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 commercial studies budgeting meaning, comparison, types, utility and limitations of budgets public finance, budget and fiscal policy public expenditure and public revenue

Sales budget is a _______________.

  1. Master budget

  2. Expenditure budget

  3. Functional budget

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

A functional budget for the manufacture of a product line might include estimated costs of production, marketing, sales, labor, equipment and materials, as well as projected sales income.

Multiple choice commercial studies budgeting meaning, comparison, types, utility and limitations of budgets public finance, budget and fiscal policy public expenditure and public revenue

___________ is a summary of all functional budgets in a capsule form.

  1. Master budget

  2. Cash budget

  3. Flexible budget

  4. Zero-base budget
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The Master Budget is consolidated summary of the various functional budgets. It has been defined as “a summary of the budget schedules in capsule form made for the purpose of presenting, in one report, the highlights of the budget forecast”.

Multiple choice commercial studies budgeting meaning, comparison, types, utility and limitations of budgets public finance, budget and fiscal policy public expenditure and public revenue

What type of budget is designed to take into account forecast changes in costs, prices etc. _______________.

  1. Rolling budget

  2. Flexible budget

  3. Functional budget

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

A rolling budget is continually updated to add a new budget period as the most recent budget period is completed. Thus, the rolling budget involves the incremental extension of the existing budget model. By doing so, a business always has a budget that extends one year into the future.

Multiple choice elements of accounts accounting in business journal - book of original entry purchases and sales book meaning and importance of journal

Stock-in-trade also includes _____________.

  1. goods in the process of production for sale

  2. items held as fixed assets

  3. items consumed for daily use

  4. depreciation on fixed assets
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Stock-in-trade doesn't include all of a firm's assets when used in the business "

"Stock-in-trade refers to any merchandise or equipment kept on hand and used in carrying on a business. It includes the collection of goods, inventories and merchandise, maintained by a business entity for the purpose of using them for processing, making salable goods or for selling to the customers with an intention to make profit from such deals."

Multiple choice elements of accounts accounting in business journal - book of original entry purchases and sales book meaning and importance of journal

XYZ company purchase an asset that turns out to be defective and was required to be sold as a worn out item. The entry will be made in _______________.

  1. Worn out journal

  2. Cash journal

  3. General journal

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

Since the transaction involves the disposal of a defective asset, it is a non-routine transaction that does not fit into specialized journals like cash or sales journals, thus it is recorded in the general journal.

Multiple choice book keeping and accountancy adjustments in preparation of financial statements accrued income earned or accrued income need for adjustment, closing stock and outstanding expenses

The recording of wages earned but not yet paid is an example of an adjustment that _____________.

  1. apportions revenues between two or more periods

  2. recordings an accrued expense

  3. recordings an unrecorded revenue

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

Recording wages earned but not yet paid is an accrual adjustment, specifically recognizing an expense that has been incurred but not yet recorded in the accounts.

Multiple choice book keeping and accountancy adjustments in preparation of financial statements accrued income earned or accrued income need for adjustment, closing stock and outstanding expenses

Income received in advance will be shown as ________.

  1. Current asset

  2. Current liabilities

  3. Fixed asset

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

Sometimes, a certain income is received but the whole amount of it does not belong to the current period. The portion of the income which belongs to the next accounting period is termed as income received in advance or an Unearned Income. Income received in advance is adjusted by recording the following entry:

Concerned Income A/c Dr.
        To Income Received in Advance A/c 
The effect of this entry will be that the balance in he income account will be equal to the amount of income earned for the current accounting period, and the new account of income received in advance will be shown as a liability in the balance sheet.

Multiple choice book keeping and accountancy adjustments in preparation of financial statements accrued income earned or accrued income need for adjustment, closing stock and outstanding expenses

 When income is received but the whole amount of it does not belong to the current period it is called as:

  1. Pre-received income

  2. Outstanding income

  3. Capital income

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

Sometimes, a certain income is received but the whole amount of it does not belong  to the current period. The portion of the income which belongs to the next accounting period is termed as income received in advance. It is also known as Unearned Income or Pre-received Income. Income received in advance is adjusted by recording the following entry:

Concerned Income A/c Dr.
    To Income Received in advance A/c
The effect of this entry will be that the balance in the income account will be equal to the amount of income earned for the current accounting period and the new account of income received in advance will be shown as a liability in the balance sheet.  

Multiple choice book keeping and accountancy adjustments in preparation of financial statements accrued income earned or accrued income need for adjustment, closing stock and outstanding expenses

' Taxes owned but payable in the following period' should be classified as __________________.

  1. Accrued assets

  2. Accrued liability

  3. Prepaid expense

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

Examples of Accrued Liabilities Employees may have performed work but have not yet received wages. Interest on loans may be accrued if interest fees have been incurred since the previous loan payment. Taxes owed to governments may be accrued because they may not be due until the next tax reporting period.

Multiple choice book keeping and accountancy adjustments in preparation of financial statements accrued income earned or accrued income need for adjustment, closing stock and outstanding expenses

Life insurance premium received by an insurance company' should be classified as _______________.

  1. Accrued asset

  2. Accrued liability

  3. Prepaid expense

  4. Unearned revenue
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The life insurance premium should be classified as unearned revenue because against this amount still the company has to render service.  Actually the insurance company will treat each year pro-rata amount of premium received as income.  

For example insurance company receives Rs.10000 as premium for 10 years.  First it shoud be treated as unearned revenue and then each year Rs.1000 should be shifted from this account to income account.

Multiple choice book keeping and accountancy adjustments in preparation of financial statements accrued income earned or accrued income need for adjustment, closing stock and outstanding expenses

'Interest earned but not received' should be classified as _____________.

  1. Accrued asset

  2. Accrued liability

  3. Prepaid expense

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

Interest that is due to the company at the end of the accounting period but not yet received is classified as accrued interest receivable.

To make the adjusting journal entry, debit the current assets account and credit income received on the income statement with the accrued amount due.

Multiple choice book keeping and accountancy adjustments in preparation of financial statements accrued income earned or accrued income need for adjustment, closing stock and outstanding expenses

The portion of income belonging to next accounting year is called _______.

  1. Income received in advance

  2. Asset

  3. Capital

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

Sometimes earned revenue that belongs to a future accounting period is received in the current accounting period, such income is considered as income received in advance. It is also known as Unearned Income and is received before the related benefits are provided.

Multiple choice book keeping and accountancy adjustments in preparation of financial statements accrued income earned or accrued income need for adjustment, closing stock and outstanding expenses

Accrued income is ______ to the expenses in the profit and loss account.

  1. Added

  2. Deducted

  3. Rounded off

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

The Accrued Income A/c appears on the assets side of the Balance Sheet. While preparing the Trading and Profit and Loss A/c we need to add the amount of accrued income to that particular income.

Multiple choice book keeping and accountancy adjustments in preparation of financial statements accrued income earned or accrued income need for adjustment, closing stock and outstanding expenses

Choose the true statement.

  1. Accrued incomes represent income unearned but realized in cash

  2. Accrued incomes represent income earned but not realized in cash

  3. Accrued income A/c is shown on the liability side

  4. No tax is payable on accrued income
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Accrued income is revenue that has been earned by providing goods or services, but for which payment has not yet been received. It is an asset to the business.