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

Which of the following is an operating revenue?

  1. Sale of merchandise

  2. Sale of old machinery

  3. Interest income on investments

  4. Dividends received
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Operating revenue is generated from the primary business activities. For a business, selling its merchandise is the core activity, whereas selling old machinery or receiving interest/dividends are non-operating activities.

Multiple choice

Which of the following are current liabilities?

  1. Outstanding wages

  2. Redeemable preference share

  3. Share premium

  4. Provision for depreciation on machinery
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Outstanding wages represent an obligation that must be paid within the short term, making it a current liability. Share premium is part of equity, and provision for depreciation is a contra-asset.

Multiple choice

Which of the following is a non-operating income?

  1. Profit on sale of used plant in manufacturing company

  2. Revenue from sales in a trading concern

  3. Dividends received by an investment company

  4. Premium received by an insurance company
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Non-operating income is derived from activities outside the core business. Profit from the sale of a used plant is incidental and not part of the manufacturing company's primary operations.

Multiple choice

Directions: Choose the correct option and complete the sentence.

______ represents diminution in the ownership equity other than from withdrawal of capital for which no compensating value has been received.

  1. Expense

  2. Cost

  3. Loss

  4. Profit

  5. Income
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

A loss is a decrease in ownership equity that arises from peripheral or incidental transactions, or from other events and circumstances affecting the entity, for which no compensating value is received.

Multiple choice

Current assets should be ______ .

  1. twice the current liability

  2. equal to current liability

  3. less than current liability

  4. none of the above
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

If the current assets are twice the current liability, it indicates that the company is in a sound financial position and can easily pay it's debts.

Multiple choice

Fixed Assets to Net Worth ratio is calculated as

  1. Fixed Assets / Net Worth

  2. Net Worth / Fixed Assets

  3. Current Assets / Net Worth

  4. Current Assets / Fixed Assets
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Right answer.  Because We can find fixed assets to net worth only by using this method.

Multiple choice

Sale Ratio is calculated as

  1. Sale to Current Assets = Sales : Fixed Assets.

  2. Sale to Fixed Assets = Sale : Fixed Assets.

  3. Sale to Liquid Assets = Sale : Fixed Assets.

  4. Sale to Fixed Assets = Sale : Current Assets.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Right answer because we can measure it only by this method  and it plays an important part in financial analysis. 

Multiple choice

Direct expenses mean

  1. office expenses

  2. expenses on Current Assets

  3. expenses on Fixed Assets

  4. expenses on Production of Goods
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Right answer because when we incur expenses to produce the goods it is known as Direct Expenses.

Multiple choice

Breakeven Point indicates

  1. High Profit

  2. Low Profit

  3. Loss

  4. No Profit and No Loss
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Right answer because Break Even Point gives the point of No Loss and No Profit for a business.

Multiple choice

Stock is a type of

  1. Current Asset for a company

  2. Fixed Asset for a company

  3. Liability for a company

  4. Loss for a company
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Right answer because it is easily convertible in money.

Multiple choice

Which of the following is not a liability?

  1. Share capital

  2. Reserves and surplus

  3. Secured loans

  4. Investments
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Investments are assets that a company holds to generate income or capital appreciation, whereas share capital, reserves, and loans are liabilities or equity.

Multiple choice

Reserves and surplus are

  1. borrowing of the firm

  2. profits which have been retained in the firm

  3. financial securities owned by the firm

  4. amount due to the firm
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Reserves and surplus represent the portion of earnings that a company has retained rather than distributing as dividends to shareholders. These are part of the shareholders' equity section on the balance sheet.

Multiple choice

“Income received in advance” is a/an

  1. <span style="">current asset

  2. current liability

  3. <span style="">investment<span style="">

  4. <span style="">secured loan
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Income received in advance is a current liability because you need to pay for this advance amount in the future.