Accountancy MCQs
Topic Notes: Accountancy
General Description
Plato
- Biography: Ancient Greek philosopher (427–347 BCE), student of Socrates and teacher of Aristotle, founder of the Academy in Athens.
- Important Ideas:
- Theory of Forms
- Philosopher-King
- Ideal State
1
In which account is a cash purchase transaction recorded?
Answer:
Cash
In a cash purchase, the transaction involves an immediate outflow of cash. According to the double-entry system, the cash account is credited to reflect the reduction in the asset, while the purchases account is debited. However, the primary recording of the cash movement occurs within the cash account.
2
Which column in a standard cash book is mathematically incapable of showing a credit balance?
Answer:
Cash column
The cash column in a cash book records physical currency transactions. Since a business cannot spend more cash than it physically possesses, the cash account must always maintain a debit balance or a zero balance. It cannot have a credit balance, as that would imply negative physical cash, which is impossible in standard accounting practice.
3
Which primary column is featured in a simple or single-column cash book?
Answer:
Cash
A simple cash book, often called a single-column cash book, is the most basic form of a cash book. It contains only one amount column on each side, which is used exclusively to record cash receipts and cash payments. It does not include columns for bank transactions or discounts, making it suitable for businesses that handle cash exclusively.
4
Which column is the primary focus of a single-column cash book?
Answer:
Cash
A single-column cash book, also known as a simple cash book, is designed to record only cash receipts and cash payments. It contains only one amount column on both the debit and credit sides, which is specifically used for recording transactions involving physical cash. Bank transactions and discounts are typically recorded in separate books or multi-column cash books.
5
What is the primary purpose of a single-column cash book in accounting records?
Answer:
Cash transactions only
A single-column cash book is designed exclusively to record cash receipts and cash payments. It does not include columns for bank transactions or trade discounts, which are handled in separate books or columns.
6
What is the standard nature of the balance found in a cash book's cash column?
Answer:
Debit balance
The cash column in a cash book represents a real account. Since cash is an asset, it follows the rule that assets always have a debit balance. A business cannot spend more cash than it possesses, meaning the cash column will always show a debit balance or a zero balance.