Rules of Debit and Credit: Nominal A/c MCQs Quiz | Class 9
This quiz is for Class IX students studying Elements of Book-Keeping & Accountancy (Code 254), focusing on Unit 3: Nature of Accounts & Rules for Debit and Credit. Test your understanding of the core topic: Rules of Debit and Credit for Nominal Accounts, specifically how to debit all expenses/losses and credit all incomes/gains. Answer all questions, submit to see your score, and download the PDF answer sheet for review.
Understanding the Rules for Nominal Accounts
In accountancy, accounts are broadly classified into Personal, Real, and Nominal accounts. Nominal accounts are related to all expenses, losses, incomes, and gains of a business. Understanding the rule for these accounts is fundamental to correctly recording transactions and determining the net profit or loss for an accounting period.
The Golden Rule for Nominal Accounts
The fundamental or ‘golden’ rule for recording transactions in nominal accounts is:
Debit all expenses and losses; Credit all incomes and gains.
This rule ensures that all expenditures and revenues are properly tracked, which is essential for preparing the Trading and Profit & Loss Account at the end of the financial year.
What to Debit? (Expenses and Losses)
An expense is a cost incurred in the process of earning revenue. A loss is an amount of money or value lost by the business without receiving any benefit in return. According to the rule, all such items are debited.
- Examples of Expenses: Salaries Paid, Rent Paid, Wages, Printing & Stationery, Advertisement, Interest Paid.
- Examples of Losses: Loss by Fire, Loss on Sale of an Asset, Goods lost in transit.
Example Transaction: Paid Salaries of Rs. 10,000 in cash.
Journal Entry:
Salaries A/c Dr. 10,000 (Because salary is an expense)
To Cash A/c 10,000 (Cash is a real account, and it’s going out)
What to Credit? (Incomes and Gains)
An income is the revenue generated from business activities like selling goods or providing services. A gain is a profit that arises from transactions which are not part of the regular business operations, like the sale of a fixed asset for more than its book value.
- Examples of Incomes: Sales, Commission Received, Rent Received, Interest Received, Discount Received.
- Examples of Gains: Profit on Sale of Machinery, Gain from appreciation in the value of an investment.
Example Transaction: Received Commission of Rs. 2,000.
Journal Entry:
Cash A/c Dr. 2,000 (Cash is a real account, and it’s coming in)
To Commission Received A/c 2,000 (Because commission received is an income)
Quick Comparison Table
| Items to be Debited (Expenses & Losses) | Items to be Credited (Incomes & Gains) |
|---|---|
| Purchases A/c | Sales A/c |
| Wages A/c | Rent Received A/c |
| Salaries A/c | Commission Received A/c |
| Discount Allowed A/c | Discount Received A/c |
| Loss by Theft A/c | Profit on Sale of Asset A/c |
Quick Revision Points
- Nominal accounts relate to incomes, expenses, gains, and losses.
- These accounts are also known as temporary accounts because their balances are transferred to the Profit & Loss Account at year-end.
- The primary purpose of nominal accounts is to find the net profit or net loss of the business.
- Always remember the rule: Debit the expenses/losses, Credit the incomes/gains.
Extra Practice Questions
- If a business pays for advertising, should the Advertising Account be debited or credited?
- When a business earns interest on its bank deposit, the Interest Received Account is ________.
- Is the ‘Sales Account’ a nominal account? Why?
- A machine was sold at a loss. Will the ‘Loss on Sale of Machinery Account’ be debited or credited?
- Rent paid to the landlord is an ________ for the business and will be ________.
Answers: 1. Debited (it’s an expense), 2. Credited (it’s an income), 3. Yes, because it represents revenue/income from the main business operation, 4. Debited (it’s a loss), 5. expense, debited.
