Essential Book Keeping - QP3

1. If we limit the transactions in an account to a particular customer, the balance on the account also represents the balance on that customer's account.

True

False

If transactions in an account are limited to a particular customer, it means that only that customer can make transactions on the account. Therefore, the balance on the account would accurately reflect the balance on that customer's account since no other transactions from other customers would affect it. Hence, the statement is true.

Explanation

If transactions in an account are limited to a particular customer, it means that only that customer can make transactions on the account. Therefore, the balance on the account would accurately reflect the balance on that customer's account since no other transactions from other customers would affect it. Hence, the statement is true.

2. It is much easier to have a lot of accounts with relatively few transactions in each.

True

False

Having a lot of accounts with relatively few transactions in each makes it easier to manage and keep track of financial transactions. With fewer transactions in each account, it becomes simpler to reconcile and balance the accounts, reducing the chances of errors or discrepancies. Additionally, having multiple accounts allows for better organization and categorization of expenses, making it easier to analyze and budget effectively.

Explanation

Having a lot of accounts with relatively few transactions in each makes it easier to manage and keep track of financial transactions. With fewer transactions in each account, it becomes simpler to reconcile and balance the accounts, reducing the chances of errors or discrepancies. Additionally, having multiple accounts allows for better organization and categorization of expenses, making it easier to analyze and budget effectively.

3. The basic accounting equation is: Capital = Assets + Liabilities

True

False

The given statement is false. The correct accounting equation is:

Assets = Liabilities + Equity

This equation represents the fundamental principle of double-entry bookkeeping, where every transaction has an equal impact on both sides of the equation. Assets represent what a company owns, liabilities represent what it owes to others, and equity represents the owner's investment in the business. By rearranging the equation, we can see that the correct relationship is Assets = Liabilities + Equity.

Explanation

The given statement is false. The correct accounting equation is:

Assets = Liabilities + Equity

This equation represents the fundamental principle of double-entry bookkeeping, where every transaction has an equal impact on both sides of the equation. Assets represent what a company owns, liabilities represent what it owes to others, and equity represents the owner's investment in the business. By rearranging the equation, we can see that the correct relationship is Assets = Liabilities + Equity.

4. In order to make sure that the accounts do not contain any erroneous transactions, it is important to balance the accounts on a yearly basis.

True

False

Balancing the accounts on a yearly basis is not necessary to ensure that the accounts do not contain any erroneous transactions. While it is good practice to regularly review and reconcile accounts, the frequency at which this is done may vary depending on the organization's needs and the volume of transactions. Some businesses may choose to balance their accounts on a monthly or quarterly basis instead. Therefore, the statement is false.

Explanation

Balancing the accounts on a yearly basis is not necessary to ensure that the accounts do not contain any erroneous transactions. While it is good practice to regularly review and reconcile accounts, the frequency at which this is done may vary depending on the organization's needs and the volume of transactions. Some businesses may choose to balance their accounts on a monthly or quarterly basis instead. Therefore, the statement is false.

5. Match the following statements:

Calculate the balance on the account

Calculate the net balance on the account

Balance the account

Submit

6. The capital of a business represents the money that the investors and banks have put in.

True

False

The capital of a business does not solely represent the money that the investors and banks have put in. It also includes retained earnings, which are the profits that the business has earned and reinvested back into the company. Additionally, capital can also include assets such as equipment, property, and inventory. Therefore, the statement is false as it oversimplifies the concept of business capital.

Explanation

The capital of a business does not solely represent the money that the investors and banks have put in. It also includes retained earnings, which are the profits that the business has earned and reinvested back into the company. Additionally, capital can also include assets such as equipment, property, and inventory. Therefore, the statement is false as it oversimplifies the concept of business capital.

Essential Book Keeping - Qp3