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 book keeping and accountancy accounts of 'not for profit' concerns accounting record of non-trading organisations features of not-for-profit organisation meaning and characteristics of not-for-profit organisation

The net result of the activities of Non-for-profit is termed as ________.

  1. Surplus or Deficit

  2. Cash at the end

  3. Net profit/loss

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

All the revenue incomes during the accounting period are shown on the income side and all of the revenue expenses during the period are shown on the debit side of income expenditure account.

Multiple choice economics laws of returns - returns to a factor and returns to scale production and costs production function producer behaviour and supply total product, average product and marginal product production and law of variable proportions production return to scale and cobb douglas function land land,labour, capital and entrepreneur how does production take place?

In the long run there is enough time for the firm to cover its losses and earn normal profits. This is because in the long run, all inputs are __________.

  1. identical

  2. homogenous

  3. variable

  4. fixed
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

In the long run, firms have sufficient time to adjust all factors of production, meaning all inputs become variable. This flexibility allows firms to optimize their scale of operations.

Multiple choice economics laws of returns - returns to a factor and returns to scale production and costs production function producer behaviour and supply total product, average product and marginal product production and law of variable proportions production return to scale and cobb douglas function land land,labour, capital and entrepreneur how does production take place?

"Law of diminishing returns" or "Law of variable proportion" operate in ___________.

  1. long run

  2. short run

  3. very long period

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

For the law of diminishing returns or variable proportions to operate, at least one factor needs to be fixed, as only then can factor proportions be changed, this happens in the short run. In the long run all factors are variable and thus it is not possible for the law of diminishing returns or law of variable proportions to operate.

Multiple choice economics laws of returns - returns to a factor and returns to scale production and costs production function producer behaviour and supply total product, average product and marginal product production and law of variable proportions production return to scale and cobb douglas function land land,labour, capital and entrepreneur how does production take place?

The "law of diminishing returns" applies to _________.

  1. the short run, but not the long run

  2. the long run, but not the short run

  3. both the short run and the long run

  4. neither the short run nor the long run
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

For the law of diminishing return to operate at least one factor needs to be fixed, as only then can factor proportions be changed, this happens in the short run. In the long run all factors are variable and thus it is not possible for the law of diminishing returns to operate.

Multiple choice introduction of business laws business law and contract act business studies

Withdrawal of cash from bank for official use will result into _____.

  1. Increase of assets

  2. Increase of expenses

  3. No impact on assets

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

When a business owner withdraws cash from a company account, the value of company assets decreases because some capital reserves have been transferred from business to personal use. Although an owner draw affects the value of a company's assets, it is essentially unrelated to the part of the equation that calculates how much the business has earned through its sales and operations. Hence, This entry will have nil impact on assets since, on one hand cash A/c will increases and on the other hand bank A/c will decrease. The entry to be passed is
Cash A/c              Dr.
            To Bank A/c

Multiple choice introduction of business laws business law and contract act business studies

Which of the following transactions would have no impact on owner's capital?

  1. Purchase of land from the proceeds of a bank loan

  2. Withdrawal of profits

  3. Net loss

  4. Cash brought in by owner as additional capital
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Purchase of land from the proceeds of a bank loan would have no impact on owner's capital. The entries to be passed on purchase of land are
Cash A/c                                  Dr.
         To Bank Loan A/c On purchase of Land the following entry will be passed-
Land A/c                                 Dr.
         To Cash A/c
Thus no impact on owner's capital

Multiple choice introduction of business laws business law and contract act business studies

Expenses paid in cash and recorded as assets before they are used are called _____.

  1. accrued Expenses

  2. interim Expenses

  3. prepaid Expenses

  4. unearned Expenses
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Prepaid expenses are future expenses that have been paid in advance. It can also be said to be costs that have been paid but have not yet been used up or have not yet expired. The amount of prepaid expenses that have not yet expired are reported on a company's balance sheet as an asset.

Multiple choice elements of book keeping and accountancy accounting from incomplete records preparation of final accounts from incomplete records preparation of statement of affairs ascertaining profit or loss from incomplete records introduction to single entry system and difference between single entry and double entry system

The difference between assets and liabilities is called as ___________.

