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 equation explain the concept of accounting equation usefulness of an accounting equation accounting equations and transactions

Both assets and owner's equity (i.e. capital) would be increased by ___________.

  1. Proprietor's withdrawals

  2. Sale of good on credit

  3. Purchasing a machinery on credit

  4. Retained earnings
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

When Owner is retaining earnings , it will  increase owners equity along with the cash or bank balance. 

Hence, option D is correct.

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

If outside liabilities and owners equity are added we get ______________.

  1. Total Liabilities

  2. Net worth

  3. Shareholders Fund

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

The total of outside liabilities and owner's equity represents the total claims against the assets of the business, which is defined as total liabilities (or total equities).

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

An increase in one liability may lead to _________________.

  1. Increase in another asset

  2. Decrease in liability

  3. Both (A) and (B)

  4. Either (A) or (B)
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

An increase in one liability can be balanced by a decrease in another liability (e.g., paying off a creditor with a bank loan) or an increase in an asset (e.g., taking a loan to buy equipment).

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

Capital is the difference between.

  1. Income and expenses

  2. Sales and Cost of goods sold

  3. Assets and liabilites

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

Capital represents the owner's claim on the business assets. It is calculated as Total Assets minus Total Outside Liabilities.

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

If assets are increased by 2,000 and liabilities are increased by 1,200. What will be the effect on business equity?

  1. 800

  2. 2,000

  3. 3,200

  4. 1,200.
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation
The duality principle is commonly expressed in terms of fundamental Accounting Equation, which is as follows:
Assets = Liabilities + Equity ( Capital)
Equity = Assets - Liabilities
            = 2,000 - 1,200 
            = 800.

Multiple choice business organisation and correspondence meaning, scope, nature and importance of business organisation factors affecting business interrelationship between industry, commerce and trade other aspects of a business

Which one of the following is INCORRECT about closing stock?

  1. It is added into current assets

  2. It is deducted from Material available for use

  3. It becomes opening stock of next year

  4. It reduces the resources of business
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Closing stock is an asset that represents unsold goods. It does not reduce the resources of a business; rather, it is a resource that has been retained for future sale.

Multiple choice civics direct taxes black money and tax evasion meaning of tax public revenue : direct and indirect taxes income tax

According to the income tax rule in India depreciation is to be charged on the basis of which one of these.

  1. Written down value method

  2. Accounting book-value method

  3. Discounted cash flow method

  4. Pay back method
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

According to the income tax rule, 1961 depreciation is to be charged on the basis of written down value method in India which meant depreciation percentage charge would be applied on the written down value that came after all such depreciation from previous years. 

Multiple choice civics direct taxes black money and tax evasion meaning of tax public revenue : direct and indirect taxes income tax

In case of annuity, the average after tax profits are ___________.

  1. equal to any year's profits

  2. more than any year's profits

  3. less than any year's profits

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

An annuity involves a series of equal payments at regular intervals. Therefore, the average after-tax profit is equal to the profit of any individual year.

Multiple choice income tax direct taxes commerce black money and tax evasion meaning of tax

______ means the financial year immediately preceding the assessment year.

  1. Calendar year

  2. Assessment year

  3. Previous year

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

Previous year means the financial year preceding the current assessment year. For example, 2017 is the previous year for the current financial year. 

Multiple choice income tax direct taxes commerce black money and tax evasion meaning of tax

Choose the correct answer:
(a) Under the straight line method, depreciation charges are allocated equally over the asset's useful life
(b) The accelerated depreciation methods provide for larger amount of depreciation in the early years of the asset's life while the amount progressively declines in latter years
Of these:

  1. Both (a) and (b) are true

  2. (a) is true but (b) is false

  3. (a) is false but (b) is true

  4. Both (a) and (b) are false
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The straight line method allocates depreciation equally over the asset's life. Accelerated methods (like double declining balance) charge more depreciation in the early years, which then decreases over time.

Multiple choice income tax direct taxes commerce black money and tax evasion meaning of tax

Operating leverage indicates the impact of changes in

  1. Sales on operating income

  2. Output on operating income

  3. Profit on operating income

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

Operating leverage measures how sensitive a company's operating income (EBIT) is to changes in sales volume. It arises from the presence of fixed operating costs.

Multiple choice organisation of commerce and management sources of business finance - 2 equity and preference shares equity shares and preference shares non-institutional sources - long-term

Retained earnings does not involve any explicit cost in the form of ________.

  1. Interest

  2. Dividend

  3. Floatation cost

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

Retained earning refers o the accumulated net income of a company or a business organization.Retained earnings does not involve any explicit cost in the form of interest, dividend and floating cost.

Multiple choice organisation of commerce and management sources of business finance - 2 equity and preference shares equity shares and preference shares non-institutional sources - long-term

The funds available with a company after paying all claims including tax and dividend is called _______.

  1. new profit

  2. net operating profit

  3. capital profit

  4. retained earnings
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

A company generally does not distribute all its earnings among the shareholders as dividends. A portion of the net earnings may be retained in the business for use in the future. This is known as retained earnings. It is a source of internal financing or self-financing or ‘ploughing-back of profits’.

Multiple choice organisation of commerce and management sources of business finance - 2 equity and preference shares equity shares and preference shares non-institutional sources - long-term

Portion of the net earnings retained in the business for future use is known as _______.

  1. Net profit

  2. Retained earnings

  3. Gross profit

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

The a company or a business revolves around earning profits, for the same, it has to perform financial planning to keep the business running. Some parts of the profits that are earned are usually kept for use in the future. This foresight of retaining a portion of the net earnings is known as retained earnings.

Multiple choice organisation of commerce and management sources of business finance - 2 equity and preference shares equity shares and preference shares non-institutional sources - long-term

Retained earnings is a ___________ source of funds available to an organisation.

  1. Temporary

  2. Permanent

  3. Higher

  4. Both a and b
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

A part of the net profit that is usually kept for use in the future is known as retained earnings. Retained earnings are a permanent source of funds available to the organisation as it is the amount that has been retained from the net earnings by the organisation and can be flexibly used.