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

Different accounting policies can be adopted in following area(s) _______.

  1. Charging depreciation

  2. Investment valuation

  3. Inventory valuation

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

Consistency is the basic assumption and it is assumed that various policies or methods adopted by the firm while preparing the financial statement are consistent from one period to another. However, different firms may follow the different accounting policies on depreciation, investment valuation or inventory valuation.

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

Inappropriate selection of the accounting policy decision may lead to _________.

  1. Overstating the financial position performance

  2. Over/understating the performance of financial position

  3. Overstatement of losses

  4. Understatement of profit
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation
Financial statements are prepared by selecting certain policies. A proper balance has to done while selecting an appropriate policies which are useful for better presentation of financial statement. Improper selection of accounting policy may lead to ambiguity in performance of financial position.
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 AS-2 inventories means tangible property held_________.

  1. For sale in the ordinary course of business

  2. In the process of production of such goods or

  3. In the production of goods or services for sale including maintenance supplies and consumables other than machinery spares

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

According to AS 2 inventory means tangible property held for sale in the ordinary course of business or in the process of production of such goods or in the production of goods or services for sale including maintenance supplies and consumables other than machinery spares.

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 these AS deals with inventory valuation?

  1. AS-13

  2. AS-12

  3. AS-2

  4. AS-5
Reveal answer Fill a bubble to check yourself
C 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

As per AS-2, inventory means goods_______.

  1. Spare parts held for break down of machinery

  2. Held for sale in the ordinary course of business

  3. Fixed assets purchased for sale

  4. Shares purchased for sale
Reveal answer Fill a bubble to check yourself
B 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. 

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 these are included in building for the purpose of rates of depreciation?

  1. Roads

  2. Bridges, culverts

  3. Wells and tubewells

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

For the purpose of depreciation rates, the classification of 'building' often includes related infrastructure such as roads, bridges, culverts, and wells, as these are integral to the utility of the building.

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. $AS - 1$
  2. $AS - 2$
  3. $AS - 3$
  4. $AS - 4$
Reveal answer Fill a bubble to check yourself
B 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

Accounting standard on inventory valuation is not applicable to _____________.

  1. Construction contracts

  2. Inventories of livestock, agricultural and forest products

  3. Stock of mineral oils, ores and gases

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

AS-2 explicitly excludes certain types of inventories from its scope, including construction contracts, livestock, and mineral ores, as these are covered by other specific standards.

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 not required to be disclosed according to $AS-6$?

  1. The depreciation methods used

  2. The total depreciation for the period for each class of assets

  3. The gross amount of each class of depreciable assets and the related accumulated depreciation

  4. Depreciated value of the assets
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

AS-6 (now superseded by AS-10) required disclosure of methods, total depreciation, and gross/accumulated values. The 'depreciated value' (Net Book Value) is a result of the calculation, not a specific disclosure requirement in the same sense as the others.

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

$AS-6$ deals with depreciation accounting and applies to all depreciable assets, except _____________.

  1. Forests, plantations and similar regenerative natural resources

  2. Wasting assets and expenditure on research and development

  3. Goodwill and livestock

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

AS-6 excludes assets like forests, wasting assets, and goodwill because they are subject to different valuation or depletion methods rather than standard depreciation.

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

Choose the correct statement.

  1. According to $AS-6$ depreciation is to be provided on land
  2. According to $AS-6$ depreciation is not to be provided on land under any situation
  3. According to $AS-6$ depreciation is not to be provided on land unless it has a limited useful life of the enterprise
  4. $AS-6$ is silent on the questions providing depreciation on land
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Land is generally not depreciated because it has an unlimited useful life. However, if land has a limited useful life to the enterprise, it may be depreciated.

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 $AS-6$, 'Depreciable assets' are assets which __________.

  1. are expected to be used during more than one accounting period

  2. have a limited useful life

  3. are held by an enterprise for use in the production or supply of goods and services, for rental to others, or for administrative purposes and not for the purpose of sale in the ordinary course of business

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

According to AS-6, depreciable assets are defined by their usage, limited useful life, and the fact that they are held for production or administrative purposes rather than sale.

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 AS-6 "Depreciation Accounting", issued by the ICAI, change in method is permitted _____________.

  1. Prospectively

  2. Retrosecpectively

  3. Negatively

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

Under AS-6, a change in the method of depreciation is treated as a change in accounting policy and is applied retrospectively to the date of the asset's acquisition.

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

The standard given by ICAI for calculation of depreciation is ________.

  1. Accounting standard 5 depreciation accounting

  2. Accounting standard 6 depreciation accounting

  3. Accounting standard 7 depreciation accounting

  4. Accounting standard 4 depreciation accounting
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

AS-6 was the specific standard issued by the ICAI to deal with depreciation accounting.

Multiple choice commercial applications bases of accounting cash and mercantile system basis of accounting basis of accounting system

Cash basis considers the revenue as realized, when the goods are produced. 

  1. True

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

 The major difference between the accrual accounting method and the cash accounting method is the way in which revenue and expenses are recorded in the accounts of the business. This difference consequently leads to a different profit result for a given period depending on the approach adopted. 

· Cash-basis - Using the cash-basis, revenue is only recorded when the cash is actually exchanged i.e. when revenue is received as cash and when expenses are actually paid.