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

____________ A/c is debited when amount of capital is to be brought in by the partner.

  1. Partners' capital

  2. Partners' current

  3. Cash/bank

  4. None of the above
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation
New partner is admitted either for increasing the partnership capital or strenghthening the management of the firm. When a new partner joins he is required to bring his share of capital and goodwill.
When partner bring his share of capital and goodwill cash/bank A/c is debited.
Multiple choice book keeping and accountancy accounts of 'not for profit' concerns receipts and payments receipts and payments account prepration of income and expenditure account prepration of income and expenditure account and balance sheet

________is/are example(s) of capital receipts.

  1. Sale proceed of fixed asset

  2. Loan raised from financial institutions

  3. Capital raised through book building process

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

b'Option D is correct. Capital receipts refer to those receipts which either create a liability or cause a reduction in the assets of the firm. They are non-recurring or non-routine in nature. Sale proceeds of fixed assets leads to reduction in assets. Loan and Capital raised create liability for firm. All are capital receipts. '

Multiple choice accountancy accounting using data base management system (dbms) applications of dbms in generating accounting information accounting and database management system accounting and database system

Which of the following is the example of intangible fixed assets?

  1. Land

  2. Patents

  3. Furniture

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

Intangible assets are assets that lack physical substance. Patents are legal rights that provide value but cannot be touched, unlike land, furniture, or machinery.

Multiple choice accountancy accounting using data base management system (dbms) applications of dbms in generating accounting information accounting and database management system accounting and database system

__________ may be classified into shares and debentures which may be further classified into quoted and unquoted.

  1. Current Assets

  2. Intangible Assets

  3. Tangible Assets

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

Investments are financial assets that can be held in the form of shares or debentures, which are often traded on markets as quoted or unquoted securities.

Multiple choice accountancy accounting using data base management system (dbms) applications of dbms in generating accounting information accounting and database management system accounting and database system

Non operating income means income from activity which is incidental to income from opearating activity.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Non-operating income is derived from activities that are not part of the core operations of the business, such as interest income or gains from the sale of assets.

Multiple choice book keeping and accountancy origin of transactions - source documents and preparation of vouchers meaning, importance and components of voucher bank book and petty cash book source documents

Wages paid for erection of machinery are debited to ____________.

  1. Wages Account

  2. Machinery Account

  3. Profit and Loss Account

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

All incidental charges incurred for installation of assets are charged to the cost of that asset. Wages paid on erection of machinery is a capital expenditure and will be debited to machinery account.

Multiple choice commercial studies sources of business finance - 2 debentures / bonds debentures non-institutional sources - long-term

The debentures which are duly recorded in the register of debenture holders maintained by the company and which can be transferred only through a regular instrument of transfer are called as _________ debentures.

  1. Secured

  2. Unsecured

  3. Convertible

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

Registered debentures are duly recorded in the register of debenture holders. It is maintained by the company and which can be transferred only through a regular instrument of transfer.

Multiple choice commercial studies sources of business finance - 2 debentures / bonds debentures non-institutional sources - long-term

__________ debentures are those debentures that can be converted into equity shares after the expiry of a specified period.

  1. Secured

  2. Unsecured

  3. Registered

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

Debentures are an important instrument to raise long term debt capital. They are issued by a company and bear a fixed rate of interest and the company promises to pay the debt at a future date. The debentures that can be converted into equity shares within a specified period of time are known as convertible debentures.

Multiple choice commercial studies sources of business finance - 2 debentures / bonds debentures non-institutional sources - long-term

As fixed charge instruments, debentures put a _________ burden on the earnings of a company.

  1. Permanent

  2. Temporary

  3. Higher

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

Debentures bear a fixed rate of interest to be paid at a future date to the the creditors. As fixed charge instruments, debentures put a permanent burden of interest payments on the earnings of a company.

Multiple choice commercial studies sources of business finance - 2 debentures / bonds debentures non-institutional sources - long-term

If the value of debentures allotted to vendors for acquiring some assets as payment for purchase consideration is more than the agreed purchase price, the difference is credited to __________.

  1. Capital reserve account

  2. Debenture suspense account

  3. Goodwill account

  4. Profit & loss account
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Goodwill Account-

  • Sometimes a company purchases some assets and liabilities from the vendor and purchase consideration (amount of payment) is determined in advance. 
  • Payment is made by issuing debentures by the company; it is called issue of debentures for consideration other than cash. Such issue of debentures may be at par, discount or premium.
  •  The entry for acquisition of assets & liabilities and issuance of debenture is shown as above:

         a.   Assets A/c                     Dr.

                  To Liabilities A/c

                  To Vendor’s A/c

             (Purchase of assets & liabilities from vendor)

         b.  Vendor’s A/c                 Dr.

