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 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. 

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

Loss on sale of asset is ___________ to profit and loss A/c.

  1. Debited

  2. Credited

  3. No Effect

  4. None
Reveal answer Fill a bubble to check yourself
A 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. Profit & Loss A/c   Dr. 
        To Asset A/c
(Being the transfer of loss on sales).

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

During sale of Asset the accumulated Depreciation in Provision Account is transferred to _______.

  1. Liabilities Account

  2. Asset Account

  3. Expense A/c

  4. Income A/c
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Option B is correct. . When depreciation charged is not deducted from assets it is recorded in a separate account named provision for depreciation account. The asset account appears in its book at its original value. At the time of sale of asset, accumulated depreciation from this account is transferred to asset account. 

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

While charging depreciation during sale of asset, ________ is Credited.

  1. Asset A/c

  2. Depreciation A/c

  3. Profit and loss A/c

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

As per the golden rules of accounting for nominal account all expenses and losses are debited and all income and gains are credited and for rael account, what comes in debit and what goes out is credit.

In the light of above rule, journal entry for providing depreciation and charging it to profit and losss A/c is -
1. Depreciation A/c     Dr.
        To Asset A/c 
(Being depreciation chargedd to asset)
2. Profit and loss A/c  Dr.
         To Depreciation A/c 
(Being depreciation expense transferred to 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

Any addition or extension to asset must be ________ its useful life of that asset.

  1. Depreciated

  2. Appreciated

  3. Ignored

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

Option A is the Correct one.

Depreciation is must on every Fixed assets and on its addition or extension 
for that there are three basic condition.
1.The Assets must be Fixed Tangible Assets
2.The Assets must be used for Business Purpose

3.The must have limited life
Note :- Land has not limited or specific life therefore we can't calculate depreciation on Land.

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 of depreciation charged on machinery is debited to ________ account.

  1. Depreciation

  2. Machinery

  3. Provision of Depreciation

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

Depreciation is charged on a certain percentage on each of the asset every year. Depreciation is an indirect cost for which the following entry will be passed:


Depreciation A/c                            Dr.
     To Asset A/c 

Later on, depreciation a/c will be transferred to profit & loss 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

The Profit on Sale of an asset is debited to ________ Account.

  1. Profit and Loss

  2. Reserve

  3. Asset

  4. Balance Sheet
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

On sale of any asset, there must be some profit/loss as the amount realized on sale may be more or less compared to the written down value. If the sale proceed is more than the written down value, there will be a profit and if the sale proceed is less than the written down value, there will be a loss. 


Profit on sale of asset is debited to asset and credited to profit & loss 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

Revaluation of assets is carried out through _________.

  1. profit and loss A/c

  2. profit and loss adjustment A/c

  3. profit and loss appropriation A/c

  4. general reserve A/c
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

b'whenever a partner exits a partnership, the books of accounts of such a firm have to be settled. the outgoing partner or his legal representative have to be paid their dues. so that revaluation of assets is carried out through profit and loss account.'

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

Loss on disposal of assets is credited to _____________.

  1. Depreciation a/c

  2. Assets a/c

  3. Loss on sale of assets a/c

  4. Profit and loss a/c
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The disposal of assets involves eliminating assets from the accounting records. This is needed to completely remove all traces of an assets from the balance sheet. An asset disposal may require the recording of a gain or loss on the transaction in the reporting period when the disposal occurs. The journal entry recorded as Debit cash for the  amount received , debit all accumulated depreciation, debit  the loss on sale of asset account, and credit the fixed asset.