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

Accounting Rate of Return =

  1. Average Profit after Tax + Average Book Value of Investment

  2. Average Profit after Tax – Average Book Value of Investment
  3. Average Profit after Tax $ \times $ Average Book Value of Investment
  4. Average Profit after Tax $ \div $ Average Book Value of Investment
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Accounting rate of return, also known as the average rate of return, or ARR is a financial ratio used in capital budgeting. ARR calculates the return generated from net income of the proposed capital investment.

Multiple choice elements of accounts accounting for not-for-profit organisation balance sheet, classification of assets and liabilities accounting records of not-for-profit organisations financial accounting and reporting

In Not-for-Profit organisations effect of surplus is_____________.

  1. Deducted from capital fund

  2. Added to capital fund

  3. Deducted from asset

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

Not-for-profit organisation prepare balance sheet for ascertaining the financial position of the organisation. There will be capital fund or general fund in place of the capital, and surplus or deficit ascertained from income and expenditure account is added to/ deducted to the capital fund account.

 It is also a common practice to add some of the capitalised  items like legacies, entrance fees, and life membership fees directly in the capital fund.

Multiple choice commerce sources of business finance - 2 lease financing non-institutional sources - medium-term long term sources of finance public deposits

Lessor gets fixed amount of lease rental every year and they cannot increase this even if the cost of asset goes up.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Lessor gets fixed amount of lease rental every year and they cannot increase this even if the cost of asset goes up- this is a true statement.While making the leasing decision, the cost of leasing an asset must be compared with the cost of owning the same.

Multiple choice commerce sources of business finance - 2 lease financing non-institutional sources - medium-term long term sources of finance public deposits

Lease rentals paid by the lessee are deductible for computing taxable profits.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The lessee never becomes the owner of the asset. A person who holds an property is known as lessee.Lease rentals paid by the lessee are deductible for computing taxable profits- this is a true statement.

Multiple choice commerce sources of business finance - 2 lease financing non-institutional sources - medium-term long term sources of finance public deposits

Match the statements in List-I with the types of lease in the List-II as follows:

List - I List - II
(a) Lessor transfers all risks and rewards of an asset to the lessee. (i) Indirect lease
(b) Lessor transfers the assets to the lessee but bears the cost of maintenance (ii) Operating lease
(c) The owner of the asset sells it to turn leases it back to the owner (now lesser) (iii) Finance lease
(d) Lessor owns/ acquires the assets that are leased to a given lesser. (iv) Direct lease
  1. $(a) - (ii), (b) - (iii), (c) - (iv), (d) - (i)$
  2. $(a) - (i), (b) - (iv), (c) - (ii), (d) - (iii)$
  3. $(a) - (iii), (b) - (ii), (c) - (i), (d) - (iv)$
  4. $(a) - (iv), (b) - (i), (c) - (iii), (d) - (ii)$
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Matching the definitions: (a) Finance lease involves transferring risks/rewards, (b) Operating lease involves maintenance by the lessor, (c) Sale and leaseback is a specific type, (d) Direct lease is the standard acquisition.

Multiple choice commerce sources of business finance - 2 lease financing non-institutional sources - medium-term long term sources of finance public deposits

While making the leasing decision, the cost of leasing an asset must be compared with the ________.

  1. cost of owning the same

  2. cost of selling the same

  3. cost of renting the same

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

While making the leasing decision, the cost of leasing an asset must be compared with the cost of owning the same.Lease financing does not provide finance diluting the ownership of the business.Lease rentals paid by the lessee are deductible for computing taxable profits.

Multiple choice commerce sources of business finance - 2 lease financing non-institutional sources - medium-term long term sources of finance public deposits

The owner of the assets is called the _______ while the party that used the asset is known as the ________.

  1. Lessor, lessee

  2. Lessee, lessor

  3. Trader, lessee

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

In a lease agreement, the owner of the assets is 'lessor' and the party that uses the asset is known as 'lessee'. The lessee pays a fixed periodic amount known as the lease rent to the lessor for the use of the assets.

