Ledger Accounts – 25 Multiple Choice Questions
Q1. Which of the following statements best defines a ledger?
(a) A chronological record of all transactions.
(b) A book that contains all accounts of a business, posted from the journal.
(c) A summary of cash receipts and payments only.
(d) A statement showing assets, liabilities and capital at a point in time.
Answer: (b)
Explanation: The ledger is the principal book of accounts where each account (e.g., cash, capital, purchases) is maintained; entries are posted from the journal.
Q2. In a ledger, the left‑hand side of an account is called:
(a) Credit side
(b) Debit side
(c) Balance side
(d) Narrative side
Answer: (b)
Explanation: By convention, debits are recorded on the left side and credits on the right side of a ledger account.
Q3. Which account normally has a debit balance?
(a) Sales
(b) Capital
(c) Purchases
(d) Creditors
Answer: (c)
Explanation: Purchases (an expense) increase on the debit side, thus normally shows a debit balance.
Q4. The process of transferring entries from the journal to the ledger is known as:
(a) Journalising
(b) Posting
(c) Balancing
(d) Casting
Answer: (b)
Explanation: Posting is the act of copying debit and credit amounts from journal entries to the respective ledger accounts.
Q5. If the total of the debit side of an account exceeds the credit side, the account shows a:
(a) Credit balance
(b) Debit balance
(c) Zero balance
(d) Contra balance
Answer: (b)
Explanation: A surplus of debits over credits results in a debit balance.
Q6. Which of the following accounts is a nominal account?
(a) Furniture
(b) Sales Returns
(c) Bank
(d) Mr. Sharma (Creditor)
Answer: (b)
Explanation: Sales Returns (or Purchase Returns) are revenue/expense accounts and therefore nominal accounts.
Q7. The trial balance is prepared from:
(a) Journal
(b) Ledger balances
(c) Cash book
(d) Bank statement
Answer: (b)
Explanation: A trial balance lists the debit and credit balances extracted from all ledger accounts.
Q8. Which side of a personal account represents the amount owed by the business to the party?
(a) Debit side
(b) Credit side
(c) Both sides equally
(d) Neither side
Answer: (b)
Explanation: In a personal account, the credit side shows amounts payable (creditor) to the party.
Q9. The ledger account for “Capital” will normally have a:
(a) Debit balance
(b) Credit balance
(c) Zero balance
(d) Fluctuating balance
Answer: (b)
Explanation: Capital is a liability of the business to the owner; it increases on the credit side, thus normally shows a credit balance.
Q10. When a cash purchase of goods is recorded, which ledger accounts are affected?
(a) Cash (credit) and Purchases (debit)
(b) Cash (debit) and Purchases (credit)
(c) Bank (credit) and Sales (debit)
(d) Debtors (debit) and Cash (credit)
Answer: (a)
Explanation: Cash decreases (credit) and Purchases increase (debit) for a cash purchase.
Q11. The process of ensuring that total debits equal total credits in the ledger is called:
(a) Posting
(b) Balancing
(c) Casting
(d) Journalising
Answer: (b)
Explanation: Balancing an account involves computing the difference between debit and credit totals to find the balance.
Q12. Which of the following is NOT a characteristic of a ledger?
(a) It is a book of secondary entry.
(b) It contains real, personal and nominal accounts.
(c) It is prepared after the journal.
(d) It records transactions in chronological order.
Answer: (d)
Explanation: The ledger records transactions analytically by account, not in chronological order; that is the function of the journal.
Q13. If a proprietor withdraws cash for personal use, the ledger entry is:
(a) Debit Drawings, Credit Cash
(b) Debit Cash, Credit Drawings
(c) Debit Capital, Credit Cash
(d) Debit Cash, Credit Capital
Answer: (a)
Explanation: Drawings increase (debit) and cash decreases (credit) when the owner takes money out.
Q14. Which ledger account would be credited when goods are sold on credit?
(a) Cash
(b) Sales
(c) Debtors
(d) Purchases
Answer: (b)
Explanation: Sales (a revenue) increase on the credit side; the corresponding debit is to Debtors (or Accounts Receivable).
Q15. The balance brought down (b/d) appears on the:
(a) Debit side if the account has a debit balance
(b) Credit side if the account has a debit balance
(c) Debit side only for nominal accounts
(d) Credit side only for real accounts
Answer: (a)
Explanation: The opening balance (b/d) is placed on the same side as the normal balance of the account.
Q16. Which of the following errors will NOT affect the trial balance?
(a) Omission of a transaction entirely
(b) Posting a debit amount to the credit side of an account
(c) Recording the same amount twice on the same side
(d) Compensating errors (equal and opposite errors)
Answer: (d)
Explanation: Compensating errors cancel each other out, leaving total debits equal to total credits, so the trial balance still agrees.
Q17. In the ledger, the term “balance carried down” (c/d) refers to:
(a) The total of the debit side
(b) The total of the credit side
(c) The net balance carried to the next period
(d) The amount posted from the journal
Answer: (c)
Explanation: c/d is the closing balance of an account that is carried forward as the opening balance for the next accounting period.
Q18. Which account is classified as a real account?
(a) Salaries Expense
(b) Prepaid Rent
(c) Commission Received
(d) Bad Debts Written Off
Answer: (b)
Explanation: Prepaid Rent is an asset (real account) representing a future benefit.
Q19. When a cheque received from a debtor is deposited into the bank, which ledger accounts are involved?
(a) Debit Bank, Credit Debtors
(b) Debit Debtors, Credit Bank
(c) Debit Cash, Credit Bank
(d) Debit Bank, Credit Cash
Answer: (a)
Explanation: Bank (asset) increases (debit) and the debtor’s receivable decreases (credit).
Q20. The ledger account for “Depreciation Expense” will normally have a:
(a) Credit balance
(b) Debit balance
(c) Zero balance
(d) Either debit or credit depending on the method
Answer: (b)
Explanation: Depreciation Expense is an expense account; expenses increase on the debit side, thus normally show a debit balance.
Q21. If the total of the credit side of the “Capital” account exceeds the debit side, the account shows a:
(a) Debit balance
(b) Credit balance
(c) Nil balance
(d) Contra balance
Answer: (b)
Explanation: Capital is a liability; excess credits indicate a credit balance representing the owner’s equity.
Q22. Which of the following is a nominal account?
(a) Machinery
(b) Loan from Bank
(c) Interest Received
(d) Prepaid Insurance
Answer: (c)
Explanation: Interest Received is a revenue (income) account, hence nominal.
Q23. The process of extracting ledger balances to prepare a trial balance is known as:
(a) Posting
(b) Marshaling
(c) Extraction
(d) Balancing
Answer: (c)
Explanation: Extraction refers to pulling the debit and credit balances from each ledger account to form the trial balance.
Q24. When a business pays rent in advance, the ledger entry is:
(a) Debit Rent Expense, Credit Cash
(b) Debit Prepaid Rent, Credit Cash
(c) Debit Cash, Credit Rent Expense
(d) Debit Cash, Credit Prepaid Rent
Answer: (b)
Explanation: Prepaid Rent (an asset) increases (debit) and Cash decreases (credit) for advance payment.
Q25. Which statement about the ledger is true?
(a) It records transactions only in chronological order.
(b) It is also known as the book of original entry.
(c) It contains separate pages for each account, showing increases and decreases.
(d) It is prepared before the journal entries are made.
Answer: (c)
Explanation: The ledger consists of individual account pages (or cards) where increases (debits/credits) and decreases are recorded for each account.
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End of MCQ set.
