GSEB Class 11 Solutions Chapter 2 Dual Effect of Transactions and Types of Accounts

1. Write the correct option from those given below each question:

Question 1. Which of the following characteristic is not applicable to economic transaction?
(a) Cash transaction
(b) Credit transaction
(c) External transaction
(d) Transaction without monetary value
Answer: (d) Transaction without monetary value
In simple words: An economic transaction always involves something that has monetary value, meaning it can be measured in terms of money. If it lacks monetary value, it is not an economic transaction.

Exam Tip: Understand the core definitions of economic and non-economic transactions. Economic transactions always have a monetary value, which is a key differentiator.

Question 2. Rent paid Rs. 10,000. What type of transaction is it?
(a) Cash transaction of asset
(b) Non-cash transaction of service
(c) Cash transaction of service
(d) Cash transaction of liability
Answer: (c) Cash transaction of service
In simple words: When rent is paid, it involves cash going out for a service received (the use of property). This makes it a cash transaction specifically for a service.

Exam Tip: Distinguish between transactions involving assets, services, and liabilities. Paying rent is an expense for a service, categorized by the payment method (cash) and what it is for (service).

Question 3. Which of the following transactions is a transaction of special nature?
(a) Goods purchased of Rs. 5,000
(b) Goods of Rs. 5,000 purchased from 'B'
(c) Goods of Rs. 5,000 purchased through cheque
(d) Goods destroyed by fire Rs. 5,000
Answer: (d) Goods destroyed by fire Rs. 5,000
In simple words: Special transactions are unusual events that affect the business but aren't regular buying, selling, or paying. Goods getting destroyed by fire is an unexpected loss, making it a special kind of transaction.

Exam Tip: Special nature transactions include events like theft, destruction of goods, or donations, which are not typical day-to-day operations but require accounting entries.

Question 4. Which transaction disclosed relation of debtor and creditor?
(a) Goods purchased of Rs. 8,000
(b) Goods of Rs. 8,000 purchased from 'B'
(c) Good of Rs. 8,000 purchased through cheque
(d) Goods destroyed by fire Rs. 8,000
Answer: (b) Goods of Rs. 8,000 purchased from 'B'
In simple words: When you buy goods from 'B' without immediately paying (i.e., on credit), 'B' becomes your creditor (someone you owe money to), and you become a debtor to 'B'. This establishes a debtor-creditor relationship.

Exam Tip: A debtor-creditor relationship arises in credit transactions where payment or receipt is deferred. The mention of a specific person's name in a transaction usually indicates a credit transaction unless cash payment is explicitly stated.

2. Answer the following questions in one sentence:

Question 1. What is dual effect?
Answer: Dual effect means the first effect is debit, and the second effect is credit; every business transaction is recorded with at least two effects or aspects.
In simple words: Dual effect means every business event changes at least two things: one gets a debit, and another gets a credit.

Exam Tip: Remember that the dual aspect concept is fundamental to double-entry bookkeeping, ensuring that for every debit, there is an equal and corresponding credit.

Question 2. What is cash transaction?
Answer: A cash transaction is one where the business's cash or bank balance is immediately affected, either increasing or decreasing, due to the exchange.
In simple words: A cash transaction is when money instantly moves in or out of the business's bank or cash box.

Exam Tip: Identify cash transactions by looking for immediate changes in the cash or bank account. If payment is received or made at the time of the transaction, it's a cash transaction.

Question 3. Explain credit transaction.
Answer: Purchase-sale of goods, assets, or services occurs now, but payment or receipt of money will happen in the future; these are recognized as credit transactions.
In simple words: Credit transactions are when you buy or sell something today, but the money is exchanged later, not right away.

Exam Tip: Credit transactions always involve a promise of future payment or receipt. The presence of a party's name (debtor/creditor) without immediate cash movement is a strong indicator.

Question 4. Give illustration of cash transaction of goods.
Answer: An illustration of cash transactions involving goods would be: Goods worth Rs. 20,000 were purchased for cash, and goods worth Rs. 24,000 were sold for cash.
In simple words: Buying goods with cash and selling goods for cash are examples of cash transactions involving goods.

Exam Tip: When providing illustrations, ensure they clearly demonstrate both aspects of the transaction (e.g., cash going out for a purchase, cash coming in for a sale).

