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 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.

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 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

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 book keeping and accountancy bill of exchange (trade bill) dishonour of a bill dishonour of bills bills of exchange advantages of bill of exchange

Which of the following is not correct ?

  1. Discount on bills discounted is treated as financial expense and is debited to P and L Account.

  2. For unsold stock lying with the consignee, no entry is made in his books.

  3. Loss of stock is said to be abnormal when such loss is natural and is due to inherent characteristics of the commodities.

  4. The abnormal loss on consignment is credited to Consignment Account.
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Abnormal loss is defined as loss due to accidents or unforeseen events, not inherent characteristics of the commodity. Inherent losses are considered normal losses.