Commerce Accountancy

Accounting Principles and Practice

1,241 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

Accounting Standard 8 is concerned with the

  1. valuation of inventories

  2. accounting for fixed assets

  3. accounting for research and development

  4. depreciation accounting
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Accounting Standard 8 (AS 8) was the standard that governed the accounting treatment for Research and Development. It was later withdrawn and its principles were integrated into AS 26 (Intangible Assets).

Multiple choice

Vouching is

  1. checking of assets

  2. valuation of assets

  3. checking of entries

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

Vouching is the fundamental auditing process of checking entries in the books of account against supporting documents. It ensures that every transaction is valid, authorized, and correctly recorded.

Multiple choice

Find the correct statement

  1. credit the increase in capital

  2. debit the decrease in assets

  3. credit the decrease in liabilities

  4. debit the increase in revenue

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

Option A is correct: increases in capital are always credited, as capital is a liability of the business to its owner. Option B is wrong; decreases in assets are credited (assets have normal debit balances). Option C is wrong; decreases in liabilities are debited (liabilities have normal credit balances). Option D is wrong; increases in revenue are credited (revenue increases capital).

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

Revenue is assumed to be realised when a legal right to receive it arises. Which concept is this?

  1. Matching concept

  2. Dual aspect concept

  3. Cost concept

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

The realization concept states that revenue should be recognized in the accounts only when it is realized, which is typically when a legal right to receive the money arises. This ensures that income is not recorded prematurely before a transaction is legally binding.

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

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

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.