Financial Management ASSESMENT 7-15

Q.1. What is a Nominal account in accounting ?

Ans:-

Nominal accounts are the general ledger accounts that are closed at the end of each accounting
year.

Example:- All of a company income statement account and the owner’s drawing account.

Q.2. What are the rules and steps to prepare for maintaining Trial balance ?

Ans:-

These are the rules and steps to prepare for maintaining trial balance:-

1). Calculate the balances of each of the ledger accounts.

2). Record Debit or Credit balances in trial balances.

3). Calculate total of the Debit column.

4). Calculate total of the Credit column.

5). Check if Debit is equal to Credit.

Q.3. Explain the classification of accounts based on a Modern approach.

Ans:-

classification of accounts under Modern approach:-

1). Assets accounts – debit the increase ; credit the decrease.

2). Liabilities accounts – credit the increase ; debit the decrease.

3). Capital accounts – credit the increase ; debit the decrease.

4). Revenue accounts – credit the increase ; debit the decrease.

5). Expenses accounts – debit the increase ; credit the decrease.

Q.4. What is Journalising ? Explain different types of accounting journal entries.

Ans:-

Journalising –

it is a process of recording a business transaction in the accounting records. This activity only applies
to the double-entry bookkeeping system.

These are different types of accounting Journal entries:-

1). Simple entries – in this entry it affects only two accounts. One account debit and another is
credit.

2). Compound entries – in this there are at least two debits and one credit, and one debit and two or
more credit. It records for those transactions which are similar in nature and occur on the same day.
3). Opening entries – it records the balances of assets and liabilities, including capital brought
forward, from a previous accounting period.

4). Transfer entries – amount of an account are transferred to another account.

5). Closing entries – the balances of revenue and expenses are closed by transferring their balances
to the trading account or profit and loss account.

6). Adjustment entries – assets and liabilities are recorded at their true values and revenues are
matched with the expenses.

7). Rectifying entries – passed to make some corrections in the books of original entries or some
accounts in the ledger.

Q.5. Define the term ‘Ledger posting ‘. Explain the procedure of ledger posting.

Ans:-

Ledger posting –

it transferring debit and credit items from journal entries into their respective accounts.

Procedure of ledger posting:- it has been debited in the journal entry.

Step-1. Locate in the ledger the account to be debited and enter the date of the transactions in the
date column on the debit side.

Step-2. Record the name of the account credit in the journal in the particulars column on the debit
side.

Step-3. Record the page number of the journal in the J.F. column on the debit side in the journal,
write the page number of the ledger on which a particular account appears in the L.F. column.

Step-4. Enter the relevant amount in the amount column on the debit side.