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 book keeping and accountancy analysis of financial statements financial statement of company rules for recording in journal dual effect of transactions, types of accounts and rules of debit and credit

Loss of stock by fire would lead to ____________.

  1. No change in total assets

  2. Total assets to decrease

  3. Total assets to increase

  4. Total assets and owners equity to decrease
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Loss of stock by fire will lead to decrease in closing stock on the asset side of balance sheet and decrease in net income of profit and loss account i.e. decrease in owner's equity on the liability side of the balance sheet.

Multiple choice book keeping and accountancy analysis of financial statements financial statement of company rules for recording in journal dual effect of transactions, types of accounts and rules of debit and credit

_____________ increases both total assets as well as owner's equity.

  1. Credit purchases

  2. Retained earnings

  3. Bank loans

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

Profits earned by the business are generally considered as retained earning, if not withdrawn by the owners. If firm generate the profits and retained in the business, cash of the firm increases which is part of the total assets. Parallel to this, all profits which are retained in the business are ultimately part of owners capital, hence it increases.

Multiple choice book keeping and accountancy analysis of financial statements financial statement of company rules for recording in journal dual effect of transactions, types of accounts and rules of debit and credit

Withdrawals by the proprietor would_______.

  1. Reduce both assets and owner's equity

  2. Reduce assets and increase liabilities

  3. Reduce owner's equity and increase liabiltiy

  4. No change
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Withdrawals by the proprietor reduce the cash or assets of the business and simultaneously reduce the owner's claim (equity) on the business assets.

Multiple choice book keeping and accountancy analysis of financial statements financial statement of company rules for recording in journal dual effect of transactions, types of accounts and rules of debit and credit

Payment of a liability results in _________________.

  1. Increase in total assets

  2. Decrease in total assets

  3. No change in total assets

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

Paying a liability involves using cash (an asset) to settle a debt. Therefore, both the liability and the asset (cash) decrease.

Multiple choice book keeping and accountancy analysis of financial statements financial statement of company rules for recording in journal dual effect of transactions, types of accounts and rules of debit and credit

Purchase of furniture for cash would ______________________.

  1. Increase the fixed assets and reduce the current assets

  2. Reduce the fixed assets and increase the current assets

  3. Increase total assets

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

Purchasing furniture for cash involves an exchange of assets: cash (a current asset) decreases, and furniture (a fixed asset) increases. Since both are assets, the total asset value remains unchanged, but the composition shifts.

Multiple choice book keeping and accountancy analysis of financial statements financial statement of company rules for recording in journal dual effect of transactions, types of accounts and rules of debit and credit

If an individual asset is increased, there will be a corresponding ____________________.

  1. Increase of another asset or increase of capital

  2. Decrease of another asset or increase of liability

  3. Decrease of specific liability or decrease of capital

  4. Increase of drawings and liabiltiy
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

According to the accounting equation (Assets = Liabilities + Equity), if an asset increases, the balance must be maintained by either a decrease in another asset, an increase in a liability, or an increase in equity (capital).

Multiple choice book keeping and accountancy analysis of financial statements financial statement of company rules for recording in journal dual effect of transactions, types of accounts and rules of debit and credit

Purchase of office equipment on credit results in ________________.

  1. Decrease in liability

  2. Decrease in Capital

  3. Increase in Capital

  4. Increase in assets
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Purchasing office equipment on credit increases the asset (equipment) and simultaneously increases a liability (accounts payable). The total assets increase.

Multiple choice book keeping and accountancy analysis of financial statements financial statement of company rules for recording in journal dual effect of transactions, types of accounts and rules of debit and credit

Purchase of machinery for cash ________________.

  1. Decrease total assets

  2. Increases total assets

  3. No change in the total assets

  4. Decreases total liabilities
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

When machinery is purchased for cash, one asset (cash) decreases while another asset (machinery) increases by the same amount. Therefore, the total value of assets remains unchanged.

Multiple choice book keeping and accountancy analysis of financial statements financial statement of company rules for recording in journal dual effect of transactions, types of accounts and rules of debit and credit

Income earned and collected results in _________________.

  1. Increase of assets and increase in capital

  2. Decrease in assets and increase in capital

  3. Increase in assets and decrease in liability

  4. Decrease in assets and increase in liability
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

When income is earned and collected, cash (an asset) increases. Since income increases the owner's equity (capital), both assets and capital increase.

Multiple choice book keeping and accountancy analysis of financial statements financial statement of company rules for recording in journal dual effect of transactions, types of accounts and rules of debit and credit

Capital brought in by the proprietor will result in _______________.

  1. Increase in asset and increase in liability

  2. Increase in liability and decrease in asset

  3. Increase in asset and decrease in liability

  4. Increase in one asset and decrease in another asset
Reveal answer Fill a bubble to check yourself
A Correct answer
Multiple choice book keeping and accountancy analysis of financial statements financial statement of company rules for recording in journal dual effect of transactions, types of accounts and rules of debit and credit

A cash purchase of supplies would ________________.

  1. Decrease owner's equity

  2. Increases liabilities

  3. Have no effect on total assets

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

A cash purchase of supplies involves decreasing one asset account (Cash) and increasing another asset account (Supplies) by the exact same amount. Therefore, total assets remain unchanged, with no effect on liabilities or owner's equity.

Multiple choice book keeping and accountancy analysis of financial statements financial statement of company rules for recording in journal dual effect of transactions, types of accounts and rules of debit and credit

Loss on sale of machinery will be ________.

  1. debited on Machinery A/c

  2. credited to Machinery A/c

  3. credited to Profit and Loss A/c

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

Loss on sale. Debit cash for the amount received, debit all accumulated depreciation, debit the loss on sale of asset account, and credit the Machinery A/c.

Multiple choice book keeping and accountancy analysis of financial statements financial statement of company rules for recording in journal dual effect of transactions, types of accounts and rules of debit and credit

Income earned which is yet to be a collected result in ________________.

  1. Increase in capital and increase in a liability

  2. Decrease in liability and increase in capital

  3. Increase in assets and increase in liability

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

Income earned but not yet collected is an accrued asset. Since the income was earned, it increases the owner's capital. Therefore, both assets and capital increase.

Multiple choice social science government budget and taxation indian taxation system taxation : need, principles and importance tax and its importance

Money obtained through the issues of debenture is ______.

  1. revenue receipt

  2. capital receipt

  3. revenue profit

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

Money obtained through the issues of debenture is capital receipt. It is the amount received from the sale of assets, shares and debentures. Nature of the capital receipt is that it is non-recurring. This should result either in the reduction in government assets (sale of share, disinvestment) or increase in some liability (government borrowings).