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 standards: concept and objectives accounting standards accounting standards (as) and ifrs accounting systems and reporting standards

Valuation of inventory is dealt with in ___________.

  1. Accounting Standard-2

  2. Accounting Standard-5

  3. Accounting Standard-6

  4. Accounting Standard-9
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

As per AS-2, Valuation of inventories 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

According to Accounting Standard-2, inventory is to be valued at __________.

  1. Actual cost or sales value, which ever is less.

  2. Historical cost.

  3. Net realizable value.

  4. Historical cost or net realizable value, which ever is less.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

As per AS-2, Valuation of inventories 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

According to Accounting Standard-10, gross  book value of a fixed asset may be____________.

  1. Fair market value.

  2. Historical cost.

  3. Revaluation amount.

  4. Historical cost or revaluation amount.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

According to AS-10, the gross book value of a fixed asset is either its historical cost or a revalued amount. This provides flexibility in reporting the value of assets on the balance sheet.

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

Where depreciable assets are revalued, then according to Accounting Standard-6 depreciation amount should be based on____________.

  1. Historical cost and profit on revaluation should be transferred to P and L a/c

  2. Revalued amount

  3. Depreciated value of the asset

  4. Accounting Standard-6 does not specify anything in this regard
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

AS-6 deals with depreciation on fixed assets hence, depreciable assets are revalued, then depreciation amount should be based on revalued amount of the asset. 

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

Accounting Standard-6 relating to depreciation is not applicable on ____________.

  1. Building

  2. Plant and machinery

  3. Live stock

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

Accounting standard-6, relating to depreciation is not applicable to the following items to which special considerations apply:

1. Forest, plantation, and similar regenerative natural resources.
2. Wasting assets including expenditure on the exploration for and extraction of minerals, oil, natural gas, and similar non-regenerative resources. 
3. Expenditure or research and develepoment.
4. Goodwill.
5. Live stock.
The statement also does not apply to land unless it has a limited useful life for the enterprise.

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

According to Accounting Standard-6 which of the following is not required to be disclosed in the financial statement?

  1. Historical cost of the asset

  2. Depreciated value of the asset

  3. Accumulated depreciation

  4. Total depreciation for the period for each class of asset
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

AS-6 deals with depreciation of the tangible asset. Hence, only the historical cost, accumulated depreciation on the asset and total depreciation for the period for each class of asset will be recorded. Depreciable value of asset is not to be disclosed according to AS-6.

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

Accounting Standard-6 relating to depreciation is applicable to___________.

  1. Forests and plantations

  2. Mines

  3. Goodwill

  4. Land if it has a limited useful life for the enterprise
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Accounting Standard-6 deals with depreciation accounting and applies to all depreciable assets, except the following items to which special considerations apply:—

(i) forests, plantations and similar regenerative natural resources; 
(ii) wasting assets including expenditure on the exploration for and extraction of minerals, oils, natural gas and similar non-regenerative resources; 
(iii) expenditure on research and development; 
(iv) goodwill and other intangible assets; 
(v) live stock. 
This standard also does not apply to land unless it has a limited useful life for the enterprise.

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

Accounting Standard-6 relating to depreciation is recommended for use companies___________________.

  1. Listed on a recognised stock exchange

  2. Engaged in manufacturing business

  3. Engaged in manufacturing or trading business

  4. All types of business undertakings
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Accounting Standards issued by the Institute of Chartered Accountancy of India are issued for better presentation of books of account and to ensure that they show a true and fair view. They are recommended for the used by company listed on a recognised stock exchange. 

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 information relating to fixed assets should be disclosed in the financial statements as per Accounting Standard-10 ?

  1. Gross book value of fixed asset at the beginning of the year

  2. Gross book value of fixed asset at the end of the year

  3. Net book value of fixed asset at the beginning and at the end of the year

  4. (A), (B), and (C)
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The following information should be disclosed in the financial statements: 

(i) Gross and net book values of fixed assets at the beginning and end of an accounting period showing additions, disposals, acquisitions and other movements;
 (ii) Expenditure incurred on account of fixed assets in the course of construction or acquisition; and 
(iii) Revalued amounts substituted for historical costs of fixed assets, the method adopted to compute the revalued amounts, the nature of indices used, the year of any appraisal made, and whether an external valuer was involved, in case where fixed assets are stated at revalued amounts.

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

Accounting standard-10 does not deal with the following fixed assets________.

  1. Goodwill

  2. Patents

  3. Trade marks

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

Accounting standard - 10 (Property, plant and equipment - updated) deals with all the fixed assets like goodwill, patent, trademarks, machinery etc. It does not deal with live stock as it is a (inventory) Current asset and not a fixed asset. 

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 items are capitalized along with the purchase price of the fixed asset?

  1. Import duties

  2. Initial delivery and handling costs

  3. Trade discounts

  4. (A) and (B)
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Initial delivery and handling costa and trade discounts are capitalized along with the purchase price of the fixed assets. 

All the cost incurred to bring the machinery in state of being used or to put machinery to use are included in the cost of machinery and discount received is reduced from the cost of the asset. 

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

Net book value of a fixed asset is its_____________.

  1. Historical cost

  2. Historical cost less accumulated deprecation

  3. Historical cost less gross book value

  4. Fair market value
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Net Book Value is the value of fixed assets after deducting the accumulated depreciation, and accumulated impairment expenses from original cost of fixed assets. Accumulated depreciation expenses are the total depreciation expenses of assets from the beginning to the reporting date.

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

Allocation of depreciable amount of fixed assets to future periods is deals with in_________________________.

  1. Account Standard-6 on depreciation accounting

  2. Accounting Standard-10 on fixed assets

  3. Accounting Standard-9 on revenue recognition

  4. Accounting Standard-1 on disclosure of accounting policies
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Accounting Standard-6 issued by The Institute of Chartered Accountants of India (ICAI) defines depreciation as “a measure of the wearing out, consumption or other loss of value of depreciable asset arising from use, effluxion of time or obsolescence through technology and market-change. 

Depreciation is allocated so as to charge fair proportion of depreciable amount in each accounting period during the expected useful life of the asset. Depreciation includes amortisation of assets whose useful life is pre-determined”.

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

Accounting Standard-10 deals with the following fixed assets___________.

  1. Land

  2. Forests

  3. Plantations

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

Accounting standard - 10 (Property, plat and equipment - updated) deals with all the fixed assets like goodwill, patent, trademarks, machinery, land etc. It deals with fixed assets in which the enterprise has invested into. In the given question AS - 10 deals with Land. 

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

Gross book value of a fixed asset is its___________.

  1. Cost less depreciation

  2. Historical cost

  3. Historical cost less accumulated deprecation

  4. Fair market value
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Gross book value of a fixed asset is its historical cost or other amount substituted for historical cost in the books of account or financial statements. When this amount is shown net of accumulated depreciation, it is termed as net book value.