Tag: meaning and classification of accounts

Questions Related to meaning and classification of accounts

An account recording financial transactions with an artificial person created by law or otherwise are termed as _______________.

commercial applications accounting procedures - rules of debit and credit golden rules of debit and credit (traditional approach) types of account meaning and classification of accounts

  1. Artificial or legal persons account

  2. Natural persons personal account

  3. Representative personal accounts

  4. Any of the above

Show answer
Correct Option: A
Explanation:

Artificial or legal persons Account - An account recording financial transactions with an artificial person created by law or otherwise is called as an Artificial personal Account. 

E.g. Co-operative society account.

State with reasons whether the following statement is true or false:
Rent paid account is a Nominal Account whereas, Rent received account is a Real account.

commercial applications accounting procedures - rules of debit and credit golden rules of debit and credit (traditional approach) types of account meaning and classification of accounts

  1. True

  2. False

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Correct Option: B

Personal accounts is of the various types namely, __________.

commercial applications accounting procedures - rules of debit and credit golden rules of debit and credit (traditional approach) types of account meaning and classification of accounts

  1. Natural, Real, Representative

  2. Artificial, Legal, Nominal

  3. Natural, Artificial, Representative

  4. Any of the above

Show answer
Correct Option: C
Explanation:

Accounts recording transactions with a person or group of persons are known as personal accounts. These accounts are necessary, in particular, to record credit transactions. Personal accounts are of the following types:


1. Natural persons: An account recording transactions with an individual is termed as a natural persons' personal account. For e.g. Kamal's account, Mala's account. Both males and females are included in it.


2. Artificial or legal persons: An account recording transactions with an artificial person created by law or otherwise is termed as an artificial persons' personal account. For e.g. Firms' accounts, limited companies' accounts.

3. Representative personal accounts: An account indirectly representing a person or persons is known as representative personal account. When accounts are of similar nature and their number is large, it is better to group them under one head and open a representative personal account. For e.g. prepaid insurance, outstanding salaries, etc.

State with reasons whether the following statement is true or false:
Patent-Right is in the nature of Real A/c.

commercial applications accounting procedures - rules of debit and credit golden rules of debit and credit (traditional approach) types of account meaning and classification of accounts

  1. True

  2. False

Show answer
Correct Option: A
Explanation:

Intangible real accounts represents assets and properties which cannot be seen, touched or felt but can be measured in terms of money. 

For e.g. Goodwill account, Trademark account, Patents account. Patent account is an intangible asset and hence, is classified as a real account.

State with reasons whether the following statement is true or false.
Outstanding expenditure is a nominal account.

commercial applications accounting procedures - rules of debit and credit golden rules of debit and credit (traditional approach) types of account meaning and classification of accounts

  1. True

  2. False

Show answer
Correct Option: B
Explanation:

Outstanding expenditure are those expenses which have been incurred and consumed during an accounting period and are due to be paid but are not paid. 

Examples include outstanding salary, outstanding rent, etc. 

Outstanding expenditure are recorded in the books at the end of an accounting period to show true numbers of a business. 
Outstanding expenses is a personal account and is shown in the liability side of a balance sheet.

All accounts are classified into _______________.

commercial applications accounting procedures - rules of debit and credit golden rules of debit and credit (traditional approach) types of account meaning and classification of accounts

  1. Personal

  2. Real

  3. Nominal accounts

  4. Any of the above

Show answer
Correct Option: D
Explanation:

Modern approach. According to modern approach, the accounts are classified as asset accounts, liability accounts, capital or owner's equity accounts, withdrawal accounts, revenue/income accounts and expense accounts.

Bad debt recovered is _______________.

commercial applications accounting procedures - rules of debit and credit golden rules of debit and credit (traditional approach) types of account meaning and classification of accounts

  1. Real Account

  2. Personal Account

  3. Nominal Account

  4. None of above

Show answer
Correct Option: C
Explanation:

 Bad debt recovery is a payment received for a debt that was written off and considered uncollectible. The receivable may come in the form of a loan, credit line, or any other accounts receivable. Because it generally generates a loss when it is written off, bad debt recovery usually produces income.

_________ represents assets and properties which cannot be seen, touched or felt but they can be measured in terms of money.

commercial applications accounting procedures - rules of debit and credit golden rules of debit and credit (traditional approach) types of account meaning and classification of accounts

  1. Tangible real accounts

  2. Intangible real accounts

  3. Representative personal accounts

  4. Artificial or legal persons account

Show answer
Correct Option: B
Explanation:

Accounts relating to properties or assets are known as "Real accounts". A separate account is maintained for each asset e.g. Cash, Machinery, Building, etc. Real accounts can be further classified into tangible and intangible.


1. Tangible real accounts: These accounts represent assets and properties which can be seen, touched, felt, measured, purchased and sold. For e.g. Machinery account, Cash account, Furniture account.


2. Intangible real account: These accounts represent assets and properties which cannot be seen, touched or felt but they can measured in terms of money. For e.g. Patents account, Goodwill account.

The rule for Real accounts is: Debit what comes in; Credit what goes out.

Prepaid insurance, outstanding salaries are example of _____________.

commercial applications accounting procedures - rules of debit and credit golden rules of debit and credit (traditional approach) types of account meaning and classification of accounts

  1. Tangible real accounts

  2. Intangible real accounts

  3. Representative personal accounts

  4. Artificial or legal persons account

Show answer
Correct Option: C
Explanation:

Accounts recording transactions with a person or group of persons are known as personal accounts. These accounts are necessary, in particular, to record credit transactions. Personal accounts are of three types: Natural, Artificial and Representative accounts.

An account indirectly representing a person or persons is known as representative personal account. When accounts are of similar nature and their number is large, it is better to group them under one head and open a  representative personal account. For e.g. prepaid insurance, outstanding salaries, etc.

Goodwill accounts, patents account, trademarks account, copyrights account are examples of _____________.

commercial applications accounting procedures - rules of debit and credit golden rules of debit and credit (traditional approach) types of account meaning and classification of accounts

  1. Tangible real accounts

  2. Intangible real accounts

  3. Representative personal accounts

  4. Artificial or legal persons account

Show answer
Correct Option: B
Explanation:

Accounts relating to properties or assets are known as "Real accounts". A separate account is maintained for each asset e.g. Cash, Machinery, Building, etc. Real accounts can be further classified into tangible and intangible.

Intangible real accounts represent assets and properties which cannot be seen, touched or felt but they can be measured in terms of money. For e.g. Goodwill account, Patent account, Trademark account, Copyright account, etc.