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 reconstitution of partnership (retirement of partner) accounting for retirement and death of partner accounting of sum payable to a partner on retirement or death accounting treatment in case of retirement of a partner

The balance of joint life policy account as shown in the balance sheet represent ___________.

  1. the surrender value of a policy

  2. annual premium of JLP

  3. total premium paid by the firm

  4. amount receivable on the maturity of the policy
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation
This is the case when Joint Life Policy Reserve account is maintained. In this case insurance premium paid is debited to joint life policy account and credited to bank account. At the end of the year, the amount in excess of surrender value is treated as loss and is transferred to profit and loss account and the surrender value is shown in the balance sheet every year.
Multiple choice business economics and quantitative methods public economics components of budget and budgetary procedure government budget and taxation government budget and economy

Capital receipts are regular and recurring in nature.

  1. True

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

False. 

Capital receipts are all those money receipts of the government that either create a liability for the government or reduce an asset of the government. These receipts are not recurring in nature as it is related to the valuation of assets and liabilities of the government. 

Multiple choice book keeping and accountancy bills of exchange renewal of the bill retirement and renewal of a bill accounting treatment of bill transaction

Discount at the time of retirement of a Bill is a gain for the drawee.

  1. True

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

Due to the premature payment done by the drawee, the drawer allows some discount as consideration. 

Such a discount at the time of retirement of a bill is an income for the drawee and is an expense for the drawer.

Multiple choice accountancy depreciation accounting asset disposal account disposal of asset disposal of asset and any addition or extension to the existing asset

An item of fixed assets which has retired from active use and is held for disposal is ______________.

  1. not shown in the financial statement

  2. shown at net book value

  3. shown at net realizable value

  4. shown at lower of net book value and net realizable value
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

As the assets is already retired from active use, the valuation has to be shown on the basis of net book value or net realizable value whichever is lower. 

This is based on the concept of conservatism. 

Multiple choice accountancy depreciation accounting asset disposal account disposal of asset disposal of asset and any addition or extension to the existing asset

 Account appear under Use of Asset Disposal Account are ____________________.

  1. Original cost of the asset

  2. Sale price of the asset

  3. Value of the parts of the asset retained for use

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

Option D is the correct one.

  1. No proceeds, fully depreciated. Debit all accumulated depreciation and credit the fixed asset.
  2. Loss on sale. Debit cash for the amount received, debit all accumulated depreciation, debit the loss on sale of asset account, and credit the fixed asset.
  3. Gain on sale.


Multiple choice accountancy depreciation accounting asset disposal account disposal of asset disposal of asset and any addition or extension to the existing asset

Disposal of asset can be done________.

  1. at the end of its useful life

  2. during its useful life due to obsolescence

  3. during its useful life due to abnormal factor

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

An asset can be disposed off due to the following reasons:

  • at the end of its useful life
  • during its useful life due to obsolescence
  • during its useful lie due to abnormal factors like technological changes. 

Multiple choice accountancy depreciation accounting asset disposal account disposal of asset disposal of asset and any addition or extension to the existing asset

The amount incurred on asset additions/extensions is _____.

  1. Added to assets

  2. Deducted from assets

  3. Added to liabilities

  4. Deducted from liabilities
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Any addition done in fixed asset should be added to the asset a/c. Depreciation on addition has to be provided on pro-rata basis i.e. depending on the utilization of assets. For example, if an addition is done on 1st Oct 2017, than depreciation will be charged for 6 months only on the additions. 

Multiple choice accountancy depreciation accounting asset disposal account disposal of asset disposal of asset and any addition or extension to the existing asset

What is debited in asset disposal account?

  1. Market value of asset

  2. Accumulated depreciation

  3. Original cost of asset being sold

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

Asset disposal account is prepaed to ascertain profit or loss, when the asset is sold or dicarded. Asset disposal account is debited with original cost of asset disposed off.

Multiple choice accountancy depreciation accounting asset disposal account disposal of asset disposal of asset and any addition or extension to the existing asset

Additional asset is Depreciated from _______.

  1. Beginning of the year

  2. Ending of the year

  3. The addition made

  4. The date addition proposed
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Depreciation is charged on the book value of the machine at the beginning of the year. If any new machinery purchased during the year, the depreciation is charged on pro rata basis for the months for which asset is used. 


For example, if a machine is purchased on 1/10/2017, than depreciation will be charged for 6 months i.e. from 1/10/2017 to 31/03/2018.

Multiple choice accountancy depreciation accounting asset disposal account disposal of asset disposal of asset and any addition or extension to the existing asset

When a part of the asset is sold and provision for depreciation account exists, which new account is formed ?

  1. Depreciation account

  2. Use of Asset Disposal Account

  3. provision for depreciation account

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

Option B is the correct one.

A disposal account is a gain or loss account that appears in the income statement, and in which is recorded the difference between the disposal proceeds and the net carrying amount of the fixed asset being disposed of.

Multiple choice accountancy depreciation accounting asset disposal account disposal of asset disposal of asset and any addition or extension to the existing asset

The balance of asset disposal account is transferred to __________.

  1. Trading account

  2. Profit and loss account

  3. Balance sheet

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

Here the B option is right answer.

When the asset is sold at the end of its useful life, the sale proceeds should be credited the asset account. The profit or loss on sale or disposal of the assets is transferred to the P&L a/c.

Multiple choice accountancy depreciation accounting asset disposal account disposal of asset disposal of asset and any addition or extension to the existing asset

What is credited in asset disposal account?

  1. Accunulated depreciation

  2. Original cost of the asset being sold

  3. Sale proceeds of the assets disposed off

  4. Both (a) and (c)
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Asset disposal account is prepaed to ascertain profit or loss, when the asset is sold or dicarded. Asset disposal account is credited with :

1. Accumulated depreciation
2. Sale proceeds of the asset disposed off.

Multiple choice accountancy depreciation accounting asset disposal account disposal of asset disposal of asset and any addition or extension to the existing asset

Profit on sale of Asset is __________ to Profit and loss A/c.

  1. Debited

  2. No Effect

  3. Credited

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

Following are the journal entries in respect of sale of fixed assets :

1. Cash/ Bank  A/c      Dr.
        To Asset A/c
(Being the asset sold)
2. Asset A/c                Dr. 
         To Profit & Loss A/c
(Being the transfer of profit on sale).

Multiple choice accountancy depreciation accounting asset disposal account disposal of asset disposal of asset and any addition or extension to the existing asset

________can take place either at the end of life of asset or during its useful life.

  1. Purchase of asset

  2. Disposal of asset

  3. Collection of asset

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

Asset disposal is the removal of a company's long term asset from the company's accounting records. It is an important concept because it primarily relates to company's capital assets. A depreciable asset can be disposed off or sold either at the end of its useful life or during its useful life. Disposal of asset may be during its useful life due to obsolescence or other factors.