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The MCQs below are drawn from the Accountancy & Auditing subject category.
Showing 3971–3980
of 4621 MCQs
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3971
Which account should be credited when goods are distributed as charity?
When goods are given away as charity, the 'Charity' account is debited as an expense. Since these goods were originally purchased for resale, the 'Purchases' account is credited to reduce the cost of goods available for sale, effectively removing the cost of the donated items from inventory.
3972
Which account is credited when goods are purchased for cash?
When goods are purchased for cash, the business acquires an asset (purchases/stock) and gives up cash. According to the rules of real accounts, since cash is an asset leaving the business, the cash account must be credited.
3973
What is the technical term for the process of recording business transactions into the appropriate journals?
Journalizing is the initial step in the accounting cycle where financial transactions are analyzed and recorded in the journal. This process involves identifying the accounts affected, determining whether to debit or credit them based on double-entry rules, and documenting the transaction details. It is distinct from posting, which is the subsequent process of transferring these journal entries into the respective ledger accounts.
3974
When a business acquires goods on credit, which account should be debited?
According to the rules of debit and credit, the purchase of goods is an expense or an asset increase. Therefore, the Purchases account is debited to record the inflow of inventory, while the Creditors account is credited to reflect the increase in the business's liability to the supplier.
3975
When inventory is lost due to fire, theft, or accidents, which account should be credited to reflect the reduction in stock?
When goods are removed from inventory for reasons other than sale, such as fire or theft, the Purchases account must be credited to reduce the cost of goods available for sale. The corresponding debit is made to an appropriate loss account, such as 'Loss by Fire' or 'Loss by Theft'.
3976
When goods are purchased on credit from Mr. Ali, which account is credited?
According to the rules of double-entry bookkeeping, when goods are purchased on credit, the Purchases account is debited as an expense, and the supplier's account (Mr. Ali) is credited as a liability. This reflects the increase in the business's obligation to pay the creditor for the goods received.
3977
When a business acquires inventory on credit, which account should be debited?
According to the rules of debit and credit, an increase in an expense or asset is recorded as a debit. Purchasing goods is an expense for the business. Therefore, the Purchases account is debited, while the Creditor (a liability) is credited to reflect the obligation to pay.
3978
When inventory is lost due to fire, which account should be credited to reflect the reduction in stock?
When goods are lost by fire, the inventory level decreases. Since the goods were originally recorded in the Purchases account, we credit the Purchases account to remove the cost of these goods from the inventory records, while debiting the Loss by Fire account to recognize the expense.
3979
In the journal entry format, where is the name of the account to be credited typically entered, and what prefix is used?
In standard accounting practice, the account to be credited is written on the line below the debited account, indented to the right, and prefixed with 'To'. The provided answer 'A' is somewhat ambiguous, but it refers to the standard structural convention of the journal entry format.
3980
What is the correct double-entry recording for the acquisition of machinery on credit?
When a fixed asset like machinery is purchased, the asset account must be debited to reflect the increase in assets. Since the purchase is on credit, a liability is created, which is recorded by crediting the trade payables account. This follows the fundamental rule of debiting assets and crediting liabilities.
