Commerce Accountancy

Accounting Principles and Practice

1,227 Questions

Accounting principles and practice questions cover core concepts like assets, depreciation, financial statements, and ledger adjustments. These topics are essential for commerce students preparing for academic and competitive exams. Regular practice ensures a strong grasp of standard accounting standards and business operations.

Asset depreciationFinancial statement adjustmentsAccounting standardsSingle entry systemCapital expenditure

Accounting Principles and Practice Questions

Multiple choice

Net working capital stands for

  1. current assets + current liabilities

  2. assets - liabilities

  3. long term sources - short term uses

  4. current assets - current liabilities

Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The net working capital formula is calculated by subtracting the current liabilities from the current assets. 

Multiple choice

The minimum capital to be retained by banks in the form of capital adequacy ratio, prescribed by Basel Committee, is

  1. 6% of the risk weighted assets

  2. 7% of the risk weighted assets

  3. 8% of the risk weighted assets

  4. 8% of the assets and liabilities of the bank
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Correct Answer: 8% of the risk weighted assets As per RBI Guidelines, Indian banks will have to maintain their capital adequacy ratio at 9 per cent as against the minimum recommended requirement of 8 per cent as per Basel Committee's requirements.

Multiple choice

Before declaring a dividend, a banking company has to reduce from its profits

(a) preliminary or share selling expenses (b) organization expenses (c) brokerage and loss incurred (d) bad debts for which adequate provision has been made

  1. Only (a) to (c)

  2. Only (b) to (d)

  3. Only (a) and (d)

  4. Only (b) and (c)
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

No banking company shall pay any dividend on its shares until all its capi­talised expenses (including preliminary expenses, organisation expenses, share-selling commission, brokerage, amounts of losses incurred and any other item of expenditure not represented by tangible assets) have been completely written off.

Multiple choice

In which of the following processes are non-liquidated financial assets (say NPAs) converted into marketable securities (security receipts)?

  1. Liquidation of NPAs

  2. Factoring of NPAs

  3. Securitisation of NPAs

  4. Reconstruction of NPAs
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Securitisation of NPAs is a process where non-liquidated financial assets (dues from a borrower) are converted into marketable securities (security receipts), that can be sold to investors.

Multiple choice

A floating charge is a/an

  1. charge on all floating assets of the company

  2. charge at the time or before the company is floated

  3. equitable charge on all assets of the company

  4. None of the above
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

A floating charge is a security, such as a mortgage or a lien, that has an underlying asset or group of assets which is subject to change in quantity and value. When businesses use floating charges, it does not affect their ability to use the underlying asset as normal. Only if the company fails to repay the loan or goes into liquidation does the floating charge become "crystallised" or frozen into a fixed charge and the lender becomes the first-in-line creditor to be able to draw against the underlying asset. A floating charge is a particular type of security, available only to companies. It is an equitable charge on (usually) all the company's assets, both present and future, on terms that the company may deal with the assets in the ordinary course of business. Very occasionally, the charge is over just a class of the company's assets, such as its stock. 

Multiple choice

Which of the following will be the effect when a fixed asset is sold at cost?

  1. Total assets will increase

  2. Total assets will decrease

  3. No change in total assets

  4. Total liability will increase

  5. None of the above
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

There will be no change in total assets. If it is sold on cash, cash will increase and fixed assets will decrease. If it is sold on credit, debtors will increase but total assets will be unaffected.

Multiple choice

Accounting Standard 2 by the ICAI defines inventory as

  1. asset held for sale in ordinary course of business

  2. fixed asset

  3. current asset

  4. current liability

  5. None of these
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The definition of inventory or closing stock includes: Items which are held for sale in the normal course of business that has finished stock of goods. Work-in-progress (WIP) for such sale. Goods which are not yet finished or ready for sale. Raw material which is not even issued for production while valuation of closing stock or inventory. It also includes consumable stores items.

Multiple choice

In case of stocks, sum insured is their _______.

  1. maximum amount indemnified

  2. fixed value

  3. market value

  4. amount as per contract
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

In case of stocks, sum insured is their market value. The insured will be reimbursed at the cost at which these stocks can be purchased in the market to replace the damaged raw material, after the loss.