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 commercial studies company final accounts forms of statements of profit and loss operating profit (ebit) meaning, need and format of profit and loss account

State the reasons whether the following are true or false.
The gain from sale of capital assets need not be added to revenue to ascertain the net profit of a business.

  1. True

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

Gains from the sale of capital assets are non-operating gains and are typically included in the Profit and Loss account to determine the net profit for the period.

Multiple choice commercial studies company final accounts forms of statements of profit and loss operating profit (ebit) meaning, need and format of profit and loss account

________ is not the integral part of profit & loss account.

  1. Bank interest received

  2. Discount received

  3. Sales

  4. Rent of property received
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Sales are recorded in the trading account to determine gross profit. The profit and loss account is used for indirect expenses and incomes, not for direct sales figures.

Multiple choice commercial studies company final accounts forms of statements of profit and loss operating profit (ebit) meaning, need and format of profit and loss account

The gain from sale of capital assets need not be added to revenue to ascertain the ________________.

  1. Gross profit of a business.

  2. Net profit of a business.

  3. Operating profit of a business.

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

The gain from sale of capital assets will need to be added to revenue to calculate the non - operating profit, and not gross profit, net profit and operating profit. 

Gross profit is calculated to ascertain the profit from sale and purchase of goods/services, operating profit accounts only operating incomes and expenses and net profit is gross profit less operating expenses. 

Multiple choice commercial studies company final accounts forms of statements of profit and loss operating profit (ebit) meaning, need and format of profit and loss account

While calculating Operating profit the incomes and expenses of purely ____________ nature are not taken into account.

  1. operating

  2. trading

  3. financial

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

Operating profit is defined as the profit earned by the firm during the course of normal trading operations. To calculate the operating profit, operational expenses are deducted from operational income. 


Expense of purely of financial nature need not to be taken into account while calculating the operational profit like interest on loan, dividends etc.

Multiple choice commercial applications accounting procedures - rules of debit and credit golden rules of debit and credit (traditional approach) types of account meaning and classification of accounts

_________ represents assets and properties which cannot be seen, touched or felt but they can be measured in terms of money.

  1. Tangible real accounts

  2. Intangible real accounts

  3. Representative personal accounts

  4. Artificial or legal persons account
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Accounts relating to properties or assets are known as "Real accounts". A separate account is maintained for each asset e.g. Cash, Machinery, Building, etc. Real accounts can be further classified into tangible and intangible.


1. Tangible real accounts: These accounts represent assets and properties which can be seen, touched, felt, measured, purchased and sold. For e.g. Machinery account, Cash account, Furniture account.


2. Intangible real account: These accounts represent assets and properties which cannot be seen, touched or felt but they can measured in terms of money. For e.g. Patents account, Goodwill account.

The rule for Real accounts is: Debit what comes in; Credit what goes out.

Multiple choice commercial applications accounting procedures - rules of debit and credit golden rules of debit and credit (traditional approach) types of account meaning and classification of accounts

Provision for Depreciation Account is ______________.

  1. Personal A/c

  2. Real A/c

  3. Nominal A/c

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

Provision for depreciation is a valuation account that reduces the value of a tangible asset. Since it is directly linked to a real account (the asset), it is generally treated as a real account.

Multiple choice business economics and quantitative methods measurement of national income methods of national income methods of measuring national income national income analysis

Under the expenditure method _________.

  1. expenditure on financial assets which are produced and owned within the country is excluded

  2. expenditure on financial assets of foreign countries is included

  3. both above are true

  4. none is true
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The expenditure method excludes purely financial transactions (like buying stocks or bonds) because they do not represent current production of goods or services.

Multiple choice business economics and quantitative methods measurement of national income methods of national income methods of measuring national income national income analysis

Income disposal method is also called as _________.

  1. product method

  2. income method

  3. expenditure method

  4. value added method
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Expenditure method is also called as income disposal method

Expenditure method: National income is measured as a flow of expenditure. Includes sum total of private consumption expenditure. Government consumption expenditure, gross capital formation (Government and private) and net exports (Export-Import).

