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 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

Unless written off, the loss on issue of debentures is shown.

  1. On the assets side of Balance Sheet

  2. On the debit side of Profit and Loss Account

  3. By way of deduction from the amount of debentures

  4. On the liabilities side of Balance Sheet
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Loss on issue of debentures, until written off, is shown as a miscellaneous expenditure on the assets side of the balance sheet.

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

Income tax deducted from interest paid on debentures is shown as.

  1. Expenses of the Co.

  2. Asset of the Co.

  3. Liability of the Co.

  4. Income of the Co.
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Income tax deducted at source (TDS) from interest paid on debentures represents an amount the company is obligated to pay to the government on behalf of the debenture holder. Since this is an obligation to be settled in the future, it is classified as a current liability of the company.

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

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 period of the debentures

  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 typically amortized over the life of the debentures to match the expense with the period of benefit.

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

In Balance Sheet of a Company, Interest accrued but not 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 but not due on debentures is a liability that the company must pay within the next 12 months, classifying it as a current liability in the balance sheet.

Multiple choice concept of social responsibility organization of commerce and management industrial pollution and degradation of environment environmental values and ethics industrial pollution accelerated with the start of industrial revolution social responsibility towards the environment

The issue of fraudulent asset valuation is included in _________.

  1. ethics in compliance

  2. ethics in finance

  3. ethics in marketing

  4. ethics in production
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation
“Ethics in Finance” will address the professional intersection where financial theory meets practice and where the concept of ethical behavior crosses from the abstract to the concrete. 
Issue of fraudulent asset valuation is an example of unethical practice in finance. This is the most common ethical issue which companies and individual face in the field of finance.

Multiple choice economics income-output determination public debt public debt main feature of tax

___________ refers to the amount of sales proceeds which an entrepreneur actually expects from the sale of output produced at a given level of employment during the year.

  1. Aggregate demand

  2. Market demand

  3. Aggregate supply

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

Aggregate Demand refers to the desired level of expenditure in the economy during an accounting year. So it can also be expressed as the sale proceeds because the expenditure from consumer's point of view is sales proceeds or earnings from producer's point of view. Therefore, Aggregate demand is the amount of sales proceeds which an entrepreneur actually expects from the sale of output produced during the year assuming it to be the full employment level of output. 

Multiple choice elements of book keeping and accountancy nature of accounts and rules of debit and credit meaning, advantages and limitations of journals understand the classification of accounts introduction to books of prime entry

Which one of the following statement is TRUE?

  1. Capital of the firm is reduced by borrowing.

  2. When there is no change in proprietor's capital, it is indication of loss in business.

  3. Nominal accounts refer to false transactions.

  4. Real accounts relates to the assets of a business.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Real accounts contain the balances of assets, liabilities, and owners' equities at a specific point in time, such as at the close of business on the last day of the year. The balance in a real account is the net amount after subtracting decreases from increases in the account.

Multiple choice elements of book keeping and accountancy nature of accounts and rules of debit and credit meaning, advantages and limitations of journals understand the classification of accounts introduction to books of prime entry

Which one of the following statement is TRUE?

  1. Capital of the firm reduced by borrowing

  2. When there is not change in proprietor's capital, it is indication of loss in business

  3. Nominal accounts refer to false transcations

  4. Real accounts relates to the assets of a business
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Real accounts are those that relate to assets and properties of the business (e.g., Cash, Building, Machinery). Option A is false because borrowing increases liabilities, not necessarily reducing capital. Option C is false because nominal accounts relate to expenses and incomes, not false transactions.

Multiple choice functional area of management financial management nature and significance of management organisation of commerce and management business studies

Degree of total leverage can be applied in measuring change in ______________________,

  1. EBIT to a percentage change in quantity

  2. EPS to a percentage change in EBIT

  3. EPS to a percentage change in quantity

  4. DFL to a percentage change in DOL

  5. Quantity to a percentage change in EBIT
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Degree of total leverage is combination of the operating and financial leverages. Thus it is a measure of the output and EPS of the company.
DOL = percentage change in EBIT/percentage change in output.
DFL = percentage change in EPS/percentage change in EBIT
Hence, DTL = DOL X DFL = Change in EPS / change in output.

Multiple choice functional area of management financial management nature and significance of management organisation of commerce and management business studies

Any firm that goes bankrupt gradually will face one or more of the following symptoms _______________.

  1. Persistent cash loses

  2. Failure of pay taxes

  3. Cost overruns

  4. All of the above

  5. Both (A) and (C) above
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Persistent cash losses, failure to pay taxes, cost overruns, low capacity utilization, accumulation of finished goods, etc.are the symptoms of bankruptcy.

Multiple choice functional area of management financial management nature and significance of management organisation of commerce and management business studies

For a weak unit which of the following should hold good _____________.

  1. Accumulated losses greater or equal to $50\%$ of its peak net worth during immediately preceding our accounting years

  2. A current ratio of less than 1:1

  3. Suffering losses in the previous accounting year

  4. All of the above

  5. Both (A) and (C) above
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

A non-small scale industrial unit is defined as weak if the accumulated losses at the end of any accounting year, resulting in the erosion of fifty percent or more of its peak net worth during the immediately preceding four accounting years.

Multiple choice functional area of management financial management nature and significance of management organisation of commerce and management business studies

Dividends paid in the ordinary course of business are known as __________.

  1. cash dividends

  2. profit dividends

  3. stock dividends

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

Dividends paid out of the regular profits generated in the ordinary course of business are referred to as profit dividends.

Multiple choice functional area of management financial management nature and significance of management organisation of commerce and management business studies

Dividends paid from capital are known as ___________.

  1. profit dividends

  2. cash dividends

  3. liquidation dividends

  4. property dividends
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Liquidation dividends are distributions made to shareholders when a company is winding up its operations or liquidating its assets. These are paid out of capital rather than accumulated profits.

Multiple choice functional area of management financial management nature and significance of management organisation of commerce and management business studies

The amount of debt, equity share capital, preference share capital are __________ by financial decisions, which is a part of financial management.

  1. affected

  2. not affected

  3. minutely affected

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

The primary goal of both investment and financing decisions is to maximize shareholder value. Investment decisions revolve around how to best allocate capital to maximize their value. Financing decisions revolve around how to pay for investments and expenses. Companies can use existing capital, borrow, or sell equity.

The amount of debt, equity share capital, preference share capital are affected by financial decisions, which is a part of financial management.
Multiple choice functional area of management financial management nature and significance of management organisation of commerce and management business studies

Under the amount of long term and short term financing to be used, the current liabilities cost is  ______ than long term liabilities.

  1. more

  2. less

  3. equal

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

Financial management involves decisions about the proportion of long term and short term finance. An organisation wanting to be more liquid would raise relatively more amount on long term basis. There is a choice between liquidity and profitability. The underlying assumption here is that current liabilities cost less than long term liabilities.