Multiple choice commerce sources of business finance - 2 lease financing non-institutional sources - medium-term long term sources of finance public deposits

_________ is deprived from the residual value of the asset.

  1. Lessee

  2. Lessor

  3. Both a and b

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

In a lease agreement, the owner of the assets is 'lessor' and the party that uses the asset is known as 'lessee'. The lessee pays a fixed periodic amount known as the lease rent to the lessor for the use of the assets. The lessee never becomes the owner of the assets, it is deprived from the residual value of the asset.

Multiple choice commerce sources of business finance - 2 lease financing non-institutional sources - medium-term long term sources of finance public deposits

The lessee pays a _________ periodic amount called lease rental to the lessor for the use of the asset.

  1. Fixed

  2. Fluctuating

  3. Both a and b

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

Lease financing is a contractual agreement where by  the owner of the assets is 'lessor' that provides the grant to  the party to use the assets, who is known as 'lessee'. The lessee pays a fixed periodic amount known as the lease rent to the lessor for the use of the assets.

Multiple choice book keeping and accountancy accounts of 'not for profit' concerns prepration of income and expenditure account accounting treatment for npo's special issues associated with accounts of non-trading concerns receipts and payments receipts and payments account financial accounting and reporting accounting procedure for not-for-profit organisations balance sheet, classification of assets and liabilities accounting records of not-for-profit organisations prepration of income and expenditure account and balance sheet

Any revenue expense for which a separate fund is available will be ___________.

  1. debited to that separate fund

  2. debited to income and expenditure account

  3. capital issues and shown in the balance sheet

  4. credited to the separate fund
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Separate funds are those funds which are earmarked for a specific activity. In case of fund based accounting, all the incomes related to that particular activity is credited to that fund and all the expenses debited to that fund. For example, Building fund, Sports fund etc. 

Multiple choice commercial applications single entry system introduction to single entry system and difference between single entry and double entry system meaning and featuresof incomplete records meaning of incomplete records, reasons for incompleteness and its limitations ascertaining profit or loss from incomplete records preparation of final accounts from incomplete records preparation of statement of affairs double entry system

Under single entry system "profit" = closing capital - _________________.

  1. Opening capital

  2. Opening assets

  3. Opening liabilities

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

Suppose Opening Capital (i.e capital on the 1st day of financial year) is Rs. 50,000 and Closing Capital ( i.e capital on the last day of financial year ) is Rs. 70,000. the resulting difference is more by Rs. 20000 indicating a positive increment in capital called Profit.

Multiple choice biology for the continuity of generation reproductive systems different stages of growth reproductive system in humans

In retention growth model, payout ratio is subtracted from one to calculate.

  1. present value ratio

  2. future value ratio

  3. retention ratio

  4. growth ratio
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The retention ratio represents the portion of earnings kept by a company rather than paid out as dividends. It is calculated as 1 minus the dividend payout ratio.

Multiple choice commercial studies finance and accounts meaning and functions of finance and accounts department nature, need and significance of business finance introduction to business capital/finance

Operating and financial leverage are _____________.

  1. Independent

  2. Dependent

  3. Interdependent

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

Operating leverage and financial leverage are interdependent because they both affect the total risk and return of the firm. They interact to determine the overall financial structure and earnings per share volatility.

Multiple choice commercial applications financial accounting and reporting balance sheet, classification of assets and liabilities accounting records of not-for-profit organisations accounting procedure for not-for-profit organisations prepration of income and expenditure account and balance sheet income and expenditure account prepration of income and expenditure account accounting treatment for npo's

Which of the following is the accounting equation for a non-profit organization ?

  1. Asset = Capital + Liabilities

  2. Capital + Liabilities = Assets

  3. Accumulated fund + Liabilities = Assets

  4. Liabilities = Asset + Accumulated fund
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Accounting equation is a statement representing a relationship between a company's assets, liabilities and its capital.

The accounting equation for non-profit organisation is the sum of company's liabilities and the accumulated fund or capital fund which equals to the assets possessed by organisation.
$Accumulated\quad fund+Liabilities=Assets$.