Quiz on Business Transactions in Accounting

A shopkeeper makes payments for telephone and carriage, instructs workers to deliver goods, and collects payments. Which concept does this illustrate in accounting?

• Business activities that are unrelated to transactions.

• Business transactions that may or may not involve cash.

• Transactions that only occur at the end of the month.

• Transactions that require approval from the government.

Credit Vouchers are used to record which types of cash receipts in a business? Select the most accurate combination.

• Cash sales of goods and cash sales of assets

• Credit sales of goods and cash sales of assets

• Cash sales of goods and credit sales of assets

• Only cash sales of goods

If you are preparing a transfer voucher for Stationery Mart, which of the following would be classified as a trade creditor?

• Puneet

• Gopi

• Mohan

• Bank

What happens when an asset is introduced in the business according to the accounting equation?

• A corresponding liability also emerges

• Only assets increase

• Only capital increases

• Only equity decreases

If a business enterprise withdraws ₹5,000 cash for personal use, how will this affect the accounting equation for assets and capital?

• Assets decrease by ₹5,000 and capital decreases by ₹5,000

• Assets increase by ₹5,000 and capital increases by ₹5,000

• Assets remain unchanged and capital decreases by ₹5,000

• Assets decrease by ₹5,000 and capital remains unchanged

Which of the following correctly represents the basic accounting equation?

• Assets = Liabilities + Capital

• Assets = Capital - Liabilities

• Assets = Capital + Furniture

• Assets = Cash + Machinery

Strategically, why is it important to record both aspects of a transaction in Double Entry accounting?

• To ensure only profits are recorded

• To maintain the dual aspect and ensure accuracy in financial statements

• To avoid recording expenses

• To simplify calculations

When salary is outstanding, how does it affect the accounting equation and why?

• Liabilities increase, equity decreases because an expense is incurred but not paid

• Assets increase, equity increases because income is earned

• Assets decrease, liabilities decrease because payment is made

• Assets remain unchanged, equity remains unchanged

When recording changes in liabilities, which action is correct according to the rules of accounting?

• Increase in liabilities is debited and decrease is credited.

• Increase in liabilities is credited and decrease is debited.

• Both increase and decrease in liabilities are debited.

• Both increase and decrease in liabilities are credited.

Explain how the rules for recording changes in capital differ from those for recording changes in assets.

• Increase in capital is debited, while increase in assets is credited.

• Increase in capital is credited, while increase in assets is debited.

• Both increase in capital and assets are debited.

• Both increase in capital and assets are credited.