be classified into personal, real and nominal. Assets = Capital + Liabilities Transactions are first recorded in journal. Golden rules of accounting: Personal account Debit the receiver Credit the giver Real account Debit what comes in Credit what goes out Nominal account Debit all expenses and losses Credit all incomes and gains Points to remember Self-examination questions I Multiple choice questions Choose the correct answer: . Accounting equation signifies (a) Capital of a business is equal to assets (b) Liabilities of a business are equal to assets (c) Capital of a business is equal to liabilities (d) Assets of a business are equal to the total of capital and liabilities .
‘Cash withdrawn by the proprietor from the business for his personal use’ causes (a) Decrease in assets and decrease in owner’s capital (b) Increase in one asset and decrease in another asset (c) Increase in one asset and increase in liabilities (d) Increase in asset and decrease in capital . A firm has assets of ` , , and the external liabilities of ` , . Its capital would be (a) ` , , (b) ` , (c) ` , , (d) ` , . The incorrect accounting equation is (a) Assets = Liabilities + Capital (b) Assets = Capital + Liabilities (c) Liabilities = Assets + Capital (d) Capital = Assets – Liabilities .
Accounting equation is formed based on the accounting principle of (a) Dual aspect (b) Consistency (c) Going concern (d) Accrual Accountancy - . Real account deals with (a) Individual persons (b) Expenses and losses (c) Assets (d) Incomes and gains . Which one of the following is representative personal account? (a) Building A/c (b) Outstanding salary A/c (c) Mahesh A/c (d) Balan & Co .
Prepaid rent is a (a) Nominal A/c (b) Personal A/c (c) Real A/c (d) Representative personal A/c . Withdrawal of cash from business by the proprietor should be credited to (a) Drawings A/c (b) Cash A/c (c) Capital A/c (d) Purchases A/c . In double entry system of book keeping, every business transaction affects (a) Minimum of