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 reserve and fund meaning and characteristics of reserves reserves provisions and reserves

Revenue reserves are also known as ___________.

  1. Free Reserves

  2. Non Free Reserves

  3. Owners reserves

  4. None
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Revenue reserves are those reserves which are created out of profits available for distribution by way of dividend. Revenue reserve refers to the amount which are free for distribution by way of dividend. Revenue reserves are also nown as free reserves as they can be freely distributed.

Multiple choice book keeping and accountancy reserve and fund meaning and characteristics of reserves reserves provisions and reserves

___________ is used to writing off capital losses or issue of bonus shares in case  of a company.

  1. Revenue Reserve

  2. Capital reserve

  3. Both

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

Capital Reserve is the part of the profit or surplus, maintained as an account in the Balance Sheet that can be used only for special purposes. It is made out of capital profits earned due to the sale of fixed assets at a price greater than its cost or profit on the reissue of forfeited shares. So Capital reserve is created when there is capital profit i.e. profit on sale of assets or upward revaluation of assets. 

Following are the uses of capital reserve :
  • To meet future capital losses
  • To issue as fully paid bonus shares
  • To strengthen the financial position of the business.

Multiple choice book keeping and accountancy reserve and fund meaning and characteristics of reserves reserves provisions and reserves

Reserves arising from capital receipts are known as _________.

  1. Capital Reserves

  2. Reserve Fund

  3. Secret Reserve

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

Capital reserves.

Capital Reserves are set aside out of capital profits and are normally not available for distribution as dividend. In other words, reserves created out of capital profits and which are not readily available for distribution of dividend among the shareholders is called Capital Reserves.
Example of capital reserves are Profit prior to incorportion,  profit on redemption of debentures, profit on slae of fixed assets, etc.

Multiple choice book keeping and accountancy reserve and fund meaning and characteristics of reserves reserves provisions and reserves

Reverse capital is ______.

  1. that part of uncalled capital which has to be called up in the event of winding up of the company

  2. same as capital reserve

  3. created out of revenue profit

  4. created out of capital profits
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Reserve Capital - A company may reserve a portion of its uncalled capital to be called only in the event of winding up of the company. Such ncalled amount is called 'Reserve Capital' of the company. It is available only for the creditors on winding up of the company.

Multiple choice business studies insurance - introduction and importance concept, scope and social security in india concept of social security industrial relations, trade unions and social security

If the account holder discontinues investment in NPS, the account will be frozen.

  1. True

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

If the account holder discontinues investment in NPS, the account will be frozen. National Pension System (NPS) is a government-sponsored pension scheme. It was launched in January 2004. National Pension Scheme provides old age income with reasonable market based returns. NPS was initially launched only for government employees.

Multiple choice elements of accounts introduction of financial statement of company general instructions for preparation of balance sheet tools of financial statements uses, importance, and limitation of financial statements

Balance sheet does not disclose information relating to ___________.

  1. asset

  2. loss of markets

  3. liabilties

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

Financial statements of the company record the assets at historical cost and not at market price. They fail to record the profit/loss that arise from the fluctuations in the market price of the assets. Hence, we can say that the financial statements do not show the complete picture of the business.  

Multiple choice elements of accounts introduction of financial statement of company general instructions for preparation of balance sheet tools of financial statements uses, importance, and limitation of financial statements

 From the following __________ limitations of financial statements.

  1. bias

  2. assets may not realise

  3. vital information missing

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

Financial statements are very important for a business but it has many limitations being personal bias, assets may not realise, vital or qualitative information missing. The financial statements may be affected by personal bias as the person making the statements is a human being. Financial statements do not show detailed information about every transaction and they also do not record the qualitative information. The statements only record quantitative information.

Multiple choice elements of accounts introduction of financial statement of company general instructions for preparation of balance sheet tools of financial statements uses, importance, and limitation of financial statements

 Financial statements help the investors to assess __________solvency.

  1. fixed

  2. immediate

  3. current

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

Investors are the owners of the company. Financial statements help them to assess the long term solvency of the business in which they have invested. They asses whether they will get fair returns or not for the money they have invested in the business.  

Multiple choice elements of accounts introduction of financial statement of company general instructions for preparation of balance sheet tools of financial statements uses, importance, and limitation of financial statements

Since the purchasing power of money is changing, the value of assets and liabilities shown in financial statement does not reflect ________ market situation.

  1. past

  2. future

  3. current

  4. both a and c
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

As Financial statements are prepared on the basis of historical cost.

It creates a demerit of financial statements. Since the purchasing power of money is changing, the values of assets and liabilities shown in financial statement do not reflect current market situation.

Multiple choice accountancy statement of changes in financial position preparation of cash flow statement cash flow statement finance

Investment by owner results in ___________________.

  1. Increase in capital and decrease in libility

  2. Increase in capital and increase in liability

  3. Increase in capital and decrease in asset

  4. Increase in capital and increase in asset
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Owner investment, also called owner's investment or contributed capital, is the amount of assets that the owner puts into the company. 


In other words, this is the amount of money or other assets that the owner contributes to the business either to start it or to keep it running.

Multiple choice accountancy statement of changes in financial position preparation of cash flow statement cash flow statement finance

A loss on sale of land is reflected on the statement of cash flows by _____________________.

  1. Adding the loss to the book value of the land to determine the cash flow from investing activities

  2. Deducting the loss from net income to determine the cash flow from operating activities

  3. Deducting the loss from the book value of the land to determine the cash flow from investing activities

  4. Both B and C
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

A business reports net income under operating activities of cash flow statement. The company reports a loss from sale of a long-term business assets as part of its net income because it represents money spent that the business didn't recoup. The difference amount between loss and book value is reported under investing activities.

Multiple choice accountancy statement of changes in financial position preparation of cash flow statement cash flow statement finance

Cash withdrawal by the proprietor would cause _______.

  1. Cash in hand to decrease

  2. External liability to decrease

  3. Total liabilities to increase

  4. Total assets remain unchanged
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The owner's capital is the part of the accounting equation that represents the liquid cash that the company has earned, which it has on hand for daily operations as well as capital investments. When a business owner withdraws cash for personal use, these funds come out this capital account. Proprietor withdrawal cash or other asset from business recorded as credit to cash and a debit to the proprietor draws account i.e. cash in hand to decrease.  

Multiple choice accountancy statement of changes in financial position preparation of cash flow statement cash flow statement finance

Redemption of debenture is a / an _______________.

  1. Operating activities

  2. Investing activities

  3. Financing activities

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

Redemption of debentures involves the repayment of borrowed capital, which is a cash outflow related to the company's capital structure, thus classified as a financing activity.

Multiple choice accountancy statement of changes in financial position preparation of cash flow statement cash flow statement finance

Operating activities are the principal revenue producing activities of the enterprise and other activities that are not investing or financing activities.

  1. True

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

Operating activities are defined as the principal revenue-producing activities of the entity and other activities that are not investing or financing activities.