Tag: understand the need for journal

Questions Related to understand the need for journal

 Cash discount is ___________.

elements of book keeping and accountancy book of original record - journal understand the need for journal journals functions, advantages, objects and importance of journal

  1. Given to encourage prompt payment 

  2. Amount deducted from list price

  3. Not required to be shown in books of accounts

  4. All of the above

Show answer
Correct Option: A
Explanation:

Amount which is deducted by the seller from the amount due at the time of the receipt is called cash discount. it is given to encourage prompt payment.

Received Rs 1100 from M/s M in settlement of Rs 1250 due from him. The nature of the journal entry to be passed for this transaction is ______.

elements of book keeping and accountancy book of original record - journal understand the need for journal journals functions, advantages, objects and importance of journal

  1. Simple entry

  2. Compound entry

  3. Complex entry

  4. Contra entry

Show answer
Correct Option: B
Explanation:

A compound journal entry is an accounting entry in which there is more than one debit, more than one credit, or more than one of both debits and credits.

Hence, it is a compound entry, as cash account and discount allowed A/c is to be debited.

Purchase Returns Account shows ______________.

elements of book keeping and accountancy book of original record - journal understand the need for journal journals functions, advantages, objects and importance of journal

  1. Debit balance

  2. Credit balance

  3. Zero balance

  4. None of these

Show answer
Correct Option: B
Explanation:

A purchase return account shows the credit balance. Purchase return represents the amount of goods returned to the supplier. 


When goods are bought from a supplier, the purchases A/c will be debited and when the goods are returned, the purchase return A/c will be credited as stock is reduced. 
Thus, purchase return A/c shows the credit balance.

When a entry involves only two accounts it is called _______.

elements of book keeping and accountancy book of original record - journal understand the need for journal journals functions, advantages, objects and importance of journal

  1. Simple entry

  2. Double entry

  3. Compound entry

  4. Complex entry

Show answer
Correct Option: A
Explanation:

Accounting is based on double entry system. that means every transaction will have two impact. When only two accounts are involved, its called simple entry.

Goods worth Rs.500 purchased on cash.
Goods account and Cash account will be impacted.

Narration is not necessary for each and every journal entry. 

elements of book keeping and accountancy book of original record - journal understand the need for journal journals functions, advantages, objects and importance of journal

  1. True

  2. False

Show answer
Correct Option: B
Explanation:

A short explanation of each transaction is written under each entry which is called narration. The subject matter of the transaction can be ascertained through narration. Besides this, if there is any mistake in determining debit or credit aspect of a transaction, it can be easily detected from narration. "A journal entry is not complete without narration".

The statement is false because narration is a brief explanation of a transaction, together with necessary derails that are provided with the journal entry, which helps to understand the account which is to be debited or credited. Thus, a narration is necessary for each and every journal entry, as it provides the details of the journal entry and helps understand the entry.

Source document on the basis of which Purchase Book is prepared ____________.

elements of book keeping and accountancy book of original record - journal understand the need for journal journals functions, advantages, objects and importance of journal

  1. Outward invoice

  2. Inward invoice

  3. Sales invoice

  4. None of the above

Show answer
Correct Option: B
Explanation:

The source document, on the basis of which the transaction are recorded in the Purchase book, is called inward invoice, bill, or credit memo. It is received by a firm from the supplier of goods when the credit purchases are made. It contains the quality of the goods, rate, amount etc. and serial number that is recorded in the purchase book.

Total of purchase returns book is posted to the ___________.

elements of book keeping and accountancy book of original record - journal understand the need for journal journals functions, advantages, objects and importance of journal

  1. credit side of purchases

  2. credit side of the purchase returns A/c

  3. debit side of purchase returns A/c.

  4. either (b) or (c).

Show answer
Correct Option: B
Explanation:

Purchase return day book is also called as Purchase return book or Purchase return journal or Purchase return register. All purchase return vouchers are recorded in purchase return day book. The totals of purchase returns book is posted to the ledger on credit side of the Purchases return A/c.

Purchases returns book is used to record ___________.

elements of book keeping and accountancy book of original record - journal understand the need for journal journals functions, advantages, objects and importance of journal

  1. returns of goods purchased for cash

  2. return of fixed assets purchased on credit

  3. returns of goods purchased on credit

  4. None of above

Show answer
Correct Option: C
Explanation:

Return of goods, purchased on credit is recorded under Purchase Return Book or return outward book. Purchase book shows a debit balance, so purchase return book will show credit balance. While returning the goods buyer sent a "debit note" to the seller. The debit note contains the quantity of returned goods and reason of returning goods.

The credit notes issued are used to prepare sales return book.

elements of book keeping and accountancy book of original record - journal understand the need for journal journals functions, advantages, objects and importance of journal

  1. True

  2. False

Show answer
Correct Option: A
Explanation:

When defective goods are returned by the customer a note is prepared by a supplier which is called as "credit note". This note is prepared and sent to customer indicating that his/her account has been credited in firm's books. A duplicate copy of the credit note is retained and used as a source document for recording the transactions in the books of accounts. 

A debit note issued to a creditor for goods returned by us is to be recorded in the __________.

elements of book keeping and accountancy book of original record - journal understand the need for journal journals functions, advantages, objects and importance of journal

  1. bills receivable book

  2. purchases book

  3. journal proper (General Journal)

  4. purchases return book

Show answer
Correct Option: D
Explanation:

When goods are returned, a debit note is prepared and is sent to the supplier with the returned goods. An original copy is sent to the supplier, informing him of the amount for which his account has been debited on account of the returned goods. A duplicate copy of the debit note becomes the source document, on the source document, on the basis of which entries are recorded in the Purchases Returned Book. Thus, a debit note is required for recording the transactions in the Purchases Return Book.