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 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 loss on sale of old motor car is debited to___________. 

  1. profit and loss account

  2. motor car account

  3. depreciation account

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

Loss on the sale of a fixed asset is a non-operating expense. Such losses are recorded in the Profit and Loss account to reflect the decrease in the value of the business assets.

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

Operating profit is also known as operating income, or earning before _______.

  1. investment and income

  2. income and taxes

  3. interest and taxes

  4. Investment and taxes
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Operating profit is the profit earned through the normal operations and activities of the business. However, while calculating operating profit expenses which are of financial nature are not taken into consideration. Operating profit is the excess of operating revenue over 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

_______ is the income earned from the core operations of a business, excluding any financing or tax-related issues.

  1. Operating profit

  2. Operating loss

  3. Operating expenses

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

Earnings before interest and taxes is a measure of a firm's profit that includes all incomes and expenses except interest expenses and income tax expenses. This is known as operating profit. Operating profit is the excess of operating revenue over operating expenses. Operating profit is the income earned from the core operations of a business, excluding any financing or tax-related issues.

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

Which one of the following will lead to under statement of net profit?

  1. Amortization of fictitious assets

  2. Treating capital expenditure as revenue expenditure

  3. Treating revenue expenditure as capital expenditure

  4. Creation of general reserve
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Treating capital expenditure (which should be an asset) as revenue expenditure (an expense) results in an overstatement of expenses, which directly leads to an understatement of net profit.

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

In the case of downward revaluation of an asset which is for the first time, the account to be debited is _________.

  1. Fixed Asset A/c

  2. Revaluation Reserve A/c

  3. Profit and Loss A/c

  4. General Reserve A/c
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

When an asset is revalued downward for the first time, the loss in value is treated as an expense and debited to the Profit and Loss account.

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 Profit and Loss A/c shows the ________________.

  1. Financial results of the concern for a period

  2. Financial position of the concern on a particular date

  3. Financial results of the concern on a particular date

  4. Cost of goods sold during the period
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The Profit and Loss account shows the financial performance (results) of a business over a specific period. The Balance Sheet shows the financial position at a specific date.

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

Bad debt recovered is _______________.

  1. Real Account

  2. Personal Account

  3. Nominal Account

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

 Bad debt recovery is a payment received for a debt that was written off and considered uncollectible. The receivable may come in the form of a loan, credit line, or any other accounts receivable. Because it generally generates a loss when it is written off, bad debt recovery usually produces income.

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.