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 book keeping and accountancy adjustments in preparation of financial statements manager's commission on net profit preparation of final accounts preparation of financial statements

Interest on capital is ______ for a business concern.

  1. Expense

  2. Income

  3. Asset

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

Interest on capital is a charge on the profits of a firm and it is debited to the P&L account to recognise as an expense (and a charge on the profits).

Multiple choice elements of book keeping and accountancy adjustments in preparation of financial statements manager's commission on net profit preparation of final accounts preparation of financial statements

The adjustment to be made for interest on drawings is ________________.

  1. Debit profit and loss account and add interest to drawings

  2. Credit profit and loss account and add interest to drawings

  3. Debit profit and loss account and deduct interest from drawings

  4. Credit profit and loss account and deduct interest from drawings
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Interest on drawings is income for the business, so it is credited to the Profit and Loss account. It is then added to the drawings account, which reduces the capital.

Multiple choice elements of book keeping and accountancy adjustments in preparation of financial statements manager's commission on net profit preparation of final accounts preparation of financial statements

If Capital = $70,000$; Liability = $40,000$. 

Find Assets.

  1. $30,000$
  2. $1,10,000$
  3. $40,000$
  4. $70,000$
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Capital Employed is the total amount of investment made for running the business.

Capital Employed = Assets - Current Liabilities
OR
Assets = Capital Employed+Current Liabilities
Hence 
1,10,000 = 70,000 + 40,000.

Multiple choice elements of book keeping and accountancy adjustments in preparation of financial statements manager's commission on net profit preparation of final accounts preparation of financial statements

Creating Reserve for Discount on Creditors is an example of __________.

  1. Increase in Asset & Owner's Liability

  2. Decrease in Asset & Owner's Liability

  3. Increase in Liability & Owner's Liability

  4. Decrease in Liability & Increase in Owner's Liability

  5. Increase in Liability & Decrease in Owner's Liability
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

A reserve for discount on creditors reduces the liability (creditors) and increases the owner's equity (profit/gain).

Multiple choice business economics and quantitative methods balance of payments exchange rate balance of payments and exchange rate balance of trade and balance of payments

Select the correct outcomes up depreciation in a country's currency-using the code given below:
1. Export of the country goes up as value of the export falls in the international market.
2. At times, countries use it as a means to promote their exports.
3.Promoting exports through depreciation in ones currency is like selling national assets at throwaway prices to the world.

  1. Only 1

  2. Only 3

  3. 2 and 3

  4. 1,2 and 3
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Depreciation makes a country's exports become cheaper in the international market (i.e. the value of export items fall for the importers)this makes the country export more (increase in 'volume' of the export). Countries use depreciation as a tool to promote their exports (in present times, China has been doing the same)but such a policy is not healthy in long-term. 

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) introduction to debentures meaning and features of debentures meaning of debentures

Auction Rated Debentures (ARDs) are a hybrid of _________________.

  1. Shares and Debentures

  2. Shares and Commercial Papers

  3. Commercial Papers and Debentures

  4. Zero Interest Bonds and Deep Discount Bonds
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Auction Rated Debentures (ARDs) are a specific financial instrument that combines features of commercial paper and debentures.

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) introduction to debentures meaning and features of debentures meaning of debentures

Balance of Debenture Redemption Fund Account is transferred to _____________.

  1. Capital Reserve A/c

  2. Profit and Loss A/c

  3. General Reserve A/c

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

Once the debentures are fully redeemed, the balance remaining in the Debenture Redemption Fund (DRF) is no longer required for that purpose and is transferred to the General Reserve.

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) introduction to debentures meaning and features of debentures meaning of debentures

Discount on issue of debentures is a:

  1. revenue loss to be charged in the year of issue

  2. capital loss to be written off from capital reserve

  3. capital loss to be written off over the tenure of the debenture

  4. capital loss to be shown as goodwill
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Discount on the issue of debentures is a capital loss because it relates to the cost of raising long-term capital. It is amortized over the tenure of the debenture rather than being written off entirely in the year of issue.

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) introduction to debentures meaning and features of debentures meaning of debentures

In Balance Sheet of a Company, Interest accrued and due on debentures appears under the head -

  1. Share Capital

  2. Reserves & Surplus

  3. Current Liabilities

  4. Non-Current Liabilities
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Interest accrued and due on debentures represents a short-term obligation that the company must pay within the next accounting period. Therefore, it is classified as a current liability on the balance sheet.

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) introduction to debentures meaning and features of debentures meaning of debentures

Tax-rate is relevant and important for calculation of specific cost of capital of ____________.

  1. Equity Share Capital

  2. Preference Share Capital

  3. Debentures

  4. Both A and B
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

In case of debenture, interest payable is the cost of capital. Interest on debenture is tax deducible and charged to profit & loss account as an expense. It reduces the tax liability of the business. 

Tax rate is relevant and important for calculation of cost of capital for debenture. 

Multiple choice elements of business joint stock company 1 - definition, classification, advantages and disadvantages meaning and features of joint stock company concept, features, advantages and disadvantages of joint stock company ownership structures - joint stock company

Consider the following statements :
A low inventory turnover may be the result of
1. Obsolescence of some of the stock
2. Slow moving inventory
3. Frequent stock-outs
4. Fast-moving inventory
Which of the above statement(s) is/are correct?

  1. 1 and 2

  2. 4 alone

  3. 2 alone

  4. 2 and 3
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Low inventory turnover implies a situation where the company is holding too much of inventory compared to sales. A low inventory turnover may be the result of
1. Obsolescence of some of the stock
2. Slow moving inventory

Multiple choice elements of accounts accounts from incomplete records - single entry system stakeholders and their information requirements ascertainment of profit and loss calculation of profit or loss under single entry system of accounting and statement of affairs

If capital as on 31st March, 2018 (closing capital) is given, what will be the treatment of additional capital for the purpose of ascertaining profit for the year?

  1. It will be added to closing capital.

  2. It will be subtracted from closing capital.

  3. No treatment is required.

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

To calculate profit, the closing capital is adjusted by adding drawings and subtracting additional capital introduced during the year to arrive at the capital that would have existed without those transactions.

Multiple choice book keeping and accountancy company accounts - issue of debentures issue of debentures for consideration other than cash types of debentures issue of debentures at par, premium, discount, collateral security and for consideration other than cash

The Securities Premium amount may be utilised by a company for

  1. Writing off any loss on sale of fixed asset

  2. Writing off any loss of revenue nature

  3. writing off the expenses/ discount on the issue of debentures

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

According to the Companies Act, the Securities Premium account can be used for specific purposes, including writing off the expenses or commission paid or discount allowed on any issue of securities or debentures.