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

Which of the following is nominal account ?

  1. Bills payable

  2. Bills receivable

  3. Debtors

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

Nominal accounts in accounting are the temporary accounts, such as the income statement accounts. In other words, nominal accounts are the accounts that report revenues, expenses, gains, and losses. They are closed at the end of each accounting year. This means that their account balances are transferred to a permanent account. This closing process allows the nominal accounts to start the next accounting year with zero balances. 

Stationary is classified as a nominal account, as it is an expense.

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.

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.