11. What do you mean by an Account?
An account is a record of all business transactions relating to a particular person or asset or liability or expense or income. In accounting, we keep a separate record of each individual, asset, liability, expense or income. The place where such a record is maintained is termed as an ‘Account’.
12. Write the Golden Rules for Debit and Credit.
1. Personal Accounts – a) Debit the receiver
b) Credit the giver
2. Real Accounts – a) Debit what comes in
b) Credit what goes out
3. Nominal Accounts – a) Debit all expenses and losses
b) Credit all incomes and gains.
13.What do you mean by Books of Original Entry?
The books in which a transaction is recorded for the first time from a source document are called Books of Original Entry or Prime Entry. Journal is one of the books of original entry in which transactions are originally recorded in a chronological (day-to-day) order according to the principles of Double Entry System.
14. What do you mean by Journal?
Journal is a date-wise record of all the transactions with details of the accounts debited and credited and the amount of each transaction.
15. Write a short note about Narration.
After each entry, a brief explanation of the transaction together with necessary details is given in the particulars column with in brackets called narration. The words ‘For’ or ‘Being are used before starting to write down narration. Now, it is not necessary to use the word ‘For’ or ‘Being’.
16. What do you mean by Ledger Folio (L.F)?
All entries from the journal are later posted into the ledger accounts. The page number or folio number of the Ledger, where the posting has been made from the Journal is recorded in the L.F column of the Journal. Till such time, this column remains blank.
17. What do you mean by Journalising?
The process of analysing the business transactions under the heads of debit and credit and recording them in the Journal is called Journalising. An entry made in the journal is called a ‘Journal Entry’.
18. What do you mean by Capital?
The amount with which a trader starts the business is known as Capital.
19. What do you mean by Drawings?
The proprietor may withdraw certain amounts from the business to meet personal expense or goods for personal use. It is called Drawings.
20. What do you mean by Bank Transactions?
Bank transactions that occur often in the business concerns are cash paid into bank, cheques and bills received from customers paid into bank for collection, payment of cheques for expenses and cheques issued to suppliers or creditors. When a cheque is received treat it as cash.
21. What is mean by Compound Journal Entry?
When two or more transactions of similar nature take place on the same date, such transactions can be entered in the journal by means of a combined journal entry is called Compound Journal Entry. The only precaution is that the total debits should be equal to total credits.
22. What is Bad Debts?
When the goods are sold to a customer on credit and if the amount becomes irrecoverable due to his insolvency or for some other reason, the amount not recovered is called bad debts. For recording it, the bad debts account is debited because the unrealised amount is a loss to the business and the customer’s account is credited.
23. What is an Opening Entry?
Opening Entry is an entry which is passed in the beginning of each current year to record the closing balance of assets and liabilities of the previous year. In this entry asset accounts are debited and liabilities and capital account are credited.
24. What are the Advantages of Journal?
The main advantages of the Journal are:
1. It reduces the possibility of errors.
2. It provides an explanation of the transaction.
3. It provides a chronological record of all transactions.
25. What are the Limitations of Journal?
The limitations of the Journal are:
1. It will be too long if all transactions are recorded here.
2. It is difficult to ascertain the balance of each account.
