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

Cash Inflows from a project include ________.

  1. Tax shield of depreciation

  2. After-tax operating profits

  3. Raising of funds

  4. Both A and B
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Depreciation is a non cash item but to know the profitability of the organization, it is charged to profit & loss account. Due to charge of depreciation, organization gets the tax benefit. 

While making cash inflow, tax shield to be included. Profits from operations is also included.

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

On an accounting statement of cash flows an "increases(decrease) in cash and cash equivalent" appears as ________________.

  1. A cash flow from operating activities

  2. A cash flow from investing activities

  3. A cash flow from financing activities

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

Cash and cash equivalent are the amount of currency on hand as well as demand deposits with banks or financial institutions. Includes other kind of accounts that have the general characteristics of demand deposits. Also includes short-term, highly liquid investments that are both readily convertible to known amounts of cash and so near their maturity that they presents insignificant risk of changes in value because of changes in interest rates.  

Multiple choice book keeping and accountancy reserve and fund accounting treatment for depreciation meaning and characteristics of provisions provision for depreciation account

Which accounting principle is followed in adopting policy of making provision for doubtful debts @5% on debtors ?

  1. Prudence

  2. Substance over from

  3. Materiality

  4. All of these
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The prudence principle is followed in adopting policy of making provision for doubtful debts @5% on debtors. Prudence principle or conservatism principle means all the expenses or possible losses should be recorded in advance, but incomes should not be recorded in advance. 

Multiple choice book keeping and accountancy reserve and fund accounting treatment for depreciation meaning and characteristics of provisions provision for depreciation account

If the amount of any known liability cannot be determined with substantial accuracy ___________________.

  1. A definite liability should be created.

  2. A provision should be created.

  3. A reserve should be created.

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

If any amount of any known liability cannot be determined with substantial accuracy. Provision is a known liability but its amount and due date and indeterminate. 

It is basically setting an amount aside for a probable liability. Its a contingent loss that's recognized as a liability.

Multiple choice book keeping and accountancy reserve and fund accounting treatment for depreciation meaning and characteristics of provisions provision for depreciation account

Under which depreciation method :
Asset account continues to appear at its original cost year after year over its entire life.

  1. Straight line

  2. Weighted average

  3. Provision for depreciation

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

There are two method of recording depreciation -

1. By charging to asset account - Under this method of recording depreciation, depreciation is directly credited to respective asset account result of which is that respective asset account appears at its book value less depreciation till date.
2. By creating Provision for depreciation/ Accumulated depreciation Account - Under this method of recording depreciation, depreciation is credited to the provision for depreciation account and as result respective asset account appears at its original cost.

Multiple choice book keeping and accountancy reserve and fund accounting treatment for depreciation meaning and characteristics of provisions provision for depreciation account

Provisions are created for _________.

  1. Uncertain income/gain

  2. Uncertain expenses/losses

  3. Certain expenses/losses

  4. Certain income/gain
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Provisions are created for the anticipated losses/expenses or for probable amount of liability based on certain assumption.

Multiple choice book keeping and accountancy reserve and fund accounting treatment for depreciation meaning and characteristics of provisions provision for depreciation account

At the time of Disposal of Asset, what will be journal entry for provision for depreciation account?

  1. Asset A/c Dr.

    To Profit and Loss A/c

  2. Provision for depreciation A/c Dr.

    To Asset A/c

  3. Asset A/c Dr.

    To Provision for depreciation A/c

  4. All of the above
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

When the depreciation is charged on the asset by creating the provision for depreciation account, in such case the assets are shown in the balance sheet on its original value against which provision for depreciation account is created. 

If the asset is disposed off, the balance of provision for depreciation is transferred to asset account by passing the below journal entry:

Provision for Depreciation A/c               Dr.
        To Asset A/c 

Multiple choice book keeping and accountancy reserve and fund accounting treatment for depreciation meaning and characteristics of provisions provision for depreciation account

_____________ is a provision.

  1. Provision for depreciation

  2. Provision for taxation

  3. Provision for bad and doubtful debts

  4. All of the above
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Provisions are created for the anticipated losses/expense  or for probable amount of liability based on certain assumption. Following can be stated as provision:

1) Provision for depreciation
2) Provision for taxation
3) Provision for bad & doubtful debts

Multiple choice book keeping and accountancy reserve and fund accounting treatment for depreciation meaning and characteristics of provisions provision for depreciation account

Under Provision method depreciation charged is credited to _____________.

  1. Provision for depreciation A/c

  2. Provision for Tax A/c

  3. Provision For cost A/c

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

Option A is correct. 

Under provision method, assets are maintained at its original cost in the ledger account. Depreciation charged is recorded in a separate account named 'provision for depreciation account.' Also known as 'Accumulated Depreciation Account'. Journal entry to record the depreciation is as follows :- 
Profit & Loss A/c Dr. 
    To Provision For Depreciation A/c.

Multiple choice book keeping and accountancy reserve and fund accounting treatment for depreciation meaning and characteristics of provisions provision for depreciation account

Net Block ( Book Value ) = Gross Block (cost) - __________.

  1. Deprecation Till date

  2. Value till date

  3. Expenses till date

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

Option A is correct One.

Gross Block Means - Total Value of Asset ( Its Original Purchase price+any cap ex)

             Net Block Means - Original Value Of Asset( As Above) - Till Date Charged Depreciation 

Normally "Accumulated depreciation account " is maintained which is credited by the depreciation charged each year on the asset of the company , Once you debit current period depreciation , such depreciation shall be transferred to Accumulated Depreciation Account.


Multiple choice book keeping and accountancy reserve and fund accounting treatment for depreciation meaning and characteristics of provisions provision for depreciation account

_________ is show on Liabilities side or by way of deduction from the original cost of asset.

  1. Provision for Depreciation

  2. Provision for cost

  3. Provision for Asset

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

Under provision for depreciation method of recording depreciation, Fixed asset is shown at its original cost on the asset side in balance sheet and depreciation till date is accumulated in provision for depreciatiion account which is shown on liabilities side in balance sheet.

Multiple choice book keeping and accountancy reserve and fund accounting treatment for depreciation meaning and characteristics of provisions provision for depreciation account

Assets continues to show on __________ when provision for depreciation A/c is maintained.

  1. Book Value

  2. Original cost

  3. Paid Cost

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

Under provision for depreciation method of recording depreciation, Fixed asset is shown at its original cost on the asset side in balance sheet and depreciation till date is accumulated in provision for depreciatiion account which is shown on liabilities side in balance sheet.

Multiple choice book keeping and accountancy reserve and fund accounting treatment for depreciation meaning and characteristics of provisions provision for depreciation account

It must be noted that the amount of provision for expenses and loss is a charge against the revenue of the __________ year.

  1. Current

  2. Next

  3. Previous

  4. None
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation
Current.
Provision is an amount set aside out of current earnings considered necessary to provide for all expenses and losses that are expected to arise out of transactions entered into, during the accounting period. Provision is made following the prudence concept of accounting which holds "provide for anticipated expense and losses but do not provide for anticipated incomes."

Multiple choice book keeping and accountancy reserve and fund accounting treatment for depreciation meaning and characteristics of provisions provision for depreciation account

__________ is accumulated in a separate account instead of being adjusted in asset account under provision method.

  1. Cost

  2. Depreciation

  3. Expenses

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

When the depreciation is charged by creating accumulated depreciation account, following journal entry is passed:


Depreciation A/c                                 Dr.
   To Accumulated Depreciation A/c 

Under accumulated depreciation method, a separate account is created for accumulation of depreciation instead of being adjusted in asset a/c.