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 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.

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 ___________.

  1. Internal financing

  2. Ploughing back of profits

  3. Self financing

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

Retained earnings are the funds which have been kept by the company for their future expenses out of the net earnings gained by the company over the course of business. These retained earnings can be a source of funds for internal financing, as a help in the low business turnover or self financing for the smooth functioning of the business or company.

Multiple choice book keeping and accountancy accounts of 'not for profit' concerns financial accounting and reporting prepration of income and expenditure account and balance sheet accounting procedure for not-for-profit organisations receipts and payments receipts and payments account

Any donation received for a specific purpose is a ___________.

  1. Liability

  2. Assets

  3. Revenue Receipts

  4. Capital Receipts
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

If donation is received without a specific purpose, it is a revenue receipt. But if donation is received for a specific purpose, this is considered as capital receipts and all expenses incurred towards the specific purpose should be set off from this receipt.

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) types of issue of debentures types of debentures meaning and kinds of debentures

Debentures which are not secured by any charge upon any assets of the company are called __________.

  1. secured debenture

  2. naked debenture

  3. bearer debenture

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

Naked debentures, also known as unsecured debentures, are those that do not carry any charge or security on the assets of the company.

Multiple choice adjustment of partners capital and death of a partner retirement/ death of a partner elements of accounts

On the dissolution of a firm, an amount realized from the unrecorded asset is credited to:

  1. Revaluation account

  2. Realisation account

  3. Cash account

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

At the time of dissolution, all the assets are transferred to realisation account. Journal entry is:
Realisation A/c Dr. 
    To assets A/c 
When assets are sold, entry is:   
Bank A/c Dr. 
    To Realisation A/c
Because bank balance increased.

Multiple choice adjustment of partners capital and death of a partner retirement/ death of a partner elements of accounts

Cash paid on settlement of retiring partners claim is credited to _____.

  1. Cash A/c

  2. Partners Capital A/c

  3. Retiring Partner Capital A/c

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

Cash is a real account. Rule for the real account is as under:

Debit what comes in 
Credit what goes out

Cash paid to partner at the time of retirement. Accordingly journal entry will be passed as:
Partner's Capital A/c                 Dr.
          To Cash A/c

Multiple choice adjustment of partners capital and death of a partner retirement/ death of a partner elements of accounts

The deceased partner's capital account is debited with his share of the following amounts:

  1. Drawings

  2. Interest on drawings from the beginning of the year to the date of death

  3. Loss on revaluation of assets and liabilities

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

The partner's capital account is an equity account in the accounting records of a partnership. It contains the following type of transactions:

1. Initial and subsequent contributions by the partners to the partnership, in the form of either cash or the market value of other types of assets.

2. Profits and losses earned by the business, and allocate to partners based on the provisions of the partnership agreement.

3. Distributions to partners.

Following are the things which are debited to deceased partner's capital account with his share:

1. Drawings

2. Interest in drawings from the beginning of the year to the date of his death.  

3. Loss on revaluation of assets and liabilities.

Multiple choice adjustment of partners capital and death of a partner retirement/ death of a partner elements of accounts

At the time of final payment to retiring partner, which of the following adjustment/s is/are necessary in the capital accounts ?

  1. Transfer of goodwill

  2. Transfer of profit or loss on revaluation

  3. Transfer of reserve

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

The following adjustments are necessary at the time of final payment to retiring partner:

1. Transfer of reserves

2. Transfer of goodwill

3. Transfer of profit and loss on revaluation
After the adjustment of the above mentioned items, the capital account balance standing to the credit of the retiring partner represents amount to be paid to him.

The continuing partners may discharge the whole claim at the time of retirement. Then the journal entry will be as follows:

Retiring Partner's capital A/c                Dr.

             To Bank A/c

Sometimes the retiring partner agrees to retain some portion of his claim in the partnership as loan. The journal entry will be as follows:

 Retiring Partner's Capital A/c              Dr.

               To Retiring Partner's Loan A/c

               To Bank A/c

Multiple choice adjustment of partners capital and death of a partner retirement/ death of a partner elements of accounts

On retirement or death of a partner the existing profit and loss a/c and Reserve a/c is transferred to ____________.

  1. debt side of all partners capital a/c

  2. credit side of all partners capital a/c

  3. debit side of remaining partners capital a/c

  4. credit side of remaining partnership capital a/c
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation
At the time of retirement of a partner, if there exist any reserve or accumulated profit in the books of the firm, they should be transferred to the old partner's capital/current accounts in the old profit sharing ratio, because these items belongs to the old partners.
In the same manner, old partner's capital/current accounts should be debited in the old ratio if any accumulated loss appears in the asset side of the balance sheet.
Multiple choice adjustment of partners capital and death of a partner retirement/ death of a partner elements of accounts

In normal trading circumstances, which of the following would not be found in a partner's capital accounts? 

  1. Profits on revaluation.

  2. Losses on dissolution.

  3. Goodwill

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

Drawings are typically recorded in a separate drawings account or as a debit to the capital account, but in the context of partnership dissolution or revaluation, the other items listed are standard adjustments to the capital account balance.