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

Capital expenditure is an expenditure which

  1. benefits the current accounting period

  2. will benefit the next accounting period

  3. will benefit the current as well as future accounting periods

  4. results in the acquisition of a current asset
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Capital expenditure results in benefit in more than one accounting period.

Multiple choice

Which of the following will lead to understatement of net profit?

  1. Amortization of fictitious assets

  2. Treating capital expenditure as revenue expenditure

  3. Treating revenue expenditure as capital expenditure

  4. Creation of general reserve
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Correct Answer: Treating capital expenditure as revenue expenditure will lead to more expenditures and thus, profits would be understated.

Multiple choice

Capital Reserve comes under

  1. part of uncalled capital

  2. reserve and surplus

  3. accumulated profits

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

Correct Answer: reserve and surplus

Multiple choice

AS 11 requires the enterprise to disclose

  1. the amount of exchange differences including the net profit or loss for the period

  2. the amount of exchange differences adjusted in the carrying amount of fixed assets

  3. the amount of exchange differences in respect of forward exchange contracts to be recognized in the profit or loss in one or more subsequent accounting period (over the life of the contract)

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

Correct Answer: All of the above

Multiple choice

AS 28 should be applied in accounting for impairment of all assets, except

  1. inventories (AS 2) and assets arising under construction contracts (AS 7)

  2. financial assets including investment covered under AS 13 and deferred tax assets (AS 22)

  3. Both (1) and (2)

  4. financial assets
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

AS 28 should be applied in accounting for impairment of all assets except options 1 and 2 because they are not considered under assets. They are considered under inventories.

Multiple choice

AS 7 deals with accounting for

  1. construction contracts

  2. research and development

  3. government grants

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

AS 7 deals with accounting for construction contracts in the financial statements of enterprises undertaking such contracts (hereafter referred to as 'contractors'). The statement also applies to enterprises undertaking construction activities of the type dealt with in this statement not as contractors but on their own account as a venture of a commercial nature where the enterprise has entered into agreements for sale.

Multiple choice

If the Going Concern concept is no longer valid, which of the following is true?

  1. All prepaid assets would be completely written off immediately.

  2. Total contributed Capital and Retained Earnings would remain unchanged.

  3. Intangible Assets would continue to be carried at net amortized historical cost.

  4. Land held as an investment would be valued at its realizable value.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Financial statements are prepared assuming that a business entity will continue to operate in the foreseeable future without the need or intention on the part of management to liquidate the entity or to significantly curtail its operational activities. If the Going Concern concept is no longer valid, all the assets would be recorded at realisable value, not at cost.