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

A debit to a liability means...

  1. An increase

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

Liability accounts have a normal credit balance. A debit to a liability account reduces the amount owed, effectively decreasing the liability.

Multiple choice

A debit to an asset means...

  1. an increase

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

Assets are on the left side of the accounting equation. Therefore, an increase in an asset is recorded as a debit.

Multiple choice

An owner investing in his/her business would result in...

  1. A credit to cash

  2. A credit to Capital

  3. A debit to capital

  4. A debit to accounts payable
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

When an owner invests in the business, the business receives cash (debit) and the owner's equity increases. Increases in equity are recorded as credits.

Multiple choice

Which of the following is the correct accounting equation?

  1. Liabilities + Owner’s Equity = Assets

  2. Assets = Liabilities + Owner’s Equity

  3. Net Income = Revenue + Expenses

  4. Net Income = Revenue – Expenses
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The fundamental accounting equation is Assets = Liabilities + Owner's Equity. This equation must always remain in balance for every transaction.

Multiple choice

An owner’s claims to the assets of the business.

  1. Assets

  2. Liabilities

  3. Owner's Equity

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

Owner's equity represents the portion of the business assets that the owners have a claim to after all liabilities have been paid. It is defined by the accounting equation: Assets = Liabilities + Owner's Equity.

Multiple choice

Property and other items of value owned by a business.

  1. Accounts Receivable

  2. Assets

  3. Valuables

  4. Owner's Equity
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Assets are items of value owned by a business, such as cash, equipment, inventory, and property. Accounts receivable is a specific type of asset, but not the general term.

Multiple choice

Items of value

  1. stock

  2. liabilites

  3. exemptions

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

In financial terms, assets are items of value that an individual or business owns, such as cash, property, or investments.

Multiple choice

A payment for rent represents 

  1. A cash inflow

  2. A cash outflow

  3. A liability

  4. An asset
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

A rent payment is a cash outflow because it represents money leaving your possession to pay for a service or expense.

Multiple choice

Savings accounts and a home are examples of 

  1. liabilities

  2. assets

  3. net worth

  4. cash outflow
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Assets are resources with economic value that an individual owns, including savings accounts and real estate like a home.