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 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 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

Common size financial statements make it easier to compare firms ____________.

  1. of different sizes

  2. in different industries

  3. with different degree of leverage

  4. that use different inventory valuation methods (FIFO Vs. LIFO)
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Common size financial statements make it easier to compare firms of different sizes as they show all items as percentages and not in absolute figures which provides better comparison. 

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.

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.