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 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.

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

In India Accounting Standards are issued by _______.

  1. ICAI

  2. ICSI

  3. ICWAI

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

Accounting standards are written statements of uniform accounting rules and guidelines or practices for preparing the uniform and consistent financial statements and for other disclosures affecting the user of accounting information. The Institute of Chartered Accountants of India, (ICAI), which is the regulatory body for standardization of accounting policies of the country has issued Accounting Standards which are expected to be uniformly adhered to, in order to bring consistency in the accounting profession.

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.