Account 3 Marks Question

a. Asset
b. Expense
c. Asset
d. Liability
e. Capital
f. Expense
g. Revenue from Operations
h. Asset
i. Revenue
j. Expenses

Accrual basis of accounting is better than cash basis of accounting due to the following reasons:
i. The accrual basis of accounting makes a clear-cut distinction between capital items and revenue items. It gives a correct picture of operating results and the financial position of the business.
ii. Accrual basis is based on generally accepted accounting principles and is considered as systematic, scientific, and reliable.
iii. Accrual basis of accounting ensures the recording of all revenues and expenses even if these are not received or paid. Thus, it gives a complete picture of the business.
iv. Accrual basis is mandatory in the case of companies under the provisions of Companies Act.

The cash basis of accounting is the system of accounting under which revenues and expenses are recorded when they are received or paid in cash. Cash basis of accounting is not popular due to the following reasons:
i. It does not make a clear cut distinction between revenue items and capital items.
ii. It is not recognized under the Companies Act.
iii. It is not in line with matching principle because revenues and costs are recognized not on the basis of incurrence but on the basis of receipt and payment. As a result, incomes include unearned incomes and exclude accrued incomes. Similarly, expenses include expense, paid in advance but does not include outstanding expenses. 

No, it is not correct. The accounts may show either debit balance or credit balance. If the debit side total exceeds the credit side total, then the balance is called Debit Balance. If the credit side total exceeds the debit side total, then the balance is called Credit Balance.