Tag: understand the classification of accounts

Questions Related to understand the classification of accounts

If cash discount is offered to customers, then which of the following would increase?

book keeping and accountancy accounting procedures - rules of debit and credit meaning, advantages and limitations of journals understand the classification of accounts introduction to books of prime entry

  1. Sales

  2. Debtors

  3. Debt collection period

  4. All of the above

Show answer
Correct Option: A
Explanation:
A cash discount is allowed by the organization to the customers to get the collection fast against the credit sales. Customer also do the trade off between the discount and the cost of funds. Offering cash discount may lead to increase in sales.

The books to be compulsorily maintained by a company are ______________.

book keeping and accountancy accounting procedures - rules of debit and credit meaning, advantages and limitations of journals understand the classification of accounts introduction to books of prime entry

  1. Cash book and ledger

  2. Sales and purchase book

  3. Journal

  4. All of the above

Show answer
Correct Option: D
Explanation:

All business transactions are recorded in the books of account depending on the nature of transaction. There are certain books which are compulsorily maintained by the business. 


Below are the books which are mandatory to maintained to record all the transactions:

1) Cash Book- It records all the cash transactions.

2) Sales & Purchase book- It records all credit sales and credit purchases.
3) Journal- It records those transactions which are not recorded in specific books. Purchase of assets etc.
4) Ledger- All above set of entries are to be posted in ledger to find out the balance of each account.

Inventory holding cost may include ___________________.

book keeping and accountancy accounting procedures - rules of debit and credit meaning, advantages and limitations of journals understand the classification of accounts introduction to books of prime entry

  1. Material purchase cost

  2. Penalty charge for default

  3. Interest on loan

  4. None of the above

Show answer
Correct Option: D
Explanation:

Inventory holding cost is that cost which is incurred by the organization to hold the unsold inventory. This cost includes the cost of storing the inventory, ordering cost, cost of storage space, cost of insurance of the inventory.