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

Provision for Discount on Debtors is_______________.

  1. Debited to Sundry Debtors Account

  2. Credited to Sundry Debtors Account

  3. Debited to Bad Debts Account

  4. Debited to Profit & Loss Account
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Provision for discount on debtors is debited to profit and loss account. Provision for depreciation Discount is allowed when our debtors settle our accounts promptly. The amount of discount is an expected loss and has to 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

Accumulated depreciation account is shown in the final accounts:

  1. On the liability side of the balance sheet.

  2. On the debit side of the profit and loss account.

  3. By deducting from the related asset account in the balance sheet.

  4. On the credit side of the profit and loss account.
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The accumulated depreciation account is an asset account with a credit balance (also known as a contra asset account); this means that it appears on the balance sheet as a reduction from the gross amount of fixed assets reported.

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

Present liability of uncertain amount, which can be measured reliably, is termed as __________.

  1. provision

  2. liability

  3. contingent liability

  4. none of the above
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation
Provision means "any amount written off or retained by way of providing for depreciation in the value of assets or retained by way of providing for any known liability of which the amount cannot be determined with substantial accuracy."
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 company accounts part - 2 (accounting for debentures) discount/loss on issue of debenture written off issue of debentures procedure for issue of debentures

When debentures are issued at a discount but are redeemable at a premium the entry is:

  1. Bank Account Discount on Debentures accountDebentures Dr. Cr. Cr.
  2. Bank Account Discount on Debentures accountDebenturesPremium on redemption of debentures Dr. Cr. Cr.Cr.
  3. Bank Account Loss on the issue of debenturesDebenturesPremium on redemption of debentures Dr. Cr. Cr.Cr.

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

When issued at a discount and redeemed at a premium, the total loss (discount + premium) is debited to the Loss on Issue of Debentures account. The entry credits Debentures and Premium on Redemption.

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 received on Issue of Debentures is?

  1. Capital profit

  2. Revenue profit

  3. Both A and B

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

Premium received on the issue of debentures is a capital receipt, as it is not derived from the company's normal trading operations. Therefore, it is a capital profit.

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 received on issue of Debenture is shown in ____________.

  1. Profit and Loss A/c

  2. Balance Sheet

  3. Contingent Assets

  4. Notes to Accounts
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Premium received on issue of debentures is capital profit, therefore, this will appear in the liabilities side of the Balance Sheet under the head 'Reserve and Surplus'.

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

As per the Companies Act, "Interest accrued but not due on debentures" should be shown.

  1. Under Debentures

  2. As Current Liabilities

  3. As Miscellaneous Exps.

  4. As a Current Asset.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Interest accrued but not due is a liability that the company owes to debenture holders, and since it is expected to be paid within the next accounting cycle, it is classified as a current liability.

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

When debentures are issued at discount. Such discount ____________.

  1. may be written off against revenue profits

  2. may be written off against capital profits

  3. Both A & B

  4. shown on debit side of balance sheet
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The discount on the issue of debentures is a capital loss and can be written off against either capital profits or revenue profits of the company.

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

Calculating the amount of profit to be set aside annually with the help of sinking fund table, is the ____ step involved in the working of sinking fund method.

  1. first

  2. second

  3. third

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

The first step in the sinking fund method is to determine the annual amount to be set aside using the sinking fund table, which calculates the annuity required to reach the target sum.

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

When debentures are issued at discount. Such discount_________.

  1. May be written off against revenue profits

  2. May be written of against capital profit

  3. Both a & b

  4. Shown at debit side of balance sheet
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Similar to question 537045, the discount on the issue of debentures is a capital loss that can be written off against either capital or revenue profits.

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

Whenever debentures are cancelled, any profit on cancellation is transferred to _________________.

  1. Profit and Loss Account

  2. Sinking Fund Account

  3. Capital Redemption Reserve Account

  4. Capital Reserve Account
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Whenever debentures are transferred, and profit is earned it is capital profit. Hence, any capital profit should be transferred to Capital reserve, and if sinking fund exists, it should be transferred to sinking fund account. 

Multiple choice

Which of the following is NOT a type of capital accumulation?

  1. Investment in physical capital

  2. Investment in human capital

  3. Saving

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

Wealth is not a type of capital accumulation, but rather a result of capital accumulation.

Multiple choice

What is the significance of zero in the calculation of financial ratios?

  1. Indicates a healthy financial position

  2. Indicates a weak financial position

  3. Has no significance

  4. Depends on the specific ratio
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The significance of zero in the calculation of financial ratios depends on the specific ratio being used. In some cases, a zero value may indicate a healthy financial position, while in others, it may indicate a weak financial position.

Multiple choice

What factors are considered in the Means Test?

  1. The debtor's income.

  2. The debtor's expenses.

  3. The debtor's assets.

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

The Means Test considers all of the debtor's income, expenses, and assets when determining eligibility for Chapter 7 bankruptcy.