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 economics theories of distribution functions of money value, nature and functions of money liquidity preference and profit

Which of the following statements about Money is incorrect?

  1. There are many assets which carry the attribute of money.

  2. Money is what money does.

  3. Value of money remains constant at all periods of time

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

The value of money is inversely related to the price level. Because price levels fluctuate due to inflation or deflation, the value of money does not remain constant over time.

Multiple choice business organisation and correspondence partnership 4 - dissolution of a partnership firm meaning of dissolution of partnership firm modes of dissolution of firm dissolution of firm difference between realisation account and revaluation account payment of firm's debts and separate debts, realisation of assets and liabilities

When a firm is dissolved, the piecemeal distribution of cash should be done in such a manner that final unpaid amount are in the:

  1. Capital ratio

  2. Profit sharing ratio

  3. Sacrificing ratio

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

The rule to follow in piecemeal distribution is that the partners whose capitals are more than proportionate to other partner's capital should first be refunded so much as to bring down their capitals to proportionate levels. After this, the cash available should be distributed in the profit -sharing ratio. Each partner's position has to be compared with position of other partners. 

Multiple choice business organisation and correspondence partnership 4 - dissolution of a partnership firm meaning of dissolution of partnership firm modes of dissolution of firm dissolution of firm difference between realisation account and revaluation account payment of firm's debts and separate debts, realisation of assets and liabilities

Which of the following is not correct statement ?

  1. On dissolution of a firm, realisation account is debited with all assets to be realised.

  2. General reserve appearing in Balance Sheet is transferred to partner's capital account in profit sharing ratio.

  3. On dissolution of a firm, Cash balance in hand is transferred to realisation account.

  4. Dissolution of partnership firm and dissolution of a firm are different.
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

All those assets which can be converted into cash are transferred to realisation account such as Building, Plant and Machinery, Land etc. Because the main object of this account is to find out the profit or loss on realisation of assets and payment of liabilities. 

Multiple choice business organisation and correspondence partnership 4 - dissolution of a partnership firm meaning of dissolution of partnership firm modes of dissolution of firm dissolution of firm difference between realisation account and revaluation account payment of firm's debts and separate debts, realisation of assets and liabilities

Under ________ company sells all its assets.

  1. Liquidation

  2. Bankruptcy

  3. Turnaround

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

Liquidation is the process in which company stops operating and sell its assets so that cash can be arranged to pay its debts. It is an event that occurs when a company is insolvent and can not pay its obligations when due. The business is no longer in existence once the liquidation process is complete.

Multiple choice business organisation and correspondence partnership 4 - dissolution of a partnership firm meaning of dissolution of partnership firm modes of dissolution of firm dissolution of firm difference between realisation account and revaluation account payment of firm's debts and separate debts, realisation of assets and liabilities

Unrecorded liability when paid on dissolution of a firm is debited to ____________ .

  1. realisation A/c

  2. partner's A/c

  3. partner's Capital A/cs

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

When an unrecorded liability is paid during the dissolution of a firm, it is treated as a realization expense and debited to the Realisation Account.

Multiple choice commercial applications generally accepted accounting principles (gaap) acccounting cycle meaning, need and objectives of accounting accounting process

Which of the following is an accounting equation?

  1. Capital = Assets + Liabilities

  2. Capital = Assets - Liabilities

  3. Assets = Liabilities - Capital

  4. Liabilities = Assets + Capital
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Accounting Equation :


Capital+Liabilities=Total Assets
Therefore, 
Capital= Total Assets- Liabilites.

Multiple choice commercial applications generally accepted accounting principles (gaap) acccounting cycle meaning, need and objectives of accounting accounting process

No profit should be anticipated but every possible loss should be provided for.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The given statement is true. The reason is that every business involves the element of risk.Business risks implies uncertainty in profits or danger of losses due to some unforeseen events.

Multiple choice book keeping and accountancy accounting equation meaning, objectives and need of adjustments need for adjustments accounting equations and transactions

Adjustment entries are those which are passed________.

  1. at the end of the year

  2. at the beginning of the year

  3. for adjustment of prepaid and outstanding expenses/income

  4. for suffering profit
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Adjustment entries are made at the end of an accounting period to ensure that revenues and expenses are recorded in the period they occur, following the accrual basis of accounting. This specifically includes adjusting for items like prepaid expenses, accrued income, and outstanding liabilities.

Multiple choice book keeping and accountancy accounting equation meaning, objectives and need of adjustments need for adjustments accounting equations and transactions

The closing stock of the year becomes the ______ of the next year.

  1. Liabilities

  2. Asset

  3. Opening stock

  4. Dead stock
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The closing stock represents the cost of unsold goods lying in the stores at the end of the accounting period. The adjustment with regard to the closing stock is done by crediting it to the trading profit and loss account and by showing  it on the asset side of the balance sheet. The closing stock of the year becomes the opening stock of the next year and is reflected in the trial balance of the next year.

Multiple choice book keeping and accountancy accounting equation meaning, objectives and need of adjustments need for adjustments accounting equations and transactions

Financial capital is also referred to ______________.

  1. Money capital

  2. Current assets

  3. Fluid

  4. Long term debt
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Financial capital is the money used to help pay for the acquisition of plants, equipment, and other items needed to build products or offer services. Hence, it can be referred to money capital. 

Multiple choice book keeping and accountancy accounting equation meaning, objectives and need of adjustments need for adjustments accounting equations and transactions

 _________ are adjusted at the time of preparing financial statements. 

  1. Depreciation on fixed assets

  2. Interest on capital

  3. Closing stock

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

According to accrual concept of accounting, the profit or loss for an accounting year is not based on the revenues realised in cash and the expenses paid in cash during the year because there may be some receipts of income and payments of expenses during the current year which may partially relate to the previous year or the next year. There are certain items which are not recorded on day-to-day basis such as depreciation on fixed assets, interest on capital, etc. These are adjusted at the time of preparing financial statements. The purpose of making various adjustments is to ensure that the final accounts reveal the true profit or loss and the true financial position of the business. The items which usually need adjustments are: 

1. Closing stock
2. Outstanding expenses
3. Prepaid/Unprepaid expenses
4. Accrued income
5. Income received in advance
6. Depreciation
7. Bad debts
8. Provision for doubtful debts
9. Provision for discount on debtors
10. Manager's commisssion
11. Interest on capitral

Multiple choice book keeping and accountancy accounting equation meaning, objectives and need of adjustments need for adjustments accounting equations and transactions

The value of closing stock is equal to _______________.

  1. Sales -Opening stock- Purchases

  2. Sales- Opening stock + Purchases

  3. Sales + Opening stock + Purchases

  4. Sales + Opening stock -Purchases
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Sales = Opening stock + Purchase - Closing Stock

Hence , it could be written as
Closing stock = Sales - Opening stock -purchases

Multiple choice book keeping and accountancy accounting equation meaning, objectives and need of adjustments need for adjustments accounting equations and transactions

________ = exp paid + o/s expense - prepaid exp.

  1. Total Expense

  2. Total income

  3. Total assets

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

Total Expenses means for any period for which such Total Expenses are being determined, the sum of the total gross cash expenditures of the Company or any subsidiary during such period, including all operating expenses, incentive fees, interest expense and taxes.