Understanding Account Types and Golden Rules of Accounting

1. Which type of account represents individuals, companies, or institutions? A) Real Account B) Nominal Account C) Personal Account D) Expense Account

• A) Temporary Account

• B) Asset Account

• D) Revenue Account

• C) Personal Account

Answer explanation

The correct choice is C) Personal Account, as it represents individuals, companies, or institutions. Real Accounts pertain to assets, Nominal Accounts relate to income and expenses, while Expense Accounts track costs.

2. According to the golden rule of Real Accounts, what should you do with what goes out? A) Debit it B) Credit it C) Ignore it D) Reverse it

• B) Credit it

• Reverse it

• Debit it

• Ignore it

Answer explanation

According to the golden rule of Real Accounts, what goes out should be credited. Therefore, the correct action for what goes out is to credit it, making option B) Credit it the right choice.

3. Which of the following is an example of a Nominal Account? A) Machinery Account B) Cash Account C) Salary Account D) John’s Account

• D) John’s Account

• Accounts Payable

• Inventory Account

• Loan Account

Answer explanation

D) John’s Account is a Nominal Account as it represents a specific individual's account, reflecting personal transactions. In contrast, the other options are all real accounts related to assets or liabilities.

4. What is the journal entry for receiving cash from a customer? A) Debit Cash, Credit Revenue B) Debit Revenue, Credit Cash C) Debit Accounts Receivable, Credit Cash D) Debit Cash, Credit Accounts Receivable

• Debit Cash, Credit Inventory

• Debit Cash, Credit Expenses

• Debit Cash, Credit Sales Tax

• A) Debit Cash, Credit Revenue

Answer explanation

The correct journal entry for receiving cash from a customer is A) Debit Cash, Credit Revenue. This reflects an increase in cash and recognizes the revenue earned from the sale.

5. What type of account is used to record expenses? A) Real Account B) Personal Account C) Nominal Account D) Liability Account

• G) Equity Account

• C) Nominal Account

• F) Asset Account

• E) Revenue Account

Answer explanation

Expenses are recorded in Nominal Accounts, which track income and expenses over a specific period. This distinguishes them from Real Accounts (assets) and Personal Accounts (individuals or entities). Thus, the correct answer is C) Nominal Account.