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 elements of accounts company accounts - redemption of debentures redemption by payment in lump sum accounting effects for redemption of debentures redemption of debentures

After redemption of debentures, the balance of debenture sinking fund is transferred to:

  1. Debenture account

  2. General reserve account

  3. Profit & loss account

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

Once debentures are redeemed, the sinking fund is no longer needed, so the balance is transferred to the General Reserve account.

Multiple choice elements of accounts company accounts - redemption of debentures redemption by payment in lump sum accounting effects for redemption of debentures redemption of debentures

___________ is created to provide for not only depreciation on the assets but also to provide sufficient funds for replacement of the assets at the end of its life.

  1. Plant and Machinery replacement fund.

  2. Sinking fund

  3. Dividend equalization reserve

  4. Debenture redemption reserve
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

A sinking fund method is a technique for depreciating an asset in bookkeeping records while generating money to purchase a replacement for the assets when it reaches the end of its useful life. 

Multiple choice elements of accounts company accounts - redemption of debentures redemption by payment in lump sum accounting effects for redemption of debentures redemption of debentures

The balance of the debentures sinking fund after redemption of debentures is transferred to ___________________.

  1. Debentures Account

  2. Profit and Loss Account

  3. General Reserve Account

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

Similar to previous questions, the balance of the sinking fund after the redemption of debentures is no longer required for its specific purpose and is transferred to the General Reserve.

Multiple choice elements of accounts company accounts - redemption of debentures redemption by payment in lump sum accounting effects for redemption of debentures redemption of debentures

Interest is credited to profit and loss account in ________________.

  1. annuity method

  2. sinking fund method

  3. insurance policy method

  4. all of the above
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

In the sinking fund method, interest earned on the sinking fund investments is credited to the Sinking Fund account, but the interest on the debentures themselves is an expense charged to the Profit and Loss account.

Multiple choice elements of accounts company accounts - redemption of debentures redemption by payment in lump sum accounting effects for redemption of debentures redemption of debentures

Profit on sale of sinking fund investment is credited to ______________.

  1. General reserve

  2. Capital reserve

  3. Sinking fund

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

Profit or loss on sale of investments is transferred to sinking fund. After the redemption of all debentures, balance left in sinking fund is transferred to general reserve but the portion of the profit on sale of sinking fund investment is preferably transferred to capital reserve.

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 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

If an organisation has followed the _______ entry system they must prepare a trial balance for checking the accuracy of the ledger accounts.

  1. single

  2. double

  3. manual

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

In a double entry system, every transaction has two effects. One is debit and other is credit. In Trial Balance, balances of all the ledger accounts are recorded. If debit side of trial balance matches with credit side it shows the mathematical accuracy of all the accounts. 

So, if an organisation has followed the double entry system they must prepare a trial balance.

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

Which statement are prepared by the Not-for-profit Organisations?

  1. Receipt and Payment Account

  2. Income and Expenditure Account

  3. Balance Sheet

  4. All of the above
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation
The statements prepared by Non-for-profit organisations are:-
1) Receipt and payments account - It is a real account just like cash account. Its prepared at the end of the year. All receipts are recorded on the debit side and expenses on the credit side. 
2) Income and expenditure account - Its a nominal account and is just like a profit and loss account. All the expenses are recorded on the debit and side and incomes on the credit side. 
3) Balance sheet - Balance sheet is prepared normally. The difference between assets and liabilities is shown as capital fund or general fund. 
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

Not for profit organisation do not have to manufacture,purchase or sell goods and may not have credit transactions so they don't have to maintain _________account.

  1. trading Account

  2. balance sheet

  3. profit and Loss Account

  4. all of the above
Reveal answer Fill a bubble to check yourself
A,C Correct answer
Explanation

Non for profit organisations do not manufacture, purchase or sell goods and may not have credit transactions so they do not have to maintain trading account and profit and loss account. 

The financial statements prepared by Non for profit organisations are Receipts and payment account, income and expenditure account and balance sheet. 

Multiple choice elements of accounts computerised accounting system accounting systems - manual and computerized difference between manual and computerised accounting meaning and importance of computerised accounting system

The identification of transactions, based on application of accounting principles is common to _________ accounting system.

  1. manual

  2. computerised

  3. Both (a) and (b)

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

Identifying is one of the activities in the context of comparison between manual and computerised accounting system. The identification of transactions, based on application of accounting principles is, common to both manual and computerised accounting system.

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.