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

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.

Multiple choice

Money you put aside to use when you need it.  

  1. Interest

  2. Investing

  3. Saving

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

Saving refers to the act of setting aside a portion of current income for future use. It is generally safer and more liquid than investing.

Multiple choice book keeping and accountancy statement of changes in financial position meaning, merits and demerits of cash flow statement meaning and objectives of cash flow statement budgeting

Which of the following is not a cash inflow?

  1. Purchase of fixed asset

  2. Sale of fixed asset

  3. Issue of debentures

  4. Cash from business operations
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Purchasing a fixed asset is a cash outflow because it requires spending cash to acquire an asset. The other options involve receiving cash.

Multiple choice commercial studies budgeting meaning, merits and demerits of cash flow statement meaning and objectives of cash flow statement statement of changes in financial position

While preparing a fund flow statement, attention is to be given to _______.

  1. Current Asset and Current Liabilities

  2. Changes in Fixed assets and Fixed Liabilities

  3. Changes in Fluctuating Capital

  4. Changes in Cash Receipts and Payments
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation
Funds Flow Statement is a statement prepared to analyse the reasons for changes in the Financial Position of a Company between two Balance Sheets. 

It shows the inflow and outflow of funds i.e. Sources and Applications of funds for a particular period.

 It is a statement which involves no error in the amount of funds inflow and outflow as it pays attention on the changes in value of fixed assets and fixed liabilities. 

Multiple choice commercial studies budgeting meaning, merits and demerits of cash flow statement meaning and objectives of cash flow statement statement of changes in financial position

Which of the following does not effect cash flows proposal?

  1. Salvage Value

  2. Depreciation Amount

  3. Tax Rate Change

  4. Method of Project Financing
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Salvage value, depreciation, and tax rates directly impact the cash flow calculations of a project. The method of financing (debt vs equity) is typically handled in the discount rate (WACC) rather than the cash flow proposal itself.