Multiple choice business economics and quantitative methods measurement of national income methods of national income methods of measuring national income national income analysis

A sum of money paid regularly (typically annually) by a company to its shareholders out of its profits (or reserves) is called __________.

  1. profits

  2. taxes

  3. dividends

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

A sum of money paid regularly (typically annually) by a company to its shareholders out of its profits (or reserves) is called a dividend

A dividend is a distribution of a portion of a company's earnings, decided by the board of directors, to a class of its shareholders. Dividends can be issued as cash payments, as shares of stock, or other property.

Multiple choice book keeping and accountancy accounting standards: concept and objectives accounting standards accounting standards (as) and ifrs accounting systems and reporting standards

If no information is available, the General Rule for valuation of stock for balance sheet is _______________.

  1. Replacement Cost

  2. Realizable Value

  3. Historical Cost

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

Historical cost is a measure of value used in accounting in which the price of of stock on the balance sheet is based on its nominal or original cost when acquired by the company.

Multiple choice book keeping and accountancy accounting standards: concept and objectives accounting standards accounting standards (as) and ifrs accounting systems and reporting standards

Market price or actual cost, whichever is less, is the generally accepted accounting principle for valuation of___________.

  1. Stock-in-trade

  2. Fixed assets

  3. Current assets

  4. All of these
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

As per AS-2, Valuation of inventories (stock-in-trade) prescribed the accounting treatment for inventories and sets the guidance to determine the value at which the inventories are carried in the financial statement. 

Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs. 

The cost of inventories should comprise all costs of purchase, Costs of conversion and other costs incurred in bringing  the inventories to their present location and condition. 

As per AS-2, "Inventories should be valued at the lower of cost and net realisable value."

Multiple choice book keeping and accountancy accounting standards: concept and objectives accounting standards accounting standards (as) and ifrs accounting systems and reporting standards

When a fixed asset is acquired in exchange for another asset, its cost is usually determined by reference to the_________________.

  1. Net book value of the asset given up

  2. Gross book value of the asset given up

  3. Net book value of the asset acquired

  4. Gross book of the asset acquired
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

When a fixed asset is acquired in exchange for another asset, its cost is usually determined by reference to the net book value. Net book value of the asset given up is the cost less depreciation. 

Multiple choice book keeping and accountancy accounting standards: concept and objectives accounting standards accounting standards (as) and ifrs accounting systems and reporting standards

An expenditure incurred relating to fixed asset resulting in increase in capacity of the asset should be_____________.

  1. Charges to P&L a/c.

  2. Added to gross book value of asset.

  3. Added to net book value of asset.

  4. Treated as deferred revenue expenditure.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

An expenditure incurred relating to fixed asset resulting in increase in capacity of the asset should be added to the gross book value of asset. They are not charged to P & L because they are expected to provide value and can be consumed over a period of time. 

Multiple choice book keeping and accountancy accounting standards: concept and objectives accounting standards accounting standards (as) and ifrs accounting systems and reporting standards

Which of the following is an example of 'REVENUE' for the purpose of AS-9?

  1. Appreciation in the value of a fixed asset.

  2. Gain resulting from changes in foreign exchange rates.

  3. Royalties receivable.

  4. Realized gain resulting from the discharge of an obligation at less than its carrying amount.
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

AS-9 deals with the bases for recognition of revenue in the statement of profit and loss of an enterprise. The Standard is concerned with the recognition of revenue arising in the course of the ordinary activities of the enterprise from: 

–the sale of goods, 
–the rendering of services, and 
–the use by others of enterprise resources yielding interest, royalties and dividends. 
Revenue is the gross inflow of cash, receivables or other consideration arising in the course of the ordinary activities of an enterprise from the sale of goods, from the rendering of services, and from the use by others of enterprise resources yielding interest, royalties and dividends.