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

If the change in accounting policy has a material effect in current period and the effect of change is ascertainable in part _________________.

  1. The amount of change should be disclosed

  2. The fact of change should be disclosed

  3. The fact of change should not be disclosed

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

When an accounting policy change has a material effect, the entity must disclose the fact of the change to ensure transparency. While the amount of the change is also relevant, the fundamental requirement is to disclose that a change has occurred.

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

All of the following are valuation principles except ___________________.

  1. Historical cost

  2. Current cost

  3. Realizable value

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

Historical cost, current cost, and realizable value are standard valuation principles used in accounting. Future value is a financial calculation concept rather than a primary valuation principle for assets in financial statements.

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

Overvaluation of opening stock in financial accounting results _____________.

  1. decreases costing profit

  2. decreases financial accounts profit

  3. increases costing profit

  4. increases financial accounts profit
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Opening stock is a debit item in the trading account. Overvaluing it increases the total debits, which in turn decreases the calculated gross profit for that period.

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

Interest on performing assets should be recognized on ___________ basis.

  1. actually received

  2. standard

  3. accrual

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

Banks are to recognize their income on accrual basis in respect of income on performing assets and on cash basis in respect of income on non-performing assets (NPA). Any interest accrued and credited to income account must be cancelled by a reverse entry once the credit facility comes under the category of NPAs.

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

According to which of the following concepts, revenue is recognised when it is earned rather than when it is collected and recognises when assets or benefits are used rather than they are paid for?

  1. Accrual concept

  2. Realisation concept

  3. Cost concept

  4. Money measurement concept
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The accrual concept dictates that revenue is recognized when earned and expenses are recognized when incurred, matching them to the period they relate to.

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

Accrued income refers to that income which has been _______________.

  1. received but not earned during the current accounting period

  2. earned but not received during the current accounting period

  3. earned but not earned during the previous accounting period

  4. received and earned during the current accounting period
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Accrued income is income that has been earned by providing goods or services during the period, but for which payment has not yet been received.

Multiple choice business organisation and correspondence companies act, 2013 - introduction and characteristics introduction to companies companies act, 2013 company

Which of the following is considered as a 'tangible asset'?

  1. Vehicles

  2. Computer Software

  3. Mining Rights

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

Tangible assets are physical assets that have a material existence. Vehicles are physical items, whereas software, mining rights, and goodwill are intangible assets.

Multiple choice business studies company companies act, 2013 - introduction and characteristics introduction to companies companies act, 2013

Which of the following is true?

  1. The cost of retained earnings is always less than the cost of external equity

  2. The cost of external equity is always less than the cost of retained earnings

  3. The cost of retained earnings is lower than the cost of external equity in the presence of flotation costs

  4. In the presence of flotation costs the cost of external equity is less than the retained earnings

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

Cost of external equity K'ee =required rate of return
f = cost of issue
Hence, in presence of floatation costs, the cost of retained earnings is less than the cost of external equity.

Multiple choice economics concept of consumption function, saving function and investment function capital economy of a village wealth, capital and money

Fixed capital stands for ______.

  1. money with the proprietor

  2. tools, machines, buildings etc. which can be used in production over many years

  3. money deposited in the bank

  4. total share of capital
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Fixed capital refers to investment in long-term assets. Management of fixed capital involves the allocation of the firm’s capital to different projects or assets with long-term implications for the business. For example, tools, machines, buildings, etc. which can be used in production over many years. 

Multiple choice economics concept of consumption function, saving function and investment function capital economy of a village wealth, capital and money

Circulating capital is directly absorbed into the finished products.

  1. True

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

Capital gets circulated and all results into the finished products as capital holds enough significance in the functional relationship between inputs and outputs produced in an economy during a given period of time.

Multiple choice economics concept of consumption function, saving function and investment function capital economy of a village wealth, capital and money

For the purpose of Capital Formation _____________________.

  1. Current consumption is to be sacrificed to a certain extent

  2. Current income should be saved

  3. Both (a) and (b)

  4. Neither (a) nor (b)
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Capital formation requires both the willingness to save (sacrificing current consumption) and the actual act of saving income, which is then channeled into investment.

Multiple choice elements of book keeping and accountancy recording and posting of cash transactions explain the purpose of maintaining a cash book introduction, meaning and importance of cash book meaning and advantages of cash book

Cash purchases ________________.

  1. increase assets

  2. result in no change in the total assets

  3. decrease assets

  4. increase liability

  5. decrease liability
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

A cash purchase involves exchanging one asset (cash) for another asset (such as inventory or equipment). Because one asset decreases and another increases by the exact same amount, there is no net change in total assets.