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

Which of the following statements is true?

  1. Going concern concept assumes that business will be carried on for a definite period.

  2. The capital losses need not be deducted to ascertain net income.

  3. Provision for bad and doubtful debts is created according to the concept of conservatism.

  4. Materiality concept states that all business transactions are to be recorded however insignificant they may be.
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Going concern concept assumes that business will be carried on for an INDEFINITE period. Capital losses need to be deducted to ascertain net income. The provision for bad debts is made in accordance with the concept of conservatism. Materiality concept states that transactions of insignificant value need not be recorded.

Multiple choice

The prescribed form of the Balance Sheet requires that under the head Issued Capital, _______ should be stated.

  1. the different classes of share capital

  2. the sub-classes of preference shares

  3. Either (1) or (2)

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

Under the head Issued Capital should be stated if the shares are issued, then all the classes of shares. If it's preference share, then all the sub-classes of preference share should be stated. 

Multiple choice

Capital employed =

  1. Net Fixed Assets + Working Capital

  2. Net Fixed Assets – Working Capital
  3. Net Fixed Assets $ \times $Working Capital
  4. Net Fixed Assets $ \div $ Working Capital
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Capital Employed = Total Assets - Current Liabilities                            = Fixed Assets + Current Assets - Current Liabilities                           = Fixed Assets + Working Capital

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.