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 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

Capital $\neq$ Wealth. This statement is ______________.

  1. True

  2. False

  3. Partially True

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

Capital is a produced means of production and a part of wealth that yields income, but wealth encompasses all valuable material possessions including non-productive items. Therefore, capital is not equal to wealth, making the statement true.

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.

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

The purchase of supplies for cash will result in an _______________.

  1. Increase in cash and a decrease in capital

  2. Increase in cash and an increase in supplies

  3. Increase in supplies and a decrease in cash

  4. Increase in equipment and an increase in capital
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

When supplies are purchased for cash, the asset 'Supplies' increases because you have acquired more of them, and the asset 'Cash' decreases because you paid money out. This is a direct asset exchange.

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

Admission fees received during the year should be treated ______________.

  1. As capital income

  2. As revenue income

  3. As revenue, unless the amount involved is large

  4. As capital, except for large amounts involved
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Admission fees (or entrance fees) received by non-profit organizations are generally recurring in nature as new members join regularly, so they are typically treated as revenue income. However, if the amount is exceptionally large or if the organization's policy dictates otherwise, it may be capitalized. Thus, the standard accounting practice is to treat it as revenue unless the amount involved is significantly large.

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

Prepaid insurance is nominal account.

  1. True

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

Prepaid insurance represents an asset (a representative personal account) because it is a payment made in advance for future benefits. Nominal accounts only represent current expenses, losses, incomes, or gains.

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

Goods returned by customer should be debited to which of the following accounts?

  1. Sales income account

  2. Sales account

  3. Return inward account

  4. Expenses account
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

When customers return goods, it is recorded as a sales return, which is also known as return inward. Since sales have a credit balance, the return of those sales must be debited to reduce the net sales revenue. Therefore, the Return Inward Account is debited.

Multiple choice commerce marketing mix marketing environment meaning and definition of marketer role of marketing

Profitability Index is equal to______________.

  1. MPV> Zero, accept

  2. MPV, zero, reject
  3. $\cfrac { Present\quad value\quad of\quad cash\quad flows }{ Future\quad value\quad of\quad cash\quad flows } $
  4. $\cfrac { Present\quad value\quad of\quad cash\quad inflows }{ Present\quad value\quad of\quad cash\quad outflows } $
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The Profitability Index (PI) is a capital budgeting tool calculated by dividing the present value of future cash inflows by the initial cash outflow (present value of cash outflows). A PI greater than 1 indicates a profitable project.

Multiple choice

What does surplus mean?

  1. Extra

  2. A little

  3. None

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

A surplus is an amount of something left over when requirements have been met. In agriculture, a food surplus means having extra food beyond what is needed for immediate survival.