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

Depreciation is a non-cash expense.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Explanation: Depreciation is charged to the P & L Account to enable the business to replace an asset when the asset completes its life time. The business does not spend anything and cash outgo is not there. It is carved out of the income of the business or charged as an expense. Hence it is a non-cash expense.

Multiple choice

Assets = Liabilities + Owners equity

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Explanation: Assets = Liabilities + Owners equity. This is the fundamental equation in financial accounting. The owner of a business brings capital which is a liability of the business to the owner. The cash brought in as capital will be used for purchase of land, building, furniture besides further investment in current assets. Again, the business may resort to outside borrowing the funds derived there from are used in purchase of assets. So, at any point of time the total assets equal Liabilities (outside) and owners' equity (liability of the business to the owner). Sources of funds and Use of funds are always equal. This is again the principles of Double entry book keeping.

Multiple choice

Reserves are the surplus created out of profits earned. Reserves cannot be created when the business unit suffers losses during a defined period.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Explanation: Reserves are created out of profits for various purposes right for the contingency needs to a specified purpose of development or investment. When then there are losses, there is no meaning in creating reserves because the word “reserves” means “retained earnings”. However, accumulated reserves could be used for equalizing the dividends, or for wiping the losses etc

Multiple choice

Account receivable is a current asset.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Explanation: Receivables which arise on account of sales are generally realizable within a period of one year. (may even for shorter periods) Hence they are treated as current assets.

Multiple choice

Royal Bank of Scotland has expected its annual loss this time about____

  1. 6 bn pounds

  2. 7 bn pounds

  3. 8 bn pounds

  4. 9 bn pounds
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Royal Bank of Scotland reported massive losses during the 2008-2009 global financial crisis. The £9 billion figure aligns with the scale of losses reported by major UK banks during this period. The lower options underestimate the crisis impact on RBS.

Multiple choice

Net working capital is calculated as

  1. Current Assets - Current Liabilities

  2. Fixed Assets - Fixed Liabilities

  3. Both 1 and 2

  4. C.A. - stock - C.L.

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

Right answer

Multiple choice

Change in accounting estimate means

  1. differences arising between certain parameters estimated earlier and re-estimated during the current period

  2. differences arising between certain parameters estimated earlier and actual results achieved during the current period

  3. differences arising between certain parameters re-estimated earlier and actual results achieved during the current period

  4. Both a and b

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

Both I and II options are answers for this.

Multiple choice

The balance of petty cash is

  1. an asset

  2. an expense

  3. income

  4. liability

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

Petty cash balance is the same as cash balance.

Multiple choice

If the capital stock is everlasting, depreciation is

  1. low

  2. high

  3. zero

  4. infinite

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

When capital stock is everlasting or perpetual, it does not wear out or lose value over time. Therefore, depreciation is zero because the asset maintains its value indefinitely without any consumption or obsolescence.