  1. Capital

  2. Drawings

  3. Incomes

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

As assets represents the total funds applied in the business from capital (owners fund) and liabilities(external funds e.g bank loan, creditors etc).
therefore the difference between Assets and Liabilities will represent Capital.

Multiple choice elements of book keeping and accountancy accounting from incomplete records preparation of final accounts from incomplete records preparation of statement of affairs ascertaining profit or loss from incomplete records introduction to single entry system and difference between single entry and double entry system

Balance of interest on calls-on-advance account is transferred to the ___________ at the end of the year.

  1. Share capital account

  2. Calls in advance account

  3. Securities premium account

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

Sometimes a shareholder pays a portion or whole on the unpaid amount on the shares held by him in advance. In such a case, money so received in advance is transferred to Calls-in- advance account. It is important to note that calls-in-advance does not form part of share capital. In-spite of this, according to Section 93 dividend may be paid on calls in advance, if authorized by the Articles.

Disclosure in Balance Sheet:

Calls in advance is shown separately, in the Balance Sheet as liability of the company under the heading ‘Current Liabilities’ until the calls are made and the amount actually becomes payable by the shareholder.

Interest on Calls-in-advance:

Since the amount received as calls-in-advance is a liability of the company, it is liable to pay interest on the calls-in-advance from the date of receipt of the amount till the date when the call becomes due for payment. If the Articles of the Company are silent about the rate of interest on calls-in-advance, then rate of interest is 6% p.a. Such an interest is a charge on profits and has to be paid to the concerned shareholder even if there is no profit.

The accounting treatemt for interest on calls in advance is as follows:

1. For interest due

 Interest on calls in advance A/c     Dr.

                To sundry shareholder's  A/c

2. For interest paid

 Sundry shareholder A/c                  Dr.

                To Bank A/c

3. For transfer of balance of interest to profit and loss A/c

  Profit and Loss A/c                            Dr.

                  To Interest on calls in advance A/c

Multiple choice long-term and short-term finance sources of business finance business studies

Current assets of a business firm should be financed through __________.

  1. Current Liability Only

  2. Long Term Liability Only

  3. Partly from both types, i.e., long and short term Liabilities

  4. None of the Above
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation
Current assets refer to those assets held in a business which can be converted in the form of cash within a period of one year. Current assets are more liquid but less profitable.
Current assets of a business firm should be financed through: both types(i.e. long and short term liabilities)
Multiple choice long-term and short-term finance sources of business finance business studies

Company may retain a part of the profits called as ______ and utilize it as capital.

  1. retained earnings

  2. debentures

  3. reserves and surplus

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

The retained earnings of a corporation is the accumulated net income of the corporation that is retained by the corporation at a particular point of time, such as at the end of the reporting period. Retained earnings are the profits that a company has earned to date, less any dividends or other distributions paid to investors.

Multiple choice book keeping and accountancy analysis of financial statements preparation of common size statements comparative statements and common-size statements tools of financial statement analysis - comparative and common-size statements

A common size balance sheet shows the percentage of each asset to the _____, and that of each liability to the ___. 

  1. Total current assets, Total current liabilities

  2. Liabilities, Assets

  3. Total assets, Total liabilities

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

Common size statement is stated as a percentage of the aggregate, of which that item is a part i.e. common size balance sheet shows the percentage of each asset to the total assets, and that of each liability to the total liabilities. The common size statement is also known as component percentage statement, is a financial tool for studying the key changes and trends in financial position and operational result of a company.

Multiple choice business organisation introduction to financial markets concept of financial market meaning and definition of financial market concepts and functions of financial markets

An industrial company which has at the end of any financial year accumulated losses greater than its net worth is said to be _______________.

  1. Bankrupt

  2. Sick

  3. Weak

  4. Both (A) and (C) above

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

Sick industrial company is company registered for not less than five years which has to the end of any financial year, accumulated losses equals to or exceeding its entire net worth.

Multiple choice commerce business finance financial planning financing financial management

The difference between current assets and current liabilities is:

  1. Gross working capital

  2. Net working capital

  3. Permanent working capital

  4. Temporary working capital
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Net working capital is defined as the difference between current assets and current liabilities, representing the liquidity available for day-to-day operations.