7 Lecture - Basic Books of Accounts

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7 Lecture

MGT101

Midterm & Final Term Short Notes

Basic Books of Accounts

Basic books of accounts are essential records that businesses maintain to track their financial transactions. These records include ledgers, journals, and financial statements that provide an accurate overview of a company's financial performanc


Important Mcq's
Midterm & Finalterm Prepration
Past papers included

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  1. Which of the following is an example of a basic book of accounts? a) Sales report b) Budget report c) Ledger d) Marketing plan Answer: c) Ledger

  2. What is the purpose of maintaining basic books of accounts? a) To track business operations b) To comply with regulatory requirements c) To make informed business decisions d) All of the above Answer: d) All of the above

  3. Which basic book of accounts records all the financial transactions of a business in chronological order? a) Journal b) Ledger c) Balance sheet d) Income statement Answer: a) Journal

  4. Which basic book of accounts records individual transactions by accounts? a) Journal b) Ledger c) Balance sheet d) Income statement Answer: b) Ledger

  5. Which basic book of accounts provides a summary of a company's financial position at a specific point in time? a) Journal b) Ledger c) Balance sheet d) Income statement Answer: c) Balance sheet

  6. Which basic book of accounts provides a summary of a company's financial performance over a period of time? a) Journal b) Ledger c) Balance sheet d) Income statement Answer: d) Income statement

  7. Which basic book of accounts records all the cash transactions of a business? a) Cash book b) Purchase book c) Sales book d) General ledger Answer: a) Cash book

  8. Which basic book of accounts records all the credit purchases made by a business? a) Cash book b) Purchase book c) Sales book d) General ledger Answer: b) Purchase book

  9. Which basic book of accounts records all the credit sales made by a business? a) Cash book b) Purchase book c) Sales book d) General ledger Answer: c) Sales book

  10. Which basic book of accounts records all the transactions of a business that are not recorded in other books? a) Cash book b) Purchase book c) Sales book d) General journal Answer: d) General journal



Subjective Short Notes
Midterm & Finalterm Prepration
Past papers included

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  1. What are the basic books of accounts? Answer: The basic books of accounts include the ledger, cash book, journal, and trial balance.

  2. What is a ledger? Answer: A ledger is a book that records all the transactions of a business in a systematic manner, arranged in different accounts.

  3. What is a cash book? Answer: A cash book is a book that records all cash and bank transactions of a business.

  4. What is a journal? Answer: A journal is a book that records all the financial transactions of a business in the order they occur.

  5. What is a trial balance? Answer: A trial balance is a statement that lists all the accounts in the ledger with their debit or credit balances to ensure that the total of all debits equals the total of all credits.

  6. What is the purpose of a ledger? Answer: The purpose of a ledger is to keep a record of all financial transactions of a business in a systematic manner to prepare accurate financial statements.

  7. What is the importance of a cash book? Answer: The cash book is important as it helps to track all cash and bank transactions, which enables a business to manage its cash flow effectively.

  8. What is the importance of a journal? Answer: The journal is important as it records all financial transactions in chronological order, which helps in identifying errors and making corrections.

  9. What is the purpose of a trial balance? Answer: The purpose of a trial balance is to ensure that all transactions have been recorded correctly and to identify any errors or discrepancies in the books of accounts.

  10. Why are the basic books of accounts important? Answer: The basic books of accounts are important as they help a business keep track of its financial transactions, which enables it to make informed decisions and prepare accurate financial statements.

The basic books of accounts are the fundamental records that a business keeps to track its financial transactions. These include the ledger, cash book, journal, and trial balance. The ledger is a book that records all the transactions of a business in a systematic manner, arranged in different accounts. The cash book records all cash and bank transactions, while the journal records all financial transactions in chronological order. The trial balance is a statement that lists all the accounts in the ledger with their debit or credit balances. Keeping accurate and up-to-date records in these basic books is critical for any business. This is because they provide a clear picture of the financial health of the company, allowing management to make informed decisions. For example, by keeping track of expenses in the ledger, a business can determine which areas are costing the most and take action to reduce them. The cash book helps management to manage the company's cash flow effectively, ensuring that there is always enough money to pay bills and expenses. The journal is an important book of accounts, as it helps to identify any errors or mistakes in the ledger. It records all financial transactions in chronological order, which makes it easier to spot discrepancies. For example, if the debit and credit totals do not match, there may be an error in one of the accounts that needs to be corrected. The trial balance is a crucial book of accounts, as it ensures that all transactions have been recorded correctly. By listing all the accounts in the ledger with their debit and credit balances, it provides a snapshot of the company's financial position at a given point in time. Any discrepancies can be investigated and corrected, ensuring that the financial statements are accurate and reliable. In summary, the basic books of accounts are essential for any business to keep track of its financial transactions. They provide a clear picture of the company's financial health, enable informed decision-making, and ensure accurate financial reporting. Therefore, it is essential that businesses maintain accurate and up-to-date records in these books of accounts.

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