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 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 commercial studies 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

Single entry system is most popular for ____________.

  1. Sole trader

  2. Government

  3. Company

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

Normally Single entry system is maintained by small traders as it do not require special set of book-keeping and expert accounting knowledge. Hence, it becomes hassle free for traders to ascertain their profit of loss earned by the business through single entry system.

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.
$Accumulated\quad fund+Liabilities=Assets$.

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 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.