IGCSE Accounting Paper-2: Specimen Questions with Answers 173 - 174 of 189

Question 173

Short Answer▾

Name the accounting concept stated in the below sentence.

“Everything a firm owns, it also owes out to someone” .

(Marks 1)

Dual Aspect Concept

Dual Aspect recognizes that every transaction has two aspects defined in accounting terms as debits and credits. Debit records the increase in assets & expenses and decrease in liabilities & income. Credit records increase in liabilities & income and decrease in assets & expenses.
A single transaction results into equal debits and credits such that the accounting equation always holds true. i.e..

The things owned by a firm are ASSETS while things which are owed by the firm are LIABILITIES. So, for every asset, there is a corresponding liability of an equal amount and that keeps the accounting equation intact.

One Liner▾

Give an example of a transaction that will be recorded in the general journal. (Marks 1)

Machinery (Fixed Assets) purchased on credit.

An item that does not belong to any of the subsidiary books: (Purchases Day book, Sales Day book, Cash book, Purchases Returns Day Book, Sales Return Day book, Receivables book, and Payables book) is recorded under General Journal.
Purchase of Fixed Assets on credit belongs neither of the former subsidiary books.