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 elements of business sources of business finance - 1 classification & choice of sources of funds classification of sources of finance owned funds and borrowed funds

Long-term financing is generally required for the acquisition of _________.

  1. Current assets

  2. Fixed assets

  3. Fictitious asset

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

Long-term finance is that which is required for a long period of time, i.e. no less than 5 years . These long-term sources are generally required for the acquisition of fixed assets as these fixed assets are purchased for a long period and are also very expensive than current assets. 

Multiple choice business economics and quantitative methods introduction to managerial economics theories of employment and income concept of international trade macro economic analysis

Operating Leverage is the response of changes in ____________.

  1. EBIT to the changes in sales

  2. EPS to the changes in EBIT

  3. Production to the changes in sales

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

Operating Leverage is also known as “Degree of Operating Leverage or "DOL”. The fact is that  the greater use of fixed costs, greater will be  the impact of a change in sales on the operating income of a company. Degree of Operating Leverage Formula = % change in EBIT / % change in Sales.

Multiple choice commercial applications basic accounting principles and concepts meaning and purposes of accounting need and basic principles of accounting generally accepted accounting principles

Which of the following is not valuation principle?

  1. Historical cost

  2. Present value

  3. Gross value

  4. Realisable value
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

In economics, gross value added is the measure of the value of goods and services produced in an area, industry or sector of an economy. In national accounts GVA is output minus intermediate consumption; it is a balancing item of the national accounts' production account.

Multiple choice commercial applications basic accounting principles and concepts meaning and purposes of accounting need and basic principles of accounting generally accepted accounting principles

Which one of the following is not a generally accepted accounting principle?

  1. Sales, revenues and incomes should not be anticipated or materially overstated.

  2. There must be proper cut off accounting for inventories and liabilities for cost and expenses.

  3. Non-recurring and extraordinary gains and losses should be recognized in the period they accrue, but should be shown separately from the usual operations.

  4. Long-term investments in securities should ordinarily be carried at inflated market values.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Accounting principles require assets to be recorded at cost or lower of cost/market value, not inflated market values. Inflating values would violate the principle of conservatism and historical cost.

Multiple choice commercial applications basic accounting principles and concepts meaning and purposes of accounting need and basic principles of accounting generally accepted accounting principles

Accounting policy for inventories of X ltd. states that inventories are valued at the lower of cost or net realizable value. Which accounting principle in followed in adopting the above policy?

  1. Materiality

  2. Prudence

  3. Substance over form

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

The principle of prudence (or conservatism) dictates that you should anticipate no profit but provide for all possible losses, which is why inventory is valued at the lower of cost or net realizable value.

Multiple choice commercial applications basic accounting principles and concepts meaning and purposes of accounting need and basic principles of accounting generally accepted accounting principles

Goodwill should be tested for value impairment at which of the following levels?

  1. Each identifiable long-term asset.

  2. Each reporting unit.

  3. Each acquisition unit.

  4. Entire business as a whole
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Under accounting standards like ASC 350, goodwill is tested for impairment at the reporting unit level, which is an operating segment or one level below an operating segment.

Multiple choice elements of book keeping and accountancy recording and posting of cash transactions understand the concept of imprest system petty cash book bank book and petty cash book

Petty cash fund is supposed to be replenished at ________________. 

  1. Every day

  2. Every half year

  3. Every Year

  4. At the end of every accounting period
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Petty cash fund is supposed to be replenished at the end of every accounting period.

This is done whenever the amount of actual cash in the petty cash box is low and at the end of each accounting period.

Multiple choice elements of book keeping and accountancy recording and posting of cash transactions understand the concept of imprest system petty cash book bank book and petty cash book

Fixed assets are __________________.

  1. Kept in the business for use over a long time of earning income

  2. Meant for resale

  3. Meant for conversion into cash as quickly as possible

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

 A fixed asset is a long-term tangible piece of property or equipment that a firm owns and uses in its operations to generate income. Fixed assets are not expected to be consumed or converted into cash within a year. Fixed assets most commonly appear on the balance sheet as property, plant, and equipment (PP&E).

Multiple choice

The amount of money that a bussines has lost in a particular period of time

  1. Deficit

  2. Surplus

  3. Surless

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

Deficit is the amount of money that a business or government has lost in a particular period, when spending exceeds income. A surplus is the opposite (excess money), and surless is not a word. Loss is similar but deficit is the specific accounting term.

Multiple choice organisation of commerce and management sources of business finance - 2 equity shares share and stock equity and preference shares

The means of obtaining financial resources that involves the sale of part of the ownership of the business is called ______.

  1. bankruptcy

  2. equity financing

  3. commercial loans

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

Equity financing is the method of raising capital by selling company stock to investors. In return for the investment, the shareholders receive ownership interests in the company.

Multiple choice accountancy provisions and reserves reserves provisions provision and reserves

Provisions are amounts set aside out of profits and other surpluses for:

  1. Meeting a liability arising out of arbitration

  2. Meeting a liability, the amount of which can be determined with exact figure

  3. Meeting an eventuality arising out of revaluation of assets in ordinary course of business

  4. Meeting known or unknown contingency that may arise in future.
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

A provision is an amount that you put in aside in your accounts to cover a future liability.

The purpose of a provision is to make a current year’s balance more accurate, as there may be costs which could, to some extent, be accounted for in either the current or previous financial year. These costs that distinctly belong to a specific year could be misleading if accounted for in the future.
A provision is not a form of saving, even though it is an amount that is put aside for a future possible cost or obligation. Provisions resulting impact is a reduction in the company's equity.
When accounting, provisions are recognized on the balance sheet and then expensed on the income statement.

Multiple choice accountancy provisions and reserves reserves provisions provision and reserves

Provision can be shown as ________ from asset.

  1. Deduction

  2. Addition

  3. Both A and B

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


A provision for anticipated expenditure is to be disclosed under the head 'current liabilities and provisions' whereas a provision for an anticipated loss (provision for doubtful debts) is to be shown as a deduction from the asset which is likely to result in a loss.

Multiple choice accountancy provisions and reserves reserves provisions provision and reserves

_______ is shown either by way of a deduction from particular asset for which it is created.

  1. Provision

  2. Appropriations

  3. Reserve

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

Provision is shown either on assets side by way of deduction from the respective asset in relation to which it has been created or on the liabilities side under the sub-head 'Provisions'