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The correct option of this multiple choice question (mcq) is option B as it represents the correct definition of an Account . Basically, there are five types of accounts Assets, Liabilities, Equity, Revenues and Expenses. In fact, the whole accounting system is starting with the recording of Business Transactions  in which these accounts involved. It shows the increase and decrease in assets, liabilities, equity, revenues and expenses of a business in the accounting period. For example, if Mr. A started business cash $1,000, then in this transaction, there are two accounts involved. One is Cash a/c, which is an asset a/c, and other one is capital a/c, which comes under owner’s equity a/c. Cash a/c shows increases of $1,000 and capital a/c also shows increases of $1,000. The increase and decrease in an account show the debit and credit in T-Account according to the Rules of Debit And Credit . The increase and decrease in Assets and Expenses indicate debits and credits and th...

The correct choices of this multiple choice question are A, C and E, as Land is a Fixed Asset / Non-Current Asset which is expected to be used by the business for a long period of time i.e., more than one year. It is expected that it will provide benefits for more than one year. Unlike building, the land is not depreciated as it is a free gift of Allah (God) as a result it has infinite useful life i.e., a non-determinable useful life. If land is purchased by the business in good location, then it provides more benefits to the business. The land account increases on left side or debit side of its T-Account as it has normal debit balance on debit side while it decreases on right side credit side of its t-account as it has negative or unfavorable balance on credit side. For example, if a company purchased land for $5,000,000 for cash, then the entry to record is to land account and credit cash account. The effect of this Business Transaction on Accounting Equation is shown below: ...

The correct option of this multiple choice question is (d) as Building is categorized under Tangible Non-Current Assets while both Cash and Accounts Receivable are classified under Current Assets on Balance Sheet. This lists falls under the definition of Assets i.e., assets are resources which are owned and controlled by an entity against which the business expects to receive probable future economic benefits. A company purchased the building to be used in the office or for daily working operations of the business. The building is owned and controlled by the business to get future economic benefits such as after acquiring the new building in good location helps in increasing sales for the business and improving working performance of the business. Building may provide benefits to the business in the long run as it has useful life of more than one year. Cash is also used to provide benefits to the business as it is used for various business purposes with the expectation to provi...

The correct options of this multiple choice question (mcq) are A, B, C and E as Equipment (E) is reported on the left side or assets side of Accounting Equation . For example, if a company purchased equipment for cash $6,000, then we debit equipment account and credit cash account with the amount of $6,000. The effect of this Business Transaction on the accounting equation is shown below:                              Assets                     =     Liabilities    +   Equity                 +Equipment   -Cash            =                      +$6,000      -$6,000          = Here E recorded on asset side which is increased by $6,000 ...

The correct options of this multiple choice question (mcq) are A, B and E as Liabilities are debts due or payable owed by the business to outsiders such as creditor, banks, financial institutions, etc., against the assets of the business. These are increased on the right side of their T-Account as these have normal credit balances while these are decreased on debit side of their t-accounts as these have unusual or negative balance on debit side of their t-accounts. The business can settle its liabilities either paying assets such as paying cash to write off liabilities or by providing products or services to others i.e., a business purchased office equipment from its creditor and then instead of paying cash payment to him provided products or services equal to the worth of office equipment. For example, rent of $5,000 is payable by the business to rental company during the current accounting period. As the payment has not yet been made, so the adjusting journal entry to record i...

The correct options of this multiple choice question are 1) and 4) as when sales made to customer on credit worth $4,500, then this Business Transaction affects two types of accounts which are Accounts Receivable (AR) / Sundry Debtors (SD) and Sales Revenue. When sales is made, then the company earned the revenue whether the cash is received or not according to Accrual Basis of Accounting . As the payment is not received immediately from customer but a promise made from him to pay to the company within the specified time period, so the amount due from customer is created which is represented by accounts receivable which is a Current Asset and it is increasing, so we debit it. Sales revenue is also created as it is made so it is also increasing as a result, we credit it according to the Rules of Debit and Credit . The journal entry to record is shown below:                                   ...

When the company / corporation received the payment more than the payment written on unpaid invoices from customer / client, then the company needs to refund this amount to its customer. It creates a Current Liability i.e., refund payable account as the company is liable to pay to customers any amount in excess of unpaid dues. Suppose, the refunded amount is $150. When the company sends cheque / check to customer, the following journal entry is recorded in the Books of Accounts as shown below:                            Refund Payable a/c $150                                                           Cash a/c $150                                       (Send A Cheque To Customer ...

The correct options of this multiple choice question depends upon the Methods used in recording the Bad Debts Account. So, we must consider these two methods before choosing the correct options. Under Direct Write-Off Approach , the company does not make an estimation of unpaid dues while under Allowance Approach , the company makes an estimation of uncollectible accounts / unpaid invoices by debited uncollectible expense a/c and credited Allowance for Doubtful Accounts . When it is sure that the customer failed to pay to company for the goods or services rendered, then the company debit actual Bad Debts Expense a/c and credit Accounts Receivable (AR) a/c under Direct Write-Off Method while under Allowance Method, debit Allowance for Doubtful Accounts and credit accounts receivable a/c. After two years, now as the customer is making payment to the company for goods sold or services rendered to him by the company, then there is Bad Debts Recovery. Under Direct Write-Off Method, two...

The correct option of this multiple choice question is (D), a Chart of Accounts (CoA) shows a list of all ledger’s accounts (whether assets, liabilities, equity, revenues or expenses) with a unique identification number for easy locating the accounts and for references in an accounting system. For example, we assign 1000 as identification number to cash account for easily locating it in the list of all ledger accounts balances. Basically, a CoA shows a list of two types accounts i.e., Balance Sheet Accounts and Income Statement Accounts . The CoA does not provide the data about the debit and credit of accounts and their balance included in Financial Statements but it provides a list of all accounts shown on financial statements for viewing about account lists at a glance and to know about the financial health of the business. It helps us in analyzing, reporting the accounting data and the preparation of financial statements. By assigning unique identification number to each acc...