Question 5. Give illustration of cash transaction of service.
Answer: An illustration of cash transactions involving services would be: A salary of Rs. 15,000 was paid to an employee (salary is a service), and a commission of Rs. 12,000 was received (work of commission is a service).
In simple words: Paying salary to an employee or getting commission for work done are examples of cash transactions for services.

Exam Tip: Differentiate between cash transactions for goods (tangible items) and services (intangible benefits). Ensure your examples clearly reflect an immediate cash exchange for a service.

Question 6. Give illustration of credit transaction of goods.
Answer: An illustration of credit transactions involving goods would be: Goods worth Rs. 21,000 were purchased from Bhavna Stores on credit, and goods worth Rs. 9,000 were sold to Eshita.
In simple words: Buying goods from Bhavna Stores without paying cash right away, or selling goods to Eshita without her paying cash right away, are examples of credit transactions for goods.

Exam Tip: Credit transactions for goods involve a specific party (e.g., Bhavna Stores, Eshita) from whom goods are bought or to whom goods are sold, with payment deferred.

Question 7. Give illustration of credit transaction of service.
Answer: An illustration of credit transactions involving services would be: Rent of Rs. 4,500 is receivable from Dhara, and brokerage of Rs. 6,000 is payable to Kailash.
In simple words: When Dhara owes rent but hasn't paid yet, or when you owe Kailash brokerage fees but haven't paid yet, these are credit transactions for services.

Exam Tip: Credit transactions for services also involve a specific party and a deferred payment. "Receivable" and "payable" are keywords indicating credit transactions.

Question 8. Which transaction is called noneconomic transaction?
Answer: A non-economic transaction is one whose value cannot be measured in terms of money, meaning it does not affect the financial position of the business.
In simple words: A non-economic transaction is an event that you cannot put a money value on.

Exam Tip: Focus on the "monetary value" criterion. If an event cannot be quantified in money, it's non-economic and typically not recorded in accounting books.

3. Answer the following questions in two or three sentences:

Question 1. Distinguish between Cash transaction and Credit transaction.
Answer:
**Cash Transaction**
1. A transaction where an exchange of cash happens immediately is called a Cash transaction.
2. In such a transaction, one account is definitely linked to Cash or Bank.
3. This transaction specifies that it is for cash, or there is no mention of cash or a person's name.
4. Cash transactions are recorded in the Cash book or Petty cash book.
5. A Cash account or Cash book is prepared to keep records of cash transactions, and the cash balance can be known at the end of the specified period.
6. No debt is created because of a cash transaction.
**Credit Transaction**
1. A transaction where no immediate exchange of cash takes place is called a Credit transaction.
2. In such a transaction, one account affected is that of a person.
3. In such a transaction, only the name of the person is mentioned without specifying that it is for cash.
4. Credit transactions are recorded in the Purchase book, Sales book, Goods-returns book, or in the Journal proper.
5. Debtors and Creditors accounts are prepared from credit transactions, and the amount payable to creditors as well as the total amount receivable from debtors can be known from these accounts.
6. A debt is created because of a credit transaction.
In simple words: Cash transactions involve immediate money exchange, while credit transactions mean money will be exchanged later. Cash transactions don't create debt, but credit transactions do.

Exam Tip: When distinguishing between concepts, use clear, numbered points for each, ensuring that corresponding points highlight direct contrasts between the two terms.

Question 2. Distinguish between Economic transaction and Non-economic transaction.
Answer:
**Economic Transaction**
1. A transaction that can be measured in money terms is known as an Economic transaction.
2. Economic transactions influence the business from an accounting point of view.
3. Economic transactions are entered into the business's books of accounts.
4. Economic transactions can be sorted into three kinds: (1) Cash transactions, (2) Credit transactions, and (3) Exchange transactions.
5. Illustration: Goods worth Rs. 24,000 were purchased for cash.
**Non-economic Transaction**
1. A transaction that has no money value or where money is not involved is known as a Non-economic transaction.
2. Non-economic transactions have no influence on business from an accounting point of view.
3. Non-economic transactions are not entered into the business's books of accounts.
4. Non-economic transactions cannot be sorted.
5. Illustration: An order for the supply of goods worth Rs. 6,000 was received from Kushal.
In simple words: Economic transactions can be counted in money and are recorded in books, affecting the business financially. Non-economic transactions cannot be counted in money and do not affect the business financially, so they are not recorded.

