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

What is the formula for calculating current ratio?

  1. Current Assets / Current Liabilities

  2. Quick Assets / Current Liabilities

  3. Total Assets / Total Liabilities

  4. Net Working Capital / Total Assets
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Current ratio is calculated by dividing current assets by current liabilities. It measures a fashion retailer's ability to meet its short-term obligations.

Multiple choice

What is the formula for calculating quick ratio?

  1. Current Assets / Current Liabilities

  2. Quick Assets / Current Liabilities

  3. Total Assets / Total Liabilities

  4. Net Working Capital / Total Assets
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Quick ratio is calculated by dividing quick assets (current assets minus inventory) by current liabilities. It measures a fashion retailer's ability to meet its short-term obligations without relying on inventory.

Multiple choice

The Net Present Value (NPV) of a project is:

  1. The difference between the present value of cash inflows and the present value of cash outflows

  2. The difference between the total revenue and the total cost of the project

  3. The difference between the profit and the initial investment of the project

  4. The difference between the payback period and the project's life
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The NPV is calculated by subtracting the present value of cash outflows from the present value of cash inflows.

Multiple choice

What happens to unused FSA funds at the end of the calendar year?

  1. They are forfeited

  2. They are rolled over to the next calendar year

  3. They are donated to charity

  4. They are transferred to a health savings account (HSA)
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Unused FSA funds at the end of the calendar year are forfeited unless the employer offers a grace period or allows for a limited carryover.

Multiple choice

The IRR of a project is the:

  1. Discount rate that makes the NPV of the project equal to zero

  2. Rate of return that the project is expected to generate

  3. Payback period

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

The IRR of a project is the discount rate that makes the NPV of the project equal to zero.

Multiple choice

What is the present value of a future cash flow?

  1. The value of the cash flow today

  2. The value of the cash flow in the future

  3. The difference between the cash flow today and the cash flow in the future

  4. The sum of the cash flow today and the cash flow in the future
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The present value of a future cash flow is the value of that cash flow today, taking into account the time value of money.

Multiple choice

How is the net annual value (NAV) of a property calculated for the purpose of taxation?

  1. Gross rental income - Municipal taxes

  2. Gross rental income - Interest on housing loan

  3. Gross rental income - Depreciation

  4. Gross rental income - Repairs and maintenance expenses
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The NAV of a property is calculated by deducting municipal taxes from the gross rental income.

Multiple choice

What is the rate of depreciation allowed on a residential property?

  1. 5%

  2. 10%

  3. 15%

  4. 20%
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Depreciation is allowed at the rate of 5% on the cost of construction of a residential property.

Multiple choice

Can depreciation be claimed on a property that is self-occupied?

  1. Yes

  2. No

  3. Only if the property is rented out for a part of the year

  4. Only if the property is used for commercial purposes
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Depreciation cannot be claimed on a property that is self-occupied.

Multiple choice

What is the time limit for carrying forward and setting off losses from rental income?

  1. 4 years

  2. 5 years

  3. 6 years

  4. 8 years
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Losses from rental income can be carried forward and set off against income from other heads for a period of 8 years.

Multiple choice

What is the purpose of the capitalization rate in the income approach to real estate appraisal?

  1. To calculate the net operating income of a property

  2. To determine the value of a property based on its rental income

  3. To estimate the depreciation of a property

  4. To compare the value of a property to similar properties
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The capitalization rate is used in the income approach to determine the value of a property based on its rental income. It is calculated by dividing the net operating income by the sale price or market value of the property.

Multiple choice

Which of the following is NOT a type of depreciation used in real estate appraisal?

  1. Physical Depreciation

  2. Functional Depreciation

  3. Economic Depreciation

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

External depreciation is not a type of depreciation used in real estate appraisal. Physical depreciation refers to the deterioration of a property due to age and wear and tear. Functional depreciation occurs when a property becomes obsolete or less desirable due to changes in technology or market preferences. Economic depreciation occurs when the value of a property decreases due to external factors such as economic conditions or changes in the neighborhood.

Multiple choice

What is the formula for the current ratio of a company?

  1. Current Ratio = Current Assets / Current Liabilities

  2. Current Ratio = Current Liabilities / Current Assets

  3. Current Ratio = Current Assets * Current Liabilities

  4. Current Ratio = Current Liabilities * Current Assets
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The current ratio of a company is calculated by dividing the current assets by the current liabilities.

Multiple choice

What is the formula for the quick ratio of a company?

  1. Quick Ratio = (Current Assets - Inventory) / Current Liabilities

  2. Quick Ratio = (Current Assets + Inventory) / Current Liabilities

  3. Quick Ratio = (Current Assets - Inventory) * Current Liabilities

  4. Quick Ratio = (Current Assets + Inventory) * Current Liabilities
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The quick ratio of a company is calculated by dividing the current assets minus the inventory by the current liabilities.

Multiple choice

What is the formula for the working capital of a company?

  1. Working Capital = Current Assets - Current Liabilities

  2. Working Capital = Current Liabilities - Current Assets

  3. Working Capital = Current Assets + Current Liabilities

  4. Working Capital = Current Liabilities + Current Assets
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The working capital of a company is calculated by subtracting the current liabilities from the current assets.