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 book keeping and accountancy partnership accounts (preliminary) adjustment of distributable profits final accounts of partnership firms profit-loss appropriation account

Which of the following transactions is of capital nature?

  1. Purchase of a truck by a company

  2. Replacement of old types and tubes

  3. Yearly premium to insure the truck

  4. Cost of repair of the truck
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Capital expenditure is a money spent by a business or organization on acquiring or maintaining fixed assets, such as land, buildings, and equipment.

Hence, Purchase of a truck by a company is a capital expenditure.

Multiple choice book keeping and accountancy partnership accounts (preliminary) adjustment of distributable profits final accounts of partnership firms profit-loss appropriation account

 Amount realization from the sale of private estate of partners is used first to pay off ___________________.

  1. Debts of the firm

  2. Private debts of the partner

  3. Wife's loan

  4. Bank loan of the firm
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

  • Assets of the firm and the capital contributed by the partners to set-off losses of the firm will be applied in the following order–
  1. Third party debts will be paid first
  2. Next, loan amount taken by firm from any partner will be repaid to that partner
  3. Capital contributed by each partner will be repaid to him in the capital contribution ratio
  4. Balance amount will be shared among the partners in their profit sharing ratios.

Multiple choice book keeping and accountancy partnership accounts (preliminary) adjustment of distributable profits final accounts of partnership firms profit-loss appropriation account

Rent paid to a partner is charged to ______.

  1. profit and loss adjustment A/c

  2. revaluation A/c

  3. profit and loss appropriation A/c

  4. profit and loss A/c
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

 Rent paid by a firm is such an expenditure which is incurred irrespective of any partner. It is not directly related to the partner. As rent is an expenditure the same is debited to profit and loss account. 

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) discount/loss on issue of debenture written off issue of debentures procedure for issue of debentures

Discount on issue of debenture A/c is to be written off ___________.

  1. immediately

  2. within 3-4 years

  3. over the tenure of the debenture

  4. all the three alternatives are available to the company
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Discount on the issue of debentures is a capital loss that is amortized over the life of the debentures, matching the expense to the period the company benefits from the borrowed funds.

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) discount/loss on issue of debenture written off issue of debentures procedure for issue of debentures

Loss on issue of Debentures is generally written off in __________.

  1. 10 years

  2. 8 years

  3. over the period of debentures

  4. 15 years
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Loss on issue of debentures is a capital loss that should be amortized over the tenure of the debentures to match the expense with the benefit received.

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) discount/loss on issue of debenture written off issue of debentures procedure for issue of debentures

Interest on debenture is __________.

  1. An Appropriation of Profit

  2. A Charged Against Profit

  3. An Adjustment of Profit

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

Debenture are financial instrument which carries a certain percentage of interest. Debentures are like other debts. Interest paid on debenture is an expense and charged to profit & loss account.

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) discount/loss on issue of debenture written off issue of debentures procedure for issue of debentures

Statement (A): Discount on issue of debentures represents capital loss.
Statement (B): The amount of such discount cannot be written off annually

  1. Both (A) and (B) are true.

  2. Both (A) and (B) are false.

  3. (A) is correct but (B) is false

  4. (B) is correct but (A) is false
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Statement A is correct because discount on issue is a capital loss. Statement B is false because the discount is typically written off over the life of the debentures.

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) discount/loss on issue of debenture written off issue of debentures procedure for issue of debentures

For creating Capital Redemption Reserve _______________ is passed.

  1. Profit or loss a/c Dr, General Reserve Dr to Capital Redemption Reserve Cr

  2. Goodwill a/c Dr to Capital Redemption Reserve a/c Cr

  3. Capital Redemption Reserve A/c Dr. to Profit and loss A/c, General Reserve A/c Dr.

  4. Capital Reserve Dr. to Capital Redemption Reserve
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Capital Redemption Reserve is created by transferring profits from the Profit and Loss account or General Reserve to the reserve account.

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) discount/loss on issue of debenture written off issue of debentures procedure for issue of debentures

A debenture is said to be issued at par when the issue price is ________ the face price.

  1. more than

  2. less than

  3. equal to

  4. double

Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

A debenture is issued at par when the amount paid by the investor is exactly equal to the face value of the debenture.

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) discount/loss on issue of debenture written off issue of debentures procedure for issue of debentures

Premium on issue of debentures can be utilized for writing off  _______.

  1. discount on issue of debenture/shares

  2. preliminary expenses

  3. goodwill/patent

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

Premium on issue of debentures (or securities premium) can be used for various purposes, including writing off preliminary expenses, discount on issue, or goodwill.

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) discount/loss on issue of debenture written off issue of debentures procedure for issue of debentures

Discount on issue of debenture is shown in balance sheet as ___________.

  1. miscellaneous expenses

  2. goodwill

  3. claims receivable

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

Discount on issue of debentures is treated as a deferred revenue expenditure and is shown under miscellaneous expenses in the balance sheet until fully written off.

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) discount/loss on issue of debenture written off issue of debentures procedure for issue of debentures

Discount on issue of debenture is a ______.

  1. capital loss

  2. revenue loss

  3. financial loss

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

A discount on the issue of debentures represents a cost incurred by the company to raise capital. Since this is a non-recurring loss related to the capital structure, it is classified as a capital loss.

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) discount/loss on issue of debenture written off issue of debentures procedure for issue of debentures

A debenture is said to be issued at premium when the issue price is ________ the face price.

  1. more than

  2. less than

  3. equal to

  4. double

Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

A debenture is issued at a premium when the amount received from the investor is greater than the nominal or face value of the debenture.

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) discount/loss on issue of debenture written off issue of debentures procedure for issue of debentures

Loss on issue of debenture A/c is a __________.

  1. personal A/c

  2. nominal A/c

  3. real A/c

  4. dummy A/c
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Loss on issue of debentures is an expense or loss account. According to the rules of accounting, all expenses and losses are recorded in a nominal account.

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) discount/loss on issue of debenture written off issue of debentures procedure for issue of debentures

Interest an Debentures will be debited to Profit and Loss Account, whether there is profit or loss.

  1. True

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

Interest on debentures is a charge against profits, meaning it must be paid regardless of whether the company earns a profit or incurs a loss.