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Question

Which one of the following statements is correct?

The correct answer is
A ledger is known as the principal book of accounts.

The question requires determining which statement about accounting is correct. Let's evaluate each of the given options:

  1. Agreement of trial balance is a conclusive proof of the accuracy.
    • This statement is incorrect. The trial balance is drawn to check the arithmetic accuracy of the ledger accounts, i.e., to ensure that credits equal debits. However, its agreement does not guarantee absolute accuracy as errors like omission, commission, or compensating errors may still exist.
  2. Suspense account opened in a trial balance is a permanent account.
    • This statement is incorrect. A suspense account is temporary and is used to balance out discrepancies in the trial balance until the errors are found and resolved.
  3. At the end of the accounting year, all the nominal accounts of the ledger book are balanced.
    • This statement is incorrect. Nominal accounts are not balanced but rather closed. At the end of the accounting period, the balances of nominal accounts are transferred to the profit and loss account.
  4. A ledger is known as the principal book of accounts.
    • This statement is correct. The ledger is indeed known as the principal or main book as it contains all the accounts in which transactions recorded in general entries are posted, hence showing the financial position of the business.

Thus, the correct answer is: A ledger is known as the principal book of accounts.

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Important Questions from Basic accounting principles

  1. The traditional accounting practice of resolving uncertainty by choosing the solution that leads to the lower amount of income being recognized in the current accounting period is based on which of the following accounting principles?

  2. The policy ‘anticipate no profit and provide for all possible losses’ arises due to

  3. “Advance received from a supplier is not taken as income or sales.” This comment is based on

  4. Revenue from sale of goods ordinarily is reported as a part of the earning in the period

  5. The generally acceptable accounting principles (GAAP) fulfill the conditions of

    (i) Relevance

    (ii) Objectivity

    (iii) Feasibility

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