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 commerce business finance financial planning financing financial management

Accumulated profits

  1. Are the profits possessed by the company on the date of liquidation

  2. Include the amounts of Development Rebate

  3. Are the profits in the hands of the company at the time of distribution of payment

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

Accumulated profits in a corporate context generally refer to retained earnings, which can include various reserves and development rebates available for distribution or reinvestment.

Multiple choice commerce business finance financial planning financing financial management

The twin objective to ensure availability of funds whenever required, includes a proper estimation of the funds required for different purposes such as for the purchase of _______ assets or to meet day-today expense of business.

  1. short-term

  2. long-term

  3. current

  4. non-current
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Financial management involves decision about the proportion of long term and short term finance. An organisation wanting to be more liquid would raise relatively more amount of long term bass and vice versa. There is a choice between liquidity and profitability. The underlying assumption here is that the current liability cost less than long term liability. 

Multiple choice installments banking business and commercial activities economics maths

Which of the following does not give a difference between a hire purchase and a normal purchase?

  1. Timing of payment for asset.

  2. Quality of asset purchased.

  3. Legal ownership of asset.

  4. Total cost of asset.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Quality of asset purchased does not give a difference between a hire purchase and a nominal purchase

Multiple choice installments banking business and commercial activities economics maths

The depreciation on an asset purchased through hire purchase should be:

  1. Based on the total cost including interest

  2. Based on the cost price of the asset only

  3. Should be straight line only

  4. No depreciation should be provide until the final payment is made
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The depreciation on an asset purchased through hire purchase should be based on the cost price of the asset only.

Multiple choice installments banking business and commercial activities economics maths

On the balance sheet of a company, the value of the asset bought through hire purchase will appear as:

  1. Cost less depreciation to date less amount owing on hire purchase less interest owing

  2. Cost less amounts owing on hire purchase

  3. Cost less depreciation to date less amount owing on hire purchase

  4. Cost less depreciation to date
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The value of the asset bought through hire purchase will appear as cost less depreciation to date on the balance sheet of a company.

Multiple choice elements of accounts ancient indian accounting meaning of accounting introduction to book-keeping and accounting book-keeping - ledger

If the change in accounting policy has no material effect in current period but which is reasonably expected to have a material effect in later periods __________________.

  1. The amount of changes should be disclosed.

  2. The fact of change should be disclosed.

  3. The fact of changes should not be disclosed.

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

According to accounting standards, if a change in policy is expected to have a material effect in future periods, the fact of the change must be disclosed to ensure transparency for stakeholders, even if the current impact is negligible.

Multiple choice elements of accounts ancient indian accounting meaning of accounting introduction to book-keeping and accounting book-keeping - ledger

Internal reconstruction can be done by __________.

  1. Alteration of share capital

  2. Reduction of share capital

  3. Issue of share capital

  4. All of these
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation
The methods given below are generally employed to effect the internal reconstruction process:
  • Alteration of Share Capital.
  • Sub-division and Consolidation of Shares.
  • Conversion of shares into stock or stock into shares.
  • Variation of Shareholder's rights.
  • Reduction of Share Capital.
  • Compromise/Arrangement.
  • Surrender of Shares.
Multiple choice elements of accounts ancient indian accounting meaning of accounting introduction to book-keeping and accounting book-keeping - ledger

Valuation is _______________.

  1. Sophisticated guess work

  2. An exact science

  3. Not related to the future

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

Valuation involves estimating the worth of assets or businesses. Because it relies on assumptions, forecasts, and market conditions, it is considered sophisticated guesswork rather than an exact science.

Multiple choice elements of accounts ancient indian accounting meaning of accounting introduction to book-keeping and accounting book-keeping - ledger

In annuity method interest is calculated ______________.

  1. on the value of the asset at the time of purchase

  2. on the value of the asset at the beginning of each year

  3. on the value of asset as expected at the end value of asset

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

Concept of Annuity Method of Depreciation:
The interest at this fixed rate on the opening balance of asset is debited to asset account each year and then the cost of asset together with interest thereon is written off equally over the life of the asset.

Multiple choice business studies sources of business finance internal & external stakeholders and distinction between shareholders, stakeholders and customers stakeholders in commercial organisation stakeholders

________ contributes asset in a form of capital or equity.

  1. An investor

  2. A Creditor

  3. Employees

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

 An investor contributes asset in a form of capital or equity. Investors invests capital or wealth in any company or financial market to receive some financial gain in return.

Multiple choice business studies sources of business finance internal & external stakeholders and distinction between shareholders, stakeholders and customers stakeholders in commercial organisation stakeholders

_____ contributes asset in the form of debt or liability.

  1. A debtor

  2. An investor

  3. Customer

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

 A creditor contributes asset in the form of debt or liability. Company or business organization owes money to creditors, thus, creditor contributes money in the debt or liability form.

Multiple choice commercial studies accounting procedures - rules of debit and credit modern approach of rules of accounts meaning and classification of accounts classification of accounts

Nominal A/c is debited when business incurs expenses.

  1. True

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

Accounts which are related to expenses, losses, incomes or gains are called Nominal accounts. The dictionary meaning of the word "nominal" is "existing in name only" and the meaning remains absolutely true in accounting sense too, because nominal accounts do not really exist in physical form, but behind every nominal accounts money is involved. E.g. Purchase A/c, Salary A/c, Sales A/C. Commission Received A/c, etc.

The final result of all nominal accounts is either profit or loss which is then transferred to the capital account. 
The golden rule for nominal account is : Debit all expenses and losses; Credit all incomes and gains.

Multiple choice commercial studies accounting procedures - rules of debit and credit modern approach of rules of accounts meaning and classification of accounts classification of accounts

Which one of the following statements is correct?

  1. Capital of the firm is reduced by borrowing

  2. Nominal accounts refer to false transactions

  3. When there is no change In proprietors capital, it is an indication of loss in business.

  4. Real accounts relate to the assets of a business
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Real account is an record of an asset. An asset can be current asset such as cash, a fixed asset such as building and intangible asset such as goodwill. Real account relate to the assets & liabilities of a business.

Multiple choice commercial studies budgeting distinction between funds flow and cash flow statements preparation of cash flow statement statement of changes in financial position

Under indirect method, which of the following items must be deducted from reported net income to determine net cash flow from operating activities?

  1. Depreciation of fixed assets

  2. Decreases in current assets

  3. Decreases in current liabilities

  4. Loss on sale of equipment
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Indirect method of ascertaining cash flow from operating activities begins with the amount of net profit/loss. Some important adjustments related to changes in working capital which is necessary to convert net profit/loss which is based on accrual basis into cash flows from operating activities i.e. increase in current assets, decrease in current liabilities should be deducted, and decrease in current assets, increases in current liabilities should be added to net profit/loss.

Multiple choice commercial studies budgeting distinction between funds flow and cash flow statements preparation of cash flow statement statement of changes in financial position

Which of the following does not represent an outflow of cash and therefore would not be reported on the statement of cash flows as a use of cash?

  1. Purchase of non-current assets

  2. Purchase of treasury stock

  3. Discarding an asset that had been fully depreciated

  4. Payment of cash dividends
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The total outgoing funds from a company in a given period of time. Cash outflows include expenses such as salaries, supplies, and maintenance as well as paying dividends or servicing any debt held by the company.  

A company may be required to seek additional financing if cash outflows exceed cash inflows. 

Examples of cash outflow are -  Cash payments to suppliers for goods and services, cash payments to acquire fixed assets including intangibles, cash payments to acquire share warrants or debt instruments of other enterprises, Dividends paid on equity and preference capital, interest paid on loans, debentures and advances.