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 accounting equation meaning, objectives and need of adjustments need for adjustments accounting equations and transactions

Adjustments helps to provide true and fair view of the ____________ of the business.

  1. State of affairs

  2. Position of cash

  3. Capital composition

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

The Companies Act requires that every balance sheet of a company should give a true and fair view of the state of affairs of the company as at the end of the financial year and every profit and loss of a company should give a true and fair view of the profit or loss of the company for the financial year.

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

__________ = income received + o/s income - income received in advance.

  1. Total expense

  2. Total income

  3. Asset

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

It is also known as Unearned Income and is received before the related benefits are provided. This revenue is not related to the current accounting period, for example, Rent received in advance, Commission received in advance, etc. It is a personal account and shown on the liability side of a balance sheet.

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

Outstanding expense is ____________ for business.

  1. Liability

  2. Asset

  3. Expense

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

 Outstanding expenses are recorded in books of finance at the end of an accounting period to show the true numbers of a business. The outstanding expense is a personal account and is treated as a liability for the business. It is also shown on the liability side of a balance sheet.

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

Outstanding expense are _________ to expense.

  1. Added

  2. Deducted

  3. No effect

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

An outstanding expense is a liability and shown in Balance Sheet as a liability. An outstanding expense is added to the respective expense in profit and loss account.

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

Under statement of closing work-in progress in the period will _______________.

  1. Understate cost of goods manufactured in that period

  2. Overstate current assets

  3. Overstate gross profit from sales in that period

  4. Understate net income in that period.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Understating closing inventory increases the Cost of Goods Sold (COGS = Opening + Purchases - Closing). Since Net Income = Revenue - COGS, an increase in COGS leads to a decrease in Net Income.

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

Provision for the outstanding liability/ expenses is _________.

  1. appropriation of profit

  2. siphoning of income

  3. charge to profit

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

A provision for outstanding expenses is an expense that must be recognized in the period it was incurred to match revenues, making it a charge against profit rather than an appropriation of profit (which is a distribution of earned profit).

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

The recording of wages earned but not yet paid is an example of an adjustment that ________________.

  1. apportions revenues between two or more periods

  2. recognises an accrued expense

  3. recognise an unrecorded reveue

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

Accrued expenses are expenses that have occurred, but are not yet recorded in the company's general ledger. This means these expenses will not appear in the financial statements unless an adjusting entry is passed prior to issuing the financial statements.

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

Closing stock in the Trial Balance implies that.

  1. It is already adjusted in the opening stock

  2. It is adjusted in the Purchase A/c

  3. It is adjusted in the Cost of Sale A/c

  4. It is adjusted in the Profit & Loss A/c
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

When closing stock appears in the Trial Balance, it means it has already been adjusted against the opening stock and purchases during the year. Therefore, it is treated as an asset and appears only in the Balance Sheet.

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

Outstanding Rent is an example of _________.

  1. Increase in asset & decrease in owner's liability

  2. Increase in liability & decrease in owner's liability

  3. Decrease in liability & owner's liability

  4. Increase in asset & owner's liability
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Outstanding rent represents an expense incurred but not yet paid, which increases liabilities. This expense reduces the net profit, which in turn reduces the owner's equity (capital).

Multiple choice commercial studies basic accounting terms basic accounting terminologies introduction to financial accounting and financial accounts basic accounting terminology meaning and features of balance sheet income-expenditure account meaning, importance and specimen of journal objectives, functions, and importance of accounting stages and functions of accounting qualitative characteristics, objectives and roles of accounting

Debit means _________.

  1. decrease in asset

  2. increase in liability

  3. an entry on the left hand side of an account

  4. moderate increase in liability
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Debit means left side. For e.g. every accounting entry will have a debit and credit amount. The debit amount is usually listed first and will be entered on the left side of the general ledger account indicated. The general ledger accounts will have both a debit and credit side, left and right side. The balance in a general ledger account will be either a debit balance or a credit balance. 

Multiple choice commercial studies basic accounting terms basic accounting terminologies introduction to financial accounting and financial accounts basic accounting terminology meaning and features of balance sheet income-expenditure account meaning, importance and specimen of journal objectives, functions, and importance of accounting stages and functions of accounting qualitative characteristics, objectives and roles of accounting

Fixed assets are recorded at _______.

  1. current cost

  2. original cost

  3. depreciated cost

  4. all of the above
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Fixed assets are those which gives the benefits to the organization on a long term basis. Fixed Assets are recorded in the books of account on the original cost irrespective of their market value as per the cost concept in accounting.

Multiple choice commercial studies basic accounting terms basic accounting terminologies introduction to financial accounting and financial accounts basic accounting terminology meaning and features of balance sheet income-expenditure account meaning, importance and specimen of journal objectives, functions, and importance of accounting stages and functions of accounting qualitative characteristics, objectives and roles of accounting

Revenue from sales of products is generally accounted in the period in which __________.

  1. cash is collected

  2. sales in made

  3. products are manufactured

  4. none of the above
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation


Business transactions are recorded when they occur and not when the related payments are received or made. This concept is called accrual basis of accounting and it is fundamental to the usefulness of financial accounting information.


Thus sale of products is recorded when sales is made and not when cash is collected or when products are manufactured.

Multiple choice commercial studies basic accounting terms basic accounting terminologies introduction to financial accounting and financial accounts basic accounting terminology meaning and features of balance sheet income-expenditure account meaning, importance and specimen of journal objectives, functions, and importance of accounting stages and functions of accounting qualitative characteristics, objectives and roles of accounting

Which of the following is correct?

  1. A transaction which increases the capital is called income.

  2. A transaction which decreases the capital is called loss.

  3. A transaction which increases the capital is called additional capital.

  4. A transaction which decreases the capital is called drawing.

  5. All of above.
Reveal answer Fill a bubble to check yourself
E Correct answer
Explanation

All listed options describe standard accounting definitions: income increases capital, losses decrease it, additional capital increases it, and drawings decrease it. Therefore, all are correct.

Multiple choice commercial studies basic accounting terms basic accounting terminologies introduction to financial accounting and financial accounts basic accounting terminology meaning and features of balance sheet income-expenditure account meaning, importance and specimen of journal objectives, functions, and importance of accounting stages and functions of accounting qualitative characteristics, objectives and roles of accounting

Which is an unearned income?

  1. Insurance premium received in advance

  2. Rent received in advance

  3. Depreciation

  4. Both A & B
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Unearned Income is that income which is received in advance. That mean income received against which services are not provided so far.

Insurance premium received in advance and Rent received in advance are the cases of unearned income. Accounting entry will be passed as under:

Income A/c                             Dr.
       To Unearned Income

Unearned Income is a liability and to be shown in the balance sheet. 

Multiple choice elements of book keeping and accountancy ledger and posting develop the understanding for posting of transactions and balancing of accounts classification of ledger (subdivision of ledger) and balancing of account meaning and importance of ledger

Unaccrued Interest Account is _____________.

  1. An Asset Account

  2. A Liability Account

  3. A Revenue Account

  4. An Expense Account
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Unaccrued (or unearned) interest is interest received in advance. Since the business has an obligation to provide the service or wait for the time to pass, it is a liability.