Exam Tip: The core distinction is the ability to measure value in money. Always provide an illustration for each type to solidify your explanation.

Question 3. Explain internal and external transaction.
Answer: **Internal transaction:** These types of transactions happen within the business. For certain business transactions, there is no need for other parties. Therefore, these transactions are called Internal transactions, for example, loss in business due to natural calamity, depreciation on an asset, or an asset becoming outdated. Internal transactions are all economic transactions but are non-cash transactions. These transactions are recorded in the books of accounts. **External transaction:** When transactions happen between the business and other parties, these transactions are called External transactions, for example, purchased goods from traders, cash withdrawn from the bank, amount paid for insurance premium, salary paid to employees, purchase of an asset, or payment of interest on bank overdraft. External transactions are all economic transactions, which are recorded in the books of accounts.
In simple words: Internal transactions happen only inside the business, like assets losing value. External transactions involve outside parties, like buying goods from a supplier or paying salaries. Both are economic and get recorded.

Exam Tip: Clearly define internal and external transactions, emphasizing the involvement (or lack thereof) of outside parties. Provide distinct examples for each category.

Question 4. Explain other transactions.
Answer: Transactions that are neither cash nor credit transactions but are real or actual events are known as special or other transactions. Examples include the theft of goods, goods destroyed by fire, goods given for donation, received goods against old furniture, or an asset becoming defective or useless. These are special or other transactions, which are recorded in the books of accounts.
In simple words: Other transactions are unusual but real events, not regular cash or credit deals, such as goods getting stolen or destroyed. They are still recorded in the books.

Exam Tip: Remember that "other transactions" cover a range of non-routine events that affect the business's assets or liabilities, even without direct cash or credit exchange.

4. To which account, the following transactions will be debited and credited in the books of Nilima? Describe with reason:
Questions
(1) Rs. 50,000 brought in cash and started business.
(2) A loan of Rs. 10,000 taken from Jasleen.
(3) Bank account opened by depositing Rs. 30,000.
(4) A computer purchased for Rs. 8,000.
(5) Stationery purchased Rs. 1,000.
(6) Purchase made of Rs. 20,000.
(7) Purchase is made of Rs. 30,000 from Raman.
(8) Goods of Rs. 15,000 sold on cash for Rs. 28,000.
(9) Goods of Rs. 8,000 sold to Nila for Rs. 15,000.
(10) Goods returned to Raman of Rs. 2,000.
(11) Goods returned by Nila of Rs. 1,500.
(12) Paid Rs. 500 for carriage.
(13) Goods of Rs. 200 destroyed by fire.
(14) Commission received Rs. 5,000.
(15) Rs. 2,000 paid for salary.
Answer:

Exam Tip: For each transaction, clearly identify the accounts involved, classify them (asset, liability, expense, income, capital), and apply the debit/credit rules based on whether they increase or decrease.

5. To which account, the following transactions will be debited and credited in the books of Ganesh? Describe with reason:
Questions
(1) Rs. 75,000 brought in cash and commenced business.
(2) Incurred Puja expenses of Rs. 2,000.
(3) Brought furniture of Rs. 10,000.
(4) Deposited Rs. 30,000 to the State Bank of India.
(5) Obtained loan of Rs. 30,000 from wife.
(6) Purchase is made of Rs. 20,000 and amount is paid by cheque.
(7) Sales is made of Rs. 42,000 and amount is received by cheque.
(8) Withdrawn Rs. 22,000 from Bank.
(9) Rs. 2,000 paid insurance premium by cheque.
(10) Rs. 3,500 received for brokerage.
(11) Goods of Rs. 12,000 sold to Dani. Amount received by cheque.
(12) Goods of Rs. 8,000 purchased from Dipak. Amount paid by cheque.
(13) Withdrawn Rs. 2,500 from business for personal use.
(14) Withdrawn goods of Rs. 1,500 from business for personal use.
(15) Dividend received Rs. 2,000 through cheque. Cheque deposited with bank.
(16) Bank has credited Rs. 200 of interest.
(17) Bank has debited Rs. 100 of bank charges.
(18) Wages paid Rs. 300.
(19) Paid loan interest of Rs. 350.
(20) Machine purchased of Rs. 12,000.
Answer:

Exam Tip: For each transaction, apply the debit and credit rules by identifying the two accounts affected and their nature (asset, liability, expense, income, capital). Always provide a clear reason for each debit and credit entry.