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 elements of book keeping and accountancy accounting from incomplete records ascertaining profit or loss from incomplete records meaning and preparation of statement of profit meaning of incomplete records, reasons for incompleteness and its limitations preparation of final accounts from incomplete records preparation of statement of affairs introduction to single entry system and difference between single entry and double entry system meaning and featuresof incomplete records

To ascertain the profit, closing capital is to be adjusted by deducting ________ and adding _________.

  1. Opening capital, Drawings

  2. Opening capital, Cash deposit

  3. Surplus, Opening balance

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

To ascertain the profit, closing capital is to be adjusted by deducting opening capital and adding drawings.


Below is the example:
Opening Capital               Rs.30000
Drawings                           Rs.5000
Closing Capital                 Rs.50000

Solution:
Closing Capital                Rs.50000
Add: Drawing                  Rs.  5000
                                         ----------------
                                         Rs.55000
Less: Opening Capital    Rs.30000
                                         ---------------
Profit during the year      Rs.25000
                                        -----------------

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

While ascertaining profit in single entry system the amount of additional capital introduced is ___________.

  1. added to the capital in the beginning

  2. deducted from the capital in the beginning

  3. added to the capital at the end

  4. deducted from the capital at the end
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

When single entry system is followed, profits can be calculated by comparing the capital at the beginning of the year and capital at the end of the year. This can be formulated as:

Opening capital+Capital introduced during the year+Profit during the year-Drawings=Closing capital.

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

In statement of profit and loss interest on capital is shown as _________.

  1. Addition

  2. Subtraction

  3. Ignored

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

Allowing interest on capital is an indirect expense for the business, an increase in expenses will lower the profit for the year. Hence, Interest on capital is deducted.

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

Further capital introduced during the year is ____________ from closing capital in order to find out the correct profit.

  1. Added

  2. Deducted

  3. Divided

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

Additional capital during the year is a result of working capital requirements and closing capital is the composition of profit or loss along with some capital contribution.
Hence, to remove the capital effect additional capital is deducted from closing capital in order to derive the correct profit or loss earned by the company.

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

The difference between capital at the end of year and capital at the beginning of year is called ____________.

  1. Profit

  2. Income

  3. Drawings

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

An increment of closing capital is a result of excess revenue earned during the year against the opening capital at the beginning thus representing Profit.

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

In order to find out the correct profit, drawings are ___________ to the closing capital.

  1. Deducted

  2. Added

  3. Divided

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

As Drawing refers to withdrawal of capital, Due to drawings, closing capital is decreased resulting a reduced Profit.
Hence, to ascertain correct profit Drawings are added back to closing capital.

Multiple choice commerce sources of business finance - 2 commercial paper non-institutional sources - short-term short term sources of finance

Commercial papers represent a new financial instrument issued for the purpose of _______________.

  1. Project financing

  2. Working capital

  3. Leasing of plant and equipment

  4. Import of capital goods
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Commercial papers are short-term debt, unsecured instrument which is issued by the companies to meet their short term obligations that is to meet their working capital requirements. They are usually issued for 15 days to 1 year.

Multiple choice commerce types of trade features of internal trade internal trade business and industry

The phenomenon of over-trading in working capital is characterized by _______________________.

  1. Less amount of cash invested in current assets

  2. Overcapitalizatiion of the company as compared to volume of sales

  3. High amount of cash invested in current assets

  4. All of the above

  5. Both (A) and (C) above
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Over-trading can be noticed from the disproportionately high turnover of assets compared to the volume of sales. This high turnover is indicative of less amount of cash invested in current assets which can create problems of liquidity at the time of making payments for current obligations.

Multiple choice business economics and quantitative methods public economics components of budget and budgetary procedure government budget and taxation government budget and economy

__________ receipts are those monetary receipts which either creates a liability or leads to a reduction in the assets of the government.

  1. Revenue

  2. Capital

  3. Tax

  4. Non-tax
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Capital receipts are all those money receipts of the government that either creates a liability for the government or reduce an asset of the government. Therefore, capital receipts include small savings, market loans and provident funds.

Multiple choice elements of book keeping and accountancy accounting in business develop the understanding of recording of transactions in journal illustrations on journal entries types of journal entries meaning and classification of business transactions

Interest on capital is credited to ___________ account.

  1. Expenses

  2. Income

  3. Capital

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

Capital is a contribution done by the owner in business. If any interest is payable, this need to be debited to Interest expenses and credited to the capital account.

Multiple choice elements of book keeping and accountancy accounting in business develop the understanding of recording of transactions in journal illustrations on journal entries types of journal entries meaning and classification of business transactions

When the claim on account of loss of stock is fully recoverable from the insurance company, the journal entry will be ______________________.

  1. Cash A/c Dr.

    To Insurance Claim

  2. Insurance Claim A/c Dr.

    To Trading A/c

  3. Trading A/c Dr.

    To Insurance Claim A/c

  4. Insurance Claim A/c Dr.

    To P and L A/c
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

When the full loss is recoverable, the entire amount is debited to the Insurance Claim account and credited to the Trading account to offset the loss of stock.

Multiple choice elements of accounts origin of transactions - source documents and preparation of vouchers business transactions and source document source documents voucher and transactions

Goodwill, Copyright and Trademarks should be classified as ___________.

  1. Tangible assets

  2. Intangible assets

  3. Current assets

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

Goodwill, Copyrights, and Trademarks are assets that lack physical substance, which classifies them as intangible assets.

Multiple choice elements of book keeping and accountancy accounting equation explain the concept of accounting equation usefulness of an accounting equation accounting equations and transactions

Which of the following is accounting equation?

  1. Capital = Assets + Liabilities

  2. Capital = Assets - Liabilities

  3. Assets = Liabilities - Capital

  4. Liabilities = Assets + Capital
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The basic accounting equation, also called as the balance sheet equation, represents the relationship between the assets, liabilities and capital of a business. It is the foundation for the double entry book-keeping system. For each transaction, the total debit equals the total credit. Following is the accounting equation:

Asset = Liability + Capital.

Multiple choice elements of book keeping and accountancy accounting equation explain the concept of accounting equation usefulness of an accounting equation accounting equations and transactions

Dual aspect concept results in the accounting equation _____________.

  1. Capital + Liabilities = Assets

  2. Revenue = Expenses

  3. Capital + Profit = Assets + Expenses

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

Dual aspect is the foundation or basic principle of accounting. This concept states that every transaction has a dual or two-fold effect and should therefore be recorded at two places.

The duality principle is commonly expressed in terms of fundamental Accounting Equation, which is as follows :

Assets = Liabilities + Capital

In other words, the equation states that the assets of a business are always equal to the claims of owners and the outsiders. The claims also called equity of owners is termed as Capital(owners’ equity) and that of outsiders, as Liabilities(creditors equity).

Multiple choice elements of book keeping and accountancy accounting equation explain the concept of accounting equation usefulness of an accounting equation accounting equations and transactions

Net worth of the business means _________________.

  1. Total assets minus depreciation

  2. Including expensene and debts.

  3. Total assets minus total outside liabilities

  4. Fixed assets minus current assets
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Net worth (or owner's equity) represents the residual interest in the assets of the entity after deducting all its liabilities.