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

If interest for April, 2005 is received in March, 2005, then it will be taken to the profit and loss account of the financial year ending on

  1. March, 2006

  2. March, 2005

  3. half in March, 2005 and half in March, 2006

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

Under the accrual and matching concepts, income must be recognized in the period it is earned. Since the interest relates to April 2005, it belongs to the financial year starting in April 2005 and ending in March 2006, even if the cash was received earlier.

Multiple choice

Imputed gross rent of owner-occupied buildings is a part of

  1. capital formation

  2. final consumption

  3. intermediate consumption

  4. consumer durable
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

In national income accounting, the imputed rent of owner-occupied dwellings is treated as part of final consumption expenditure. It represents the value of the housing services consumed by the owner.

Multiple choice

Valuation of Inventory is dealt with in

  1. AS -2

  2. AS- 5

  3. AS -6

  4. AS -9
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Accounting Standard 2 (AS-2) specifically provides the guidelines for the valuation of inventory in financial statements.

Multiple choice

Accounting Standard on Inventory Valuation is not applicable to

  1. textile industries

  2. construction projects

  3. cycle manufactures

  4. steel mills
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

AS-2 does not apply to construction contracts (which are covered by AS-7) because the nature of inventory in construction is distinct from standard manufacturing or trading inventory.

Multiple choice

Accounting Standard on Inventory valuation is not applicable to

  1. agricultural commodities

  2. shares and debentures held as stock

  3. live stock

  4. all of the above
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

AS-2 excludes agricultural produce, livestock, and financial instruments like shares and debentures held as stock-in-trade, as these have specific valuation requirements.

Multiple choice

Net working capital stands for

  1. fixed assets minus current assets

  2. fixed assets minus current liabilities

  3. current assets minus current liabilities

  4. none of these
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Net working capital is defined as the difference between current assets and current liabilities. It represents the liquidity available for day-to-day operations.

Multiple choice

Which of the following are not current assets?

  1. Salary paid in advance

  2. Inventory

  3. Preliminary expenses

  4. Temporary investments
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Preliminary expenses are fictitious assets or deferred revenue expenditures that are written off over time. They are not current assets because they cannot be converted into cash.

Multiple choice

Which of the following is classified as an operating expense?

  1. Purchase of machinery

  2. Debenture interest

  3. Freight on sales

  4. Dividends payable on preference capital
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Operating expenses are costs incurred in the normal course of business operations. Freight on sales is a direct selling expense, whereas machinery purchase is a capital expenditure, and interest/dividends are financial expenses.

Multiple choice

Which of the following is a non-operating expense?

  1. Miscellaneous office expense

  2. Depreciation of plant and machinery

  3. Interest on debentures

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

Non-operating expenses are costs not related to the core business activities. Interest on debentures is a financing cost, which is classified as non-operating, while office expenses and depreciation are typically operating expenses.

Multiple choice

According to Accounting Standard-2, inventory is to be valued at

  1. actual cost or sale value whichever is less

  2. historical cost

  3. net realisable value

  4. historical cost or net realisable value whichever is less
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Accounting Standard-2 (AS-2) mandates that inventory should be valued at the lower of its historical cost or its net realizable value to adhere to the principle of prudence.