Ledger Accounts: 25 Essential Multiple Choice Questions & Answers
Master the fundamentals of ledger accounting with this comprehensive set of practice questions. Each entry includes a clear explanation to reinforce key concepts for students and professionals.
Understanding the Ledger
Q1. Which of the following statements best defines a ledger?
Answer: (b)
Explanation: The ledger is the principal book of accounts. It maintains individual accounts (e.g., cash, capital, purchases) where entries are posted from the journal.
Q2. In a ledger, the left‑hand side of an account is called:
Answer: (b)
Explanation: By accounting convention, debits are recorded on the left side and credits on the right side of a ledger account.
Q12. Which of the following is NOT a characteristic of a ledger?
Answer: (d)
Explanation: The ledger records transactions analytically by account, not chronologically. The journal serves as the book of original chronological entry.
Q25. Which statement about the ledger is true?
Answer: (c)
Explanation: The ledger consists of individual account pages (or cards) where all increases (debits/credits) and decreases for that specific account are recorded.
Account Types & Balances
Q3. Which account normally has a debit balance?
Answer: (c)
Explanation: Purchases is an expense account. Expenses increase on the debit side, therefore they normally show a debit balance.
Q6. Which of the following accounts is a nominal account?
Answer: (b)
Explanation: Sales Returns (and Purchase Returns) are revenue or expense accounts, classifying them as nominal accounts.
Q9. The ledger account for “Capital” will normally have a:
Answer: (b)
Explanation: Capital represents the owner’s claim, a liability of the business. It increases on the credit side, thus normally shows a credit balance.
Q18. Which account is classified as a real account?
Answer: (b)
Explanation: Prepaid Rent is an asset account (a real account) representing a future economic benefit for the business.
Q22. Which of the following is a nominal account?
Answer: (c)
Explanation: Interest Received is a revenue or income account, which falls under the category of nominal accounts.
Posting, Balancing & The Trial Balance
Q4. The process of transferring entries from the journal to the ledger is known as:
Answer: (b)
Explanation: Posting is the act of recording debit and credit amounts from journal entries into their respective ledger accounts.
Q5. If the total of the debit side of an account exceeds the credit side, the account shows a:
Answer: (b)
Explanation: A surplus of debits over credits results in a debit balance for that account.
Q7. The trial balance is prepared from:
Answer: (b)
Explanation: A trial balance is a list of all debit and credit balances extracted from the ledger accounts at a point in time.
Q11. The process of ensuring that total debits equal total credits in the ledger is called:
Answer: (b)
Explanation: Balancing an account involves calculating the difference between its debit and credit totals to find the net balance.
Q15. The balance brought down (b/d) appears on the:
Answer: (a)
Explanation: The opening balance (b/d) is placed on the same side as the normal balance of the account (debit for debit balances, credit for credit balances).
Q16. Which of the following errors will NOT affect the trial balance?
Answer: (d)
Explanation: Compensating errors cancel each other out, leaving total debits equal to total credits, so the trial balance will still agree.
Q17. In the ledger, the term “balance carried down” (c/d) refers to:
Answer: (c)
Explanation: “Balance carried down” (c/d) is the closing balance of an account. It is carried forward to become the next period’s opening balance (b/d).
Q23. The process of extracting ledger balances to prepare a trial balance is known as:
Answer: (c)
Explanation: Extraction refers to pulling the final debit or credit balance from each ledger account to compile the trial balance.
Common Ledger Entries & Transactions
Q8. Which side of a personal account represents the amount owed by the business to the party?
Answer: (b)
Explanation: In a personal account (like a creditor), the credit side shows amounts payable by the business to that external party.
Q10. When a cash purchase of goods is recorded, which ledger accounts are affected?
Answer: (a)
Explanation: For a cash purchase, Cash (asset) decreases (credited) and Purchases (expense) increases (debited).
Q13. If a proprietor withdraws cash for personal use, the ledger entry is:
Answer: (a)
Explanation: The Drawings account (owner’s equity reduction) increases (debit), and the Cash account (asset) decreases (credit).
Q14. Which ledger account would be credited when goods are sold on credit?
Answer: (b)
Explanation: Sales (a revenue account) increases on the credit side. The corresponding debit entry is made to the Debtors (Accounts Receivable) account.
Q19. When a cheque received from a debtor is deposited into the bank, which ledger accounts are involved?
Answer: (a)
Explanation: The Bank account (asset) increases (debit), and the Debtors (Accounts Receivable) account decreases (credit).
Q24. When a business pays rent in advance, the ledger entry is:
Answer: (b)
Explanation: Prepaid Rent (an asset) increases (debit) representing a future benefit, and Cash (asset) decreases (credit).
Specific Account Scenarios
Q20. The ledger account for “Depreciation Expense” will normally have a:
- (a)
