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 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

Gopal Sons starts a business by investing Rs. 15 lakh and purchases goods worth Rs.12.5 lakh. At the end of the year he is left with a profit of Rs.1,50,000. The surplus profit of Rs.1,50,000 is a /an_________.

  1. event

  2. transaction

  3. dealing

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

Every economic activity is performed through transactions and events. An event is the happening, consequence or result of the transaction. Hence in our example the surplus profit is an event which is result of transaction.

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.

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

Provision for Depreciation 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
A Correct answer
Explanation

Provision for depreciation is a contra-asset account. It reduces the book value of the asset, effectively functioning as a negative asset.

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

Goods destroyed by Fire 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
D Correct answer
Explanation

Goods destroyed by fire represent a loss to the business. Losses are treated similarly to expenses in accounting, making this an expense account.

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

Which account is the odd one out?

  1. Advance to supplier

  2. Bills Receivable

  3. Debtors

  4. Cash
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Advance to supplier, bills receivable, and debtors are all receivables (assets). Cash is a liquid asset, but the others are specifically receivables.

Multiple choice book keeping and accountancy accounting equation and business transactions 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

Current assets are those assets which get converted into cash ___________ .

  1. within six months

  2. within one year

  3. between one and three years

  4. between three and five years
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Current assets are assets that can be converted into cash within one fiscal year or one operating cycle. Current assets are used to facilitate day-to-day operational expenses and investments. As a result, short-term assets are liquid meaning they can be readily converted into cash.

Hence, current assets which get converted into cash within one year.

Multiple choice book keeping and accountancy accounting equation and business transactions 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

Fresh capital introduction will increase _______________.

  1. Assets and Liabilities

  2. Assets and Equity

  3. Liabilities and equity and bank balance

  4. Capital and Liabilities
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

When fresh capital is introduced into a business, the cash (an asset) increases and the owner's capital (equity) also increases to maintain the accounting equation: Assets = Liabilities + Equity.