidence is explained by the ___________ concept.
(iv) The ___________ concept states that if straight line method of depreciation is used in one year, then it should also be used in the next year.
(v) A firm may hold stock which is heavily in demand. Consequently, the market value of this stock may be increased. Normal accounting procedure is to ignore this because of the ___________.
(vi) If a firm receives an order for goods, it would not be included in the sales figure owing to the ___________.
(vii) The management of a firm is remarkably incompetent, but the firms accountants can not take this into account while preparing book of accounts because of ________ concept.
Giving examples, explain each of the following accounting terms:
* Fixed assets * Revenue * Expenses
* Gain * Profit * Capital
* Short-term liabilities
Discuss the concept-based on the premise do not anticipate profits but provide for all losses.
When should revenue be recognised? Are there exceptions to the general rule?
'Accounting information should be comparable'. Do you agree with this statement? Give two reasons.
What is meant by provision for doubtful debts? How are the relevant accounts prepared and what journal entries are recorded in final accounts? How is the amount for provision for doubtful debts calculated?
State the three fundamental steps in the accounting process.
What entry (debit or credit) would you make to:
(a) increase revenue
(b) decrease in expense,
(c) record drawings
(d) record the fresh capital introduced by the owner.
Which of following errors will be rectified through suspense account:
(a) Sales return book undercast by Rs. 1,000.
(b) Sales return by Madhu Rs. 1,000 not recorded.
(c) Sales return by Madhu Rs. 1,000 recorded as Rs. 100.
(d) Sales return by Madhu Rs. 1,000 recorded through purchases returns book.
Balancing of account means :
(i) Total of debit side
(ii) Total of credit side
(iii) Difference in total of debit & credit
(iv) None of these
The periodic total of purchases return journal is posted to :
(i) Purchase account
(ii) Profit and loss account
(iii) Purchase returns account
(iv) Furniture account
Credit balance of bank account in cash book shows :
(i) Overdraft
(ii) Cash deposited in our bank
(iii) Cash withdrawn from bank
(iv) None of these
What are special purpose books?
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