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

If uninsured goods are destroyed by accident/fire, ____ account is debited.

  1. trading

  2. loss by fire/accident

  3. insurance company

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

The correct entry is: Loss by fire/accident account______ Dr.             To trading/purchase account. Trading/Purchase account should be credited. Insurance company may be debited with the amount of claim admitted by them, if the goods are insured.

Multiple choice

The expenses, benefits of which are derived for more than one year, are

  1. revenue expenditures

  2. capital expenditures

  3. deferred revenue expenditures

  4. all of these
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The examples of capital expenditures are machinery, furniture etc.           Revenue expenditures are those, the benefit of which is derived during the current period only. The deferred revenue expenses are paid during the current period but not written off due to the heavy expenditures; and the benefit is likely to be secured in more than one period such as advertisement, suspense.

Multiple choice

The errors which adjust the effect of some other mistakes are called

  1. errors of omission

  2. errors of commission

  3. errors of principle

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

Compensating errors are those which compensate the effect of another error. The entries made in contravention of accounting principles are errors of principle. Error of omission refers to complete/partial omission of transaction from the books of account. When an entry is posted with wrong amount or on wrong side, it is the error of commission.

Multiple choice

The amount of depreciation does not depend upon

  1. will of business

  2. cost of asset

  3. scrap value

  4. life of asset
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The rates of depreciation are defined in income tax act. However, it depends upon certain factors which are (B), (C), (D) above.

Multiple choice

Which of the following is not true about straight line method?

  1. It is also known as original cost/fixed installment method.

  2. Depreciation remains same from year to year.

  3. It is generally basis of charging depreciation as per the Income Tax Act.

  4. The residual value of asset becomes zero after certain years.
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The diminishing balance method is generally applicable in business.

Multiple choice

Any deficit from sinking fund to the value of machine is transferred to

  1. profit and loss account

  2. general reserve

  3. capital reserve

  4. capital redemption reserve
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

It is transferred to profit and loss account. Any surplus is transferred to general reserve. Any capital profit is transferred to capital reserve. The sufficient amount from free reserves is credited to capital redemption reserve.

Multiple choice

A machine was being depreciated at 10% as per straight line method. Now, the business decided to depreciate it at the same rate by diminishing balance method with retrospective date. The differences in the amount of depreciation will be

  1. credited to machinery account

  2. debited to machinery account

  3. debited to P and L account

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

The W.D.V. of machine will increase. Thus, it will appreciate. It will be credited to P and L account.