                   To Debentures A/

              (Issue of debentures to vendors)

  •  In such cases, if purchase consideration is more than assets & liabilities acquired then the difference is goodwill and amount of difference to “Goodwill A/c” which is calculated as below:

     Goodwill= Purchase consideration- Assets acquired- Liabilities taken over

  • The entry of goodwill will be as shown below:
           Assets A/c                     Dr.

           Goodwill A/c                 Dr.

                     To Liabilities A/c

                     To Vendor’s A/c

         (Purchase of assets & liabilities from vendor)

Multiple choice commercial studies sources of business finance - 2 debentures / bonds debentures non-institutional sources - long-term

If the debentures are issued at a price higher than the nominal value of the debentures, the premium should be credited to ______________.

  1. General Reserve

  2. Securities Premium Account

  3. Reserve Capital

  4. Profit & Loss Account
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Securities Premium Account-

·  When debenture is issued at a price more than its face value, they are said to be issued at a premium.

·  For example: if a debenture of ₹10 is issued at ₹12; ₹2 will be called as premium on that debenture.

·  The amount of premium on debenture is a capital profit so it is credited to a separate account called “Securities Premium Account” or “Securities Premium Reserve” and it is shown in Balance sheet under the head “Reserved and Surplus”.

· Though there is no legal restriction on issue of debenture at premium but there is restriction on utilization of securities premium a/c.

·  Utilization of securities premium a/c is restricted to following purposes:

       a.  Writing off preliminary expenses

       b.  Writing off expenses, discount allowed on issue of shares/debentures or commission paid on issue of debentures/shares (underwriting commission)

       c.  Issue of fully paid bonus shares to equity shareholders

       d.  Providing for payment of premium payable on redemption of preference shares or debenture

       e.  For buy back of its own shares.

Multiple choice commercial studies sources of business finance - 2 debentures / bonds debentures non-institutional sources - long-term

If face value of debentures is more than issue price, then the debentures are said to be issued at a _________.

  1. Premium

  2. Discount

  3. Par

  4. None of above
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation
Issue of Debentures at Discount:

When debentures are issued by company at a price less than its nominal value (face value) it is said to be issued at discount. It is important to note that the Companies Act has not put any restriction on the maximum limit of discount. For example, if a debenture of Rs. 1,000 is offered to public at Rs. 950, it is issue at a discount. Here Rs. 50 on each debenture is loss to the company. As a principle of equity, it is desirable to write off this loss.

Disclosure of Discount in Balance Sheet:
It is a capital loss and until it is written off-completely, it is shown on the asset side of balance sheet, under the heading ‘Miscellaneous Expenditure’, as a fictitious asset. Discount on issue of debentures account is supposed to be allowed on allotment, unless, otherwise, mentioned.

Accounting Treatment:
The requisite entries to be passed are as follows:
(a) When allotment money becomes due

Debenture allotment a/c
Discount on issue of debenture a/c
To Debentures a/c

(b) When allotment money is received
Bank a/c
To Debenture allotment a/c

(c) To Write off Discount
Profit & Loss A/c
To Discount on Issue of Debenture A/c.
Multiple choice commercial studies sources of business finance - 2 debentures / bonds debentures non-institutional sources - long-term

Discount on issue of debentures is ____________.

  1. Revenue loss

  2. Capital profits

  3. Capital loss

  4. Capital receipt
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation
 Capital Loss :-

A capital loss is the loss incurred when a capital asset, such as an investment or real estate, decreases in value. This loss is not realized until the asset is sold for a price that is lower than the original purchase price. 
Capital losses are generally tax deductible, but only when they are realized. That is, they only become deductible when the asset is actually sold (unless the stock is legally deemed worthless). Until that point, any losses are considered unrealized and are not deductible. 
The IRS considers nearly every asset owned by individuals and companies as capital assets and thus subject to capital gains taxes and capital loss deductions.
Multiple choice commercial studies sources of business finance - 2 debentures / bonds debentures non-institutional sources - long-term

The balance of the Debentures Sinking Fund after redemption of debentures is transferred to____________.

  1. Profit and loss A/c

  2. General reserve A/c

  3. Debenture A/c

  4. Cash A/c
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The balance of the Debentures Sinking Fund after redemption of debentures is transferred to General Reserve account. It is the amount which is kept separately out of redeemed amount from debentures, that is why it is transferred to general reserve account.

Multiple choice organization of commerce and management business risks and insurance meaning, importance and principles of insurance features and principles of insurance meaning and definition of insurance

Insurance and garage rent is _______.

  1. fixed charges

  2. maintenance charges

  3. operating charges

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

Insurance and garage rent are costs that do not change with the distance traveled or usage of the vehicle, making them